Growth Strategies For FMCGAli HeydariMBA – MarketingIV Semester
FMCG Fast-moving consumer goods (FMCG) or consumer packaged goods (CPG) are products that are sold quickly and at relatively low cost. Examples include non-durable goods such as soft drinks, toiletries, and grocery items. Though the absolute profit made on FMCG products is relatively small, they generally sell in large quantities, so the cumulative profit on such products can be substantial.
Introduction The success of an FMCG depends greatly on its marketing strategy. Typically a marketer pursues a wide combination of strategies. For instance when prices are competitive the company would use an extensive distribution network, design suitable advertising and sales promotion schemes for time to time.
1.Multibrand Strategy A company often nurtures a number of brands in the same category. There are various motives for doing this. The main rationale behind this strategy is to capture as much of the market share as possible by trying to cover as many segments as possible, as it is not possible for one brand to cater to the entire market. This also enables the company to lock up more distributer shelf space. Example : Hindustan Lever . It has Dove in the ultra premium segment, Lifebuoy for the economy segment and brands like Rexona, Liril, Lux, Le Sancy for the intervening segment.
2.Product Flanking Refers to the introduction of different combinations of products at different prices, to cover as many market segments as possible. It is basically offering the same product in different sizes and price combinations to tap diverse market opportunities. The idea behind this concept is to flank the core product by offering different variations of size and price so that the consumer finds some brand to choose from. Example: Vicks the cough and cold relieving medicine is now available in small containers and also as inhalers, cough drops and cough syrups.
3.Brand Extensions Companies make brand extensions in the hope that the extensions will be able to ride on the equity of successful brands, and that the new brand will stand in its own right in the course of time. A well respected brand name gives the new product instant recognition and easier acceptance. It enables the company to enter new product categories more easily. Example: Amul. With the success of its first product, Amul milk powder, the company came out with Amul ghee, Amul butter, Amul cheese, Cheese spread, and finally added Amul chocolates to its portfolio.
4.Building Product Lines Some companies add related new product lines to give the consumer all the products he/she would like to buy under one umbrella. Example: Britannia has adopted a similar strategy. It has introduced different kinds of biscuits and backed foods in the past few years. By adding a number of flavours in each product line the company grew in the industry.
5.New Product Development A company can add new products through the acquisition of other companies or by devoting one’s own efforts on new product development. With the help of new products a company can enter a growing market for the first time, and supplement its existing product lines. Example: Dove by HLL is an example of creating an entirely new premium segment. For the first time in India, a soap with One-fourth moisturiser was offered to the consumer. It has been positioned for the super premium segment as a skin care product not as a soap.
6.Innovations in Core Products In the FMCG market, the life of a product is short. Marketers continually try to introduce new brands to offer something new and meet the changing requirements of customer. It is prudent for a marketer to innovate from time to time both by technological expertise as well as from the consumer’s or dealer’s feedback. Such innovations are tried out around the core products of a company.
7.Long term outlook Many companies adopt a long term outlook towards growth in an FMCG market. In the process, short term gains which might adversely affect the long term prospects of the company are sacrificed. Example: Kellogg’s in Mexico. The concept of cornflakes for breakfast promoted by Kellogg’s is entirely American in nature and in Mexico which is culturally so different from America, could not accept. Kellogg’s with its long term outlook took 28 years before finally breaking even. Today is the market leader in the breakfast cereals market, enjoying an unparalleled monopoly.
8.Extending the PLC Economic conditions change, competitors launch new assaults, and the products encounters new types of buyers and new requirements are situations in which a FMCG company try to extend the PLC. In the mature stage of the PLC, some companies abandon their weaker products. They prefer to concentrate their resources on their more profitable products and quickly develop new products. Example: Existing models in products like automobiles, motorcycles, watches and cameras in India have experienced a good demand whenever new options were offered.
9.Expanding markets by usage A company usually expands the market for its brand in two ways, either to increase the number of customers or by encouraging more consumption per intake. The usage rate of the consumers can be increased in 3 ways :1) It may try to educate or persuade customers to use the product more frequently.2) The Company can try to induce users to consume more of the product on each occasion.3) The company can try to discover new product uses and convince customers to use the product in more varied ways.
10.Wide distribution network A very simple way of increasing FMCG company’s market share is by developing a strong distribution network, preferably in terms of more locations. An extensive distribution system can be developed over time, or the company many acquire another company which has an extensive distribution network. Example: Brooke Bond, Asian Paints, Hindustan Lever, Union Carbide have developed a good distribution network.
11.Monitoring the pulse of the consumers Companies spend considerable effort to find out the what, where, how and when of their consumers. Well known companies frequently undertake marketing research to find out more about their consumers and how to satisfy their needs and wants in a better manner. It helps them to monitor the pulse of their buyers. Example: We may cite here the famous Marketing Research about instant coffee.
12.Advertising and Media coverage Advertising is required to build awareness about an FMCG or brand which is available in the market but not many people might know about it. Informative advertising figures heavily in the pioneering stage of a product category, where the objective is to build primary demand. Persuasive advertising becomes important in the competitive stage where the objective is to build a selective demand for a particular brand. Reminder advertising is quite common with mature products. Example: Expensive four colour Coca-Cola ads in magazines tries to remind people to purchase it.
13.Sales promotion Sales promotions offer a direct incentive to buy more in the short term. They are designed to stimulate quicker and/or greater purchase of particular products by consumers or the trade. Example : Pepsi has been doing a large amount of promotions since the time it entered India. Pepsi cassettes and T-shirts have been offered to young people all over the country.