How experiments can help you grow during tough times

Leonie Valentine / September 2020
HK#2_Hero.png

Everywhere in the world, companies are struggling to keep up with the new normal that has been enforced upon us all thanks to the pandemic. In Hong Kong, lockdowns have caused businesses in the densely populated city to rethink their approach in capturing the attention of their consumer segments.

In the second installment of our Lessons of Resilience from Hong Kong Businesses series, we invited Terence Lam, general manager of Mentholatum, one of the most prominent FMCG brands in Asia Pacific, to a fireside chat with Leonie Valentine, Google Hong Kong’s managing director of sales and operations, to learn more about the company’s strategy in moving forward in an uncertain economy.

Leonie: Many businesses are making drastic restructuring changes to their operations in the hopes of staying above the reds, what would you say is the strategy for Mentholatum?

Terence: As most categories’ consumption are on a steady decline, many marketers are faced with the tough choice to either radically change their marketing strategies to grow sales, or drastically reduce marketing expense to protect bottomline.

The choices we faced at Mentholatum weren’t any easier. But I strongly believe that we can ride this out. Our focus, as always, never wavered from our business objectives of growing penetration and market share for our brands.

When we thought about how to improve marketing efficiencies, we decided to accelerate our digital experimentations.

During the lockdown, there was a sharp increase in people consuming digital content as well as how they were consuming it, so we stayed close and kept evolving our digital marketing strategy. We also had to optimize the money we were putting in to ensure we could generate revenue with good ROI even during these difficult times.

Leonie: That’s interesting how you kept to your digital marketing strategy when most businesses would pull out as a cost-saving measure. What prompted you to continue banking on digital marketing and optimize?

Terence: Firstly, I strongly believe in brand building, regardless of good times or bad. And digital marketing is such a critical element in today’s brand building exercises.

Instead of completely pulling the plug on our marketing efforts online, we changed the way we engage with our audience.

It was the perfect time for us to turn to experimentation. We put every single thing to the test and optimized, optimized, and optimized.

We tested different marketing content, target segments, reach models, media conversions, and more to find the right approach that will improve customer acquisition costs, sales conversion rates, and surpass our target ROI.

Since everything was digital, it was easy for us to measure success, and quantify our efforts with data. Plus, combined with qualitative consumer research and trends watching, I’m proud to say that we kept a growth mindset in an otherwise dire situation.

Leonie: Another benefit of digital marketing is that it allows you to really know your audience. Would you say that given Hong Kong’s high digital literacy rate, customer segmentation is an important tool for Mentholatum?

Terence: Definitely. Previously, we can only get user data from direct retail sales or through market surveys, so consumer segmentation was limited to age, gender, and perhaps income levels. Turning digital switched on even more possibilities for us to know more aspects of our target customers. This efficient segmentation then leads to a more efficient and effective media dollar spent.

Turning digital switched on even more possibilities for us.

Segmentation is no walk in the park. It can take countless experiments before we can confidently identify our target segments accurately, and we have had our fair share of failures in those experiments. However, looking back, all the experimentations paid off in the end for Mentholatum as we accumulated valuable learnings when it came to segmenting customers in more meaningful ways.

Once we had our customers segmented, it was easier to target them with more relevant messages.

Leonie: Customer segmentation is but a tiny piece in the whole digital marketing pie. Now that you’ve found your customers, what was your strategy in reaching them during this COVID-19 period?

Terence: Mentholatum used a mix of current trends, intuition, and data, plus rounds and rounds of experiments to get it right. It’s not a one size fits all solution. This is where results from past campaigns make excellent lessons to inform future campaigns. We have to accept that in digital marketing, we will never have the perfect answer or a “best-in-class model” in a static way. Instead, the right mindset for marketers should be to keep learning, keep pushing for better answers by using smart hypotheses and faster experimentations.

When I say experiments, many would immediately think of A/B testing. The truth is, the combinations are infinite, like A+B or A with parts of C. With a drop of creativity and some strategic thinking, anyone could come up with dozens and dozens of combinations, and still get no closer to finding that one winning formula.

The truth is, the combinations [for experimentation] are infinite.

In the case of Mentholatum, we combined the experiments with industry insights. We uncovered interesting insights regarding consumer perception towards our beauty and health product lines. In the beauty industry, we have to work very hard to keep up with the latest trending concepts and ingredients in the market in order to appear savvy and up to date. However, if we used the same approach for our healthcare lines, we would only be shooting ourselves in the foot. It would only damage our reputation as a credible and trustworthy brand in healthcare product lines where consistency reflects safety and reliability for consumers in that category.

Leonie: If anything, this really highlights the importance of knowing your customers. So with a solid customer base, and data to inform, how does Mentholatum plan to navigate its way out of our pandemic situation?

Terence: I don’t know the future, unfortunately. This pandemic may last longer than we expect it to, who knows? But the most important thing about growing your business in a pandemic is having a growth mindset. I don’t mean the old way of throwing ideas to the wind to see if it goes viral.

Keep it methodical. Ingrain a culture of innovation — testing new hypotheses, trying new ways of thinking, exploring ideas in a different way, and more.

In a lockdown environment, more and more people are going online using their mobile as a source of entertainment and distraction from daily worries. This is our chance to fill that gap, by making content that is most relevant to consumers’ lives at the moment.

This time allowed us to explore and test new ideas, specifically for local consumers.

With no tourists visiting the city, local consumers became the only source of data collection for every brand. This allowed us to be laser-focused in our communication approach.

For example, consumers are desperately looking for some fun and entertainment at home during this period of time, so we let our guard down and produced some funny content for 50 Megumi, featuring our spokesperson, Chinese-American actor Michael Wong, and a local comedian, Derek Wong, to launch a hilarious episode that lightened the mood for the people of Hong Kong. We may not have been brave enough previously to venture into comedy, but hey, growth mindset, right? Thankfully, this risk proved fruitful as the video performed wildly better than expected and business has responded strongly.

This is evident of the uniqueness of our current situation. Some of our previous ways of working might no longer be relevant.

Opportunities lie in our courage to think digitally and creatively in a growth mindset, making a lot of small changes over time to focus on efficiency and new ideas exploration that help move the needle.

In times of chaos and crisis, our instinct is to cut marketing expenses and conserve resources, so as to protect the bottomline. But what if this is no ordinary time and this new normal is here to stay for at least quite some time?

So the question we should ask ourselves is, how can we embrace what is happening faster, turn the crisis into a brand building opportunity, and increase consumer penetration and market share during this period of time?

Insights and learnings from Hong Kong’s business leaders