LEO Digital Network’s Dalton Zheng: The role of agencies in the era of consumption expansion and quality improvement

It is the best - and most challenging - of times for Chinese marketers.

On one hand, rapid digitalisation and an expansion in consumption and better-quality products and services means that marketers are offered opportunities to drive business growth by helping brands build closer relationships with consumers.

On the other hand, Generation Z’s spending habits are unlike that of any other generation. As their consumption power grows, it will also bring about a reshuffling of the brand landscape.

The above brings plenty of new opportunities, and it’s up to truly talented marketers to seize them. What role does marketing play amidst these myriad changes? How should marketers ensure they’re charting a sustainable path to success?

In 2020, LDN achieved a total revenue of more than 15.5 billion. In just a few years, the agency network has grown to become a leader in the digital marketing space in China.  Exemplifying this is LDN’s recognition from various prestigious awards programs, including Campaign Asia’s Greater China Agency of the Year awards. The network took home Greater China Digital Agency of the Year for two years running in 2019 and 2020 as well as Gold for Greater China Brand Experience Agency and Silver for Greater China Integrated Marketing Agency in 2020.

To understand more about LDN’s success and plans for innovation and growth, we invited LDN’s CEO Dalton Zheng to take a deep dive into the evolution of digital marketing, the changing role of agencies and the value of marketing.

Consumption expansion and quality improvement create new opportunities for the marketing industry

China’s consumer market is supported by a population of 1.4 billion presents a significant advantage for China’s economic growth. That consumption has already become the major driver for the country’s economic growth.

There have been three key consumption developments since China entered the newest stage of advancement: the rapid rise of consumption levels, the significant change in the structure of consumption, and the fast growth in the capacity of consumption.

China will become the world’s largest consumer market, with total retail figures eclipsing the US by 2021 at the earliest and 2023 at the latest.

The increase in consumer potential and the opening up of the market means that new consumption and new retail are on the rise in China. The year 2020 witnessed the birth of over 2,000 new consumption brands. During the “Double 11” shopping festival, 360 new brands achieved top sales in specific categories, with 16 new brands breaking 100 million in turnover.

Zheng highlights two major challenges currently faced by marketers:

1. The need for brands to enhance their brand power, product capacity and communication method in a sustainable and effective manner, all of which will allow for marketers to better communicate and connect with consumers.

2. The need to help brands to enhance their understanding and control of different platforms in order to ramp up content output and increase sales conversions.

Trends over the past two years point towards the fact that domestic brands and products are increasingly valued by more and more young Chinese people. 

China has also seen rapid changes in the area of digital transformation, with new phenomena revolutionising the digital landscape every six months to a year; the continuing rise of live streaming and short video being one example.

According to QuestMobile’s China Mobile Internet Report, short video platforms surpassed other media in advertising revenue - with a 42.6% revenue share - in the first half of 2021.

As new platforms and trends keep emerging, in areas such as social-e-commerce, live broadcast e-commerce, cross border e-commerce and private domain operations, brands are also finding it difficult to predict marketing trends and design the most up-to-date strategies in response.

This ever-changing environment also makes it difficult for brands to make long-term plans.

The new business environment has created opportunities for marketers. Yet with those opportunities come fresh challenges.

Brand Partner: The new role of agencies in the new retail environment 

The shifts in the market mark a new phase in the relationship between brands and agencies, transitioning from the traditional service-and-served model to a more long-term, mutually trusted partnership.

As key players in the marketing ecosystem, agencies are no longer confined to traditional remits, such as creative content production and media buying, but have the opportunity to stand alongside brand owners as brand partners in the new retail environment.

Looking back, the rapid development of LDN results from its deep understanding of China’s economic development and its impact on the digital marketing landscape. 

Today LDN comprises six wholly owned agencies, including MediaV, Amber China, arkr Digital, LEO Wansheng Ad, MIAGE and Wit Advertising.

LDN continues to improve its capabilities at the front and back end of the industry through investment and the incubations to help brands make decisions & execute campaigns in an efficient manner.

The way LDN has developed could be seen a microcosm of various shifts within the larger advertising industry. Every single LDN’s innovation is a response to industry demand.

Front-end marketing: becoming a brand partner, driving creative and business values

When it comes to front-end marketing, LDN has several companies specialising in integrated marketing.

Amber China, for example, is dedicated to making brands purposeful through creativity and sincerity, providing clients with effective digital-driven integrated marketing communications solutions.

arkr Digital, meanwhile specialises in integrated creation, focusing on social media marketing to create ‘chemistry’ between brands and consumers, in order to help brands innovate their digital marketing.

The goal of these two companies is to expand upstream, extending into business strategy and product design and packaging.

Amber China’s new label Q&A, specialising in branding and product design, was involved in the launch of Durex’s high-end product line 001; from the logo and packing design, to TVC and social media content, to the offline pop-up shop. Amber China produced the widely popular CG microfilm “Safely Feel the Real World”, Durex 001’s co-branding project with Volvo.

The microfilm won a slew of international awards, including D&AD, One Show, CLIO, ADC and NYF, while the package design has been shortlisted for the One Show Award, Pentawards and won an Ad Stars trophy.

Amber China is leveraging its strong creative background not only for content, but also strategy, service and on-the-ground activations, helping their clients grow their businesses.

arkr Digital is dedicated to becoming a new consumption brand partner and has created a complete set of tools for designing new consumer brand strategies. The company was involved in the incubation process of the new consumer brand Xiong Kun Kun, providing comprehensive support, from product design to e-commerce launch, and successfully helped the brand reach no.1 position in the liquid coffee category on Tmall.

The expansion of front-end marketing allows LDN to better understand the brand, so they can assist them in launching products that are more in line with future trends and consumer needs, creating value for the brand in both the dimensions of "creativity" and "business".

Back-end marketing: uplifting traffic efficiency, exploring traffic monetisation and sales conversion

When it comes to back-end marketing, LDN has several companies specialising in media and traffic. 

For example, LEO Wansheng Ad mainly serves Ocean Engine and Tencent Ads, helping to deliver news feed ads - predominately in short video form - for a variety of leading clients in the online service, e-commerce, gaming and Internet industries.

MIAGE, on the other hand, serves major mainstream platforms including Kuaishou, 360 and Baidu, and is the key partner for Huawei, Xiaomi, Oppo, and Vivo. The company specialises in app and content distribution.

In 2020, Leo Wansheng Ad and MIAGE exceeded turnover of 5.4 billion and 3.3 billion respectively.

At present, Leo Wansheng Ad has more than 300 signed actors and actresses, creating a daily average of more than 400 original short videos, serving more than 1,500 quality clients.

MIAGE meanwhile, has a team of 150 focusing on short video production, creating as many as 1,000 real-life videos per week, or more than 10,000 videos produced with stock materials, serving around 1200-1400 clients per year.

LDN was at the forefront of live-streaming e-commerce and short video advertising, having started the development as early as 2018. It successfully incubated e-commerce label Mars Garage, setting up 15 live-streaming studios within the company, helping to develop its KOL strategy, and integrating its human resources, product and channel arms.

In addition, LDN set up its own short video bases in Shanghai and Chongqing with 3500 square meter and more than 100 scenes, upgrading into a more systematic, efficient and centralised system of operation and management for the development of KOLs, live-streaming and short video advertising.      

This focus on back-end marketing has enabled LDN’s march towards traffic monetisation and sales conversion for digital media, allowing it to better advise brands on new sales models.

Technology products empower brands to achieve their digital marketing transformation

As post-click marketing gains more traction, the value of tools has come to the fore. Here, LDN is not only collaborating with established SaaS and PaaS companies, but also actively developing its own tools.  

To boost distribution efficiency, LDN has developed a “Titan Engine” to achieve distribution automation and editing automation, effectively fulfilling the demand for distribution efficiency and content customisation across the board.

Meanwhile, LDN’s subsidiary MediaV has optimised its operational technology by utilising innovative media and new post-click tools including joint modelling, industry in-depth conversion modelling and AI outbound to achieve traffic competition and cost reduction. These innovations have helped the company in achieving both effectiveness and efficiency in distribution.

When it comes to private traffic, LDN has incubated “Business Butler” and "ReachLinkO” to provide martech tools for private domain operations and transactions. "Business Butler" connects public domain, private domain and transaction in order to support companies with precise operations and management of all contact points in private domains. “ReachLinkO” mainly serves Meituan and Dianping by means of O2O marketing to circulate their offline/online scenarios and manage customer service.

Private domain operation efficiently achieves traffic conversion by connecting different business sectors. This allows marketers to better leverage media and short video advertising to achieve sales conversion and promotion. 

Creating value in day-to-day work

Looking ahead, LDN’s Zheng says that advertising agencies should work on providing more comprehensive and professional marketing services to help their clients boost sales and achieve success in both communication and business performance.

Advertising agencies must pay close attention to market dynamics, respond to changes and seize opportunities in a timely manner, working collaboratively with their clients. Only when agencies and brands become mutually trusting partners can they grow together.

This is what LDN has always strived to do.

Zheng believes everyone in the marketing industry, including those who work for brands, platforms and agencies, has the opportunity to create value through day-to-day work, and to lead and drive the industry forward.

LDN hopes to extend their service to other parts of China, supporting major brands to tap into third-tier cities and rural areas, and helping new domestic consumer brands build recognition. LDN is dedicated to supporting all types of brands in their digital transformation journey and contributing their part to transforming Shanghai into the "International Digital Advertising  Capital”.