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EXECUTIVE SUMMARY
Products which have a quick turnover, and relatively low cost are known as FastMoving Consumer Goods (FMCG). FMCG products are those that get replaced within
a year. Examples of FMCG generally include a wide range of frequently purchased
consumer products such as toiletries, soap, cosmetics, tooth cleaning products, shaving
products and detergents, as well as other non-durables such as glassware, bulbs,
batteries, paper products, and plastic goods. FMCG may also include pharmaceuticals,
consumer electronics, packaged food products, soft drinks, tissue paper, and chocolate
bars.
Indias FMCG sector is the fourth largest sector in the economy and creates
employment for more than three million people in downstream activities. Its principal
constituents are Household Care, Personal Care and Food & Beverages. The total
FMCG market is in excess of Rs. 85,000 Crores. It is currently growing at double digit
growth rate and is expected to maintain a high growth rate. FMCG Industry is
characterized by a well established distribution network, low penetration levels, low
operating cost, lower per capita consumption and intense competition between theorganized and unorganized segments.
The Rs 85,000-crore Indian FMCG industry is expected to register a healthy growth in
the third quarter of 2008-09 despite the economic downturn. The industry is expected to
register a 15% growth in Q3 2008-09 as compared to the corresponding period last ye
ar. Unlike other sectors, the FMCG industry did not slow down since Q2 2008. the
industry is doing pretty well, bucking the trend. As it is meeting the every-day demands
of consumers, it will continue to grow. In the last two months, input costs have come
down and this will reflect in Q3 and Q4 results.
Market share movements indicate that companies such as Marico Ltd and Nestle India
Ltd, with domination in their key categories, have improved their market shares and
outperformed peers in the FMCG sector. This has been also aided by the lack of
competition in the respective categories. Single-product leaders such as Colgate
Palmolive India Ltd and Britannia Industries Ltd have also witnessed strength in their
respective categories, aided by innovations and strong distribution.
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RESEARCH OBJECTIVE
OBJECTIVES OF THE STUDY
To profile the cherry pickers.
To study the cherry picking sales pattern.
To find out whether Cherry pickers increases the basket size.
To find out whether cherry pickers increase the retail turnover.
To understand the demand pattern of FMCG products in the rural market.
To understand the image of products in the eyes of the consumers.
Heavy launch costs on new products on launch advertisements, free samples
and product promotions.
Majority of the product classes require very low investment in fixed assets
Existence of contract manufacturing
Marketing assumes a significant place in the brand building process
Extensive distribution networks and logistics are key to achieving a high level
of penetration in both the urban and rural markets
Factors like low entry barriers in terms of low capital investment, fiscal
incentives from government and low brand awareness in rural areas have led to
the mushrooming of the unorganised sector.
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RESEARCH METHODOLOGY
TYPE OF RESEARCH DESIGN
Descriptive research was used for the project.
QUANTITATIVE RESEARCH
A survey of customers leaving Big Bazaar was done so that all details of the shopping
trip were fresh in their minds and hence accurate price data could be collected. The
survey was done by questionnaire which comprised of closed ended questions.
SOURCES OF DATA
Primary data was collected through survey of customers at Big Bazaar.
Secondary data was collected from previous research by various authors on this topic,
retail biz magazine and articles and reports on the internet.
METHODOLOGY
The method used for survey was structured questionnaire.
RESEARCH TOOL
Questionnaire
QUESTIONNAIRE DESIGN
The questionnaire comprised ofclosed ended questions.
SAMPLE DESIGN
SAMPLE SIZE: 100 samples
SAMPLING TECHNIQUE: Convenience sampling.
PILOT STUDY
A pilot survey of 5 customers at Big Bazaar had been done to ensure that the
questionnaire is correct and relevant of research objectives.
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SURVEY
Once pilot study is over, actual survey will be conducted.
DATAANALYSISThe researcher has used inferential statistics (through SPSS) in order to draw a
conclusion. Result of the study has been put in tables and graphs for easy understanding
of the findings of the research.
EXPECTED CONTRIBUTION OF THE STUDY
This project will help in giving a fresh insight on this topic on which research has been
done very rarely in India. It will help to understand the overall pattern of this activity
and its impact on the marketing strategies of various FMCG products. Also the
profiling of this set of consumers can help in framing the strategies accordingly.
REASON FOR TAKING UP THE PROJECT
The researcher has done his BBA and currently pursuing his MBA. This topic has not
been researched upon extensively in India and hence promises unique exposure and
experience to the researcher and hence this project has been undertaken.
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INTRODUCTION
Fast-moving consumer goods (FMCG) orconsumer 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 are generally
sold in large quantities, and so the cumulative profit on such products can be
substantial.
Fast-moving consumer electronics are a type of FMCG and are typically low
priced generic or easily substitutable consumer electronics, including lower end
mobile phones,MP3 players,game players, and digital cameras, which have a
short usage life, typically a year or less, and as such are disposable. Cheap
FMCG electronics are often retained even after immediate failure, as the
purchaser rationalizes the decision to not return the goods on the basis that the
goods were cheap to begin with, and that the cost of return relative to the low
cost of purchase is high. Thus low-quality electronic FMCG goods can be highly
profitable for the vendors.
The term FMCGs refers to those retail goods that are generally replaced or fully
used up over a short period of days, weeks, or months, and within one year. This
contrasts with durable goods or major appliances such as kitchen appliances,
which are generally replaced over a period of several years.
FMCG have a short shelf life, either as a result of high consumer demand or
because the product deteriorates rapidly. Some FMCGssuch as meat, fruits
and vegetables, dairy products, and baked goodsare highly perishable. Other
goods such as alcohol, toiletries, pre-packaged foods, soft drinks, and cleaning
products have high turnoverrates. An excellent example is a newspaperevery
day's newspaper carries different content, making one useless just one day later,
necessitating a new purchase every day.
http://en.wikipedia.org/wiki/Low_costhttp://en.wikipedia.org/wiki/Soft_drinkhttp://en.wikipedia.org/wiki/Toiletrieshttp://en.wikipedia.org/wiki/Consumer_electronicshttp://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/Portable_media_playerhttp://en.wikipedia.org/wiki/Handheld_video_gamehttp://en.wikipedia.org/wiki/Digital_camerahttp://en.wikipedia.org/wiki/Durable_goodhttp://en.wikipedia.org/wiki/Major_appliancehttp://en.wikipedia.org/wiki/Soft_drinkhttp://en.wikipedia.org/wiki/Inventory_turnoverhttp://en.wikipedia.org/wiki/Newspaperhttp://en.wikipedia.org/wiki/Newspaperhttp://en.wikipedia.org/wiki/Inventory_turnoverhttp://en.wikipedia.org/wiki/Soft_drinkhttp://en.wikipedia.org/wiki/Major_appliancehttp://en.wikipedia.org/wiki/Durable_goodhttp://en.wikipedia.org/wiki/Digital_camerahttp://en.wikipedia.org/wiki/Handheld_video_gamehttp://en.wikipedia.org/wiki/Portable_media_playerhttp://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/Consumer_electronicshttp://en.wikipedia.org/wiki/Toiletrieshttp://en.wikipedia.org/wiki/Soft_drinkhttp://en.wikipedia.org/wiki/Low_cost -
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The following are the main characteristics of FMCGs:
From the consumers' perspective:
o Frequent purchase
o Low involvement (little or no effort to choose the itemproducts
with strong brand loyalty are exceptions to this rule)
o Low price
From the marketers' angle:
o High volumes
o Low contribution margins
o Extensive distribution networks
o High stock turnover
ISIC definition
The retail market for FMCGs includes businesses in the following International
Standard Industrial Classification (ISIC) (Revision 3) categories :
ISIC 5211 retail sales in non-specialized stores
ISIC 5219 other retail sale in non-specialized stores
ISIC 5220 retail sale of food, beverages and tobacco in specialized stores
ISIC 5231 retail sale of pharmaceutical and medical goods, cosmetic and
toilet articles
ISIC 5251 retail sale via mail order houses
ISIC 5252 retail sale via stalls and markets
ISIC 5259 whole sale goods
Supplier industries for FMCGs include
1511 meat and meat products
1512 fish and fish products
1513 fruit and vegetables
1514 vegetable and animal oils and fats
http://en.wikipedia.org/wiki/Brand_loyaltyhttp://en.wikipedia.org/wiki/Contribution_marginhttp://en.wikipedia.org/wiki/Distribution_%28business%29http://en.wikipedia.org/wiki/Stock_turnoverhttp://en.wikipedia.org/wiki/International_Standard_Industrial_Classificationhttp://en.wikipedia.org/wiki/International_Standard_Industrial_Classificationhttp://en.wikipedia.org/wiki/International_Standard_Industrial_Classificationhttp://en.wikipedia.org/wiki/International_Standard_Industrial_Classificationhttp://en.wikipedia.org/wiki/Stock_turnoverhttp://en.wikipedia.org/wiki/Distribution_%28business%29http://en.wikipedia.org/wiki/Contribution_marginhttp://en.wikipedia.org/wiki/Brand_loyalty -
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1520 dairy products
1531 grain mill products
1532 starches and starch products
1533 animal feeds
1541 bakery products
1542 sugar
1543 cocoa, chocolate and sugar confectionery
1544 macaroni, noodles, couscous
1549 other food products
1551 spirits; ethyl alcohol
1552 wines
1553 malt liquors and malt
1554 soft drinks, mineral waters
1600 tobacco products
2101 pulp, paper and paperboard
2102 corrugated paper, containers
2109 other articles of paper and paperboard
2424 soap and detergents, cleaning preparations, perfumes.like the big
supermarkets
FMCG sector in India
The fast-moving consumer goods (FMCG) sector in India is the fourth
largest sector in the economy. It also called the consumer packaged goods sector.
The FMCG sector in India has market size in excess of US$ 13.1 billion as of
the year 2012. The FMCG sector in India had a growth rate of 15% in the year
2011.
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FMCG companies in India
The following is a list of FMCG companies in India:
Hindustan Unilever Ltd.
Colgate-Palmolive (India) Ltd.
ITC Limited
SABMiller, India
Britannia Industries Ltd.
Marico Industries Ltd.
Nestl India
Godrej Group
Tata Global Beverages
Parle Agro
Nirma
Bovonto
Cavin Kare
Grove limited
Wipro
GCMMF (AMUL)
Reckitt Benckiser
Cadburys India
Procter & Gamble Hygiene and Health Care
Gillette India Ltd.
Godfrey Phillips
Henkel Spic
Johnson & Johnson
Himalaya Herbal Healthcare
Modi Revlon
http://en.wikipedia.org/wiki/Hindustan_Unileverhttp://en.wikipedia.org/wiki/Colgate-Palmolivehttp://en.wikipedia.org/wiki/ITC_Limitedhttp://en.wikipedia.org/wiki/SABMillerhttp://en.wikipedia.org/wiki/Britannia_Industrieshttp://en.wikipedia.org/wiki/Maricohttp://en.wikipedia.org/wiki/Nestlehttp://en.wikipedia.org/wiki/Godrej_Grouphttp://en.wikipedia.org/wiki/Tata_Global_Beverageshttp://en.wikipedia.org/wiki/Parle_Agrohttp://en.wikipedia.org/wiki/Nirmahttp://en.wikipedia.org/wiki/Bovontohttp://en.wikipedia.org/wiki/Cavin_Karehttp://en.wikipedia.org/wiki/Wiprohttp://en.wikipedia.org/wiki/Cadburyshttp://en.wikipedia.org/wiki/Procter_%26_Gamblehttp://en.wikipedia.org/wiki/Gillette_%28brand%29http://en.wikipedia.org/w/index.php?title=Godfrey_Phillips&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Henkel_Spic&action=edit&redlink=1http://en.wikipedia.org/wiki/Johnson_%26_Johnsonhttp://en.wikipedia.org/wiki/Himalaya_Herbal_Healthcarehttp://en.wikipedia.org/wiki/Himalaya_Herbal_Healthcarehttp://en.wikipedia.org/wiki/Johnson_%26_Johnsonhttp://en.wikipedia.org/w/index.php?title=Henkel_Spic&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Godfrey_Phillips&action=edit&redlink=1http://en.wikipedia.org/wiki/Gillette_%28brand%29http://en.wikipedia.org/wiki/Procter_%26_Gamblehttp://en.wikipedia.org/wiki/Cadburyshttp://en.wikipedia.org/wiki/Wiprohttp://en.wikipedia.org/wiki/Cavin_Karehttp://en.wikipedia.org/wiki/Bovontohttp://en.wikipedia.org/wiki/Nirmahttp://en.wikipedia.org/wiki/Parle_Agrohttp://en.wikipedia.org/wiki/Tata_Global_Beverageshttp://en.wikipedia.org/wiki/Godrej_Grouphttp://en.wikipedia.org/wiki/Nestlehttp://en.wikipedia.org/wiki/Maricohttp://en.wikipedia.org/wiki/Britannia_Industrieshttp://en.wikipedia.org/wiki/SABMillerhttp://en.wikipedia.org/wiki/ITC_Limitedhttp://en.wikipedia.org/wiki/Colgate-Palmolivehttp://en.wikipedia.org/wiki/Hindustan_Unilever -
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Industry Category and Products
Household Care
Personal Wash:-
The market size of personal wash is estimated to be around Rs. 8,300 Cr. The personal
wash can be segregated into three segments: Premium, Economy and Popular. The
penetration level of soaps is ~92 per cent. It is available in 5 million retail stores, out of
which, 75 per cent are in the rural areas. HUL is the leader with market share of ~53
per cent; Godrej occupies second position with market share of ~10 per cent. With
increase in disposable incomes, growth in rural demand is expected to increase because
consumers are moving up towards premium products. However, in the recent past there
has not been much change in the volume of premium soaps in proportion to economy
soaps, because increase in prices has led some consumers to look for cheaper
substitutes.
Detergents:-
The size of the detergent market is estimated to be Rs. 12,000 Cr. Household care
segment is characterized by high degree of competition and high level of penetration.With rapid urbanization, emergence of small pack size and sachets, the demand for the
household care products is flourishing. The demand for detergents has been growing
but the regional and small unorganized players account for a major share of the total
volume of the detergent market. In washing powder HUL is the leader with ~38 per
cent of market share. Other major players are Nirma, Henkel and Proctor & Gamble.
Personal Care
Skin Care:-
The total skin care market is estimated to be around Rs. 3,400 Cr. The skin care market
is at a primary stage in India. The penetration level of this segment in India is around
20 per cent. With changing life styles, increase in disposable incomes, greater product
choice and availability, people are becoming aware about personal grooming. The
major players in this segment are Hindustan Unilever with a market share of ~54 per
cent, fol-lowed by CavinKare with a market share of ~12 per cent and Godrej with a
market share of ~3 per cent.
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Hair Care:-
The hair care market in India is estimated at around Rs. 3,800 Cr. The hair care market
can be segmented into hair oils, shampoos, hair colorants & conditioners, and hair gels.
Marico is the leader in Hair Oil segment with market share of ~ 33 per cent; Dabur
occu-pies second position at ~17 per cent.
Shampoos:-
The Indian shampoo market is estimated to be around Rs. 2,700 Cr. It has the
penetration level of only 13 per cent in India. Sachet makes up to 40 per cent of the
total shampoo sale. It has low penetration level even in metros. Again the market is
dominated by HUL with around ~47 per cent market share; P&G occupies second
position with market share of around ~23 per cent. Antidandruff segment constitutes
around 15 per cent of the total shampoo market.
The market is further expected to increase due to increased marketing by players and
availability of shampoos in affordable sachets.
Oral Care:-
The oral care market can be segmented into toothpaste - 60 per cent; toothpowder - 23
per cent; toothbrushes - 17 per cent. The total toothpaste market is estimated to be
around Rs. 3,500 Cr. The penetration level of toothpowder/toothpaste in urban areas is
three times that of rural areas. This segment is dominated by Colgate-Palmolive with
market share of ~49 per cent, while HUL occupies second position with market share
of ~30 per cent. In toothpowders market, Colgate and Dabur are the major players. The
oral care market, es-pecially toothpastes, remains under penetrated in India with
penetration level ~50 per cent.
Food & Beverages
Food Segment :-
The foods category in FMCG is gaining popularity with a swing of launches by HUL,
ITC, Godrej, and others. This category has 18 major brands aggregating Rs. 4,600 Cr.
Nestle and Amul slug it out in the powders segment. The food category has also seen
innovations like softies in ice creams, ready to eat rice by HUL and pizzas by both
GCMMF and Godrej Pillsbury.
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Tea :-
The major share of tea market is dominated by unorganized players. More than 50 per
cent of the market share is capture by unorganized players. Leading branded tea players
are HUL and Tata Tea.
Coffee :-
The Indian beverage industry faces over supply in segments like coffee and tea.
However, more than 50 per cent of the market share is in unpacked or loose form. The
major players in this segment are Nestl, HUL and Tata Tea.
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GROWTH PROSPECT
Large Market
India has a population of more than 1.150 Billions which is just behind China.
According to the estimates, by 2030 India population will be around 1.450 Billion and
will surpass China to become the World largest in terms of population. FMCG Industry
which is directly related to the population is expected to maintain a robust growth rate.
Spending Pattern
An increase is spending pattern has been witnessed in Indian FMCG market. There is
an upward trend in urban as well as rural market and also an increase in spending in
organ-ized retail sector. An increase in disposable income, of household mainly
because of in-crease in nuclear family where both the husband and wife are earning,
has leads to growth rate in FMCG goods.
Changing Profile and Mind Set of Consumer
People are becoming conscious about health and hygienic. There is a change in the
mind set of the Consumer and now looking at Money for Value rather than Value
for Money. We have seen willingness in consumers to move to evolved products/
brands, because of changing lifestyles, rising disposable income etc. Consumers are
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switching from economy to premium product even we have witnessed a sharp increase
in the sales of packaged water and water purifier. Findings according to a recent survey
by A. C. Nielsen shows about 71 per cent of Indian take notice of packaged goods
labels containing nutritional information compared to two years ago which was only 59
per cent.
Sources: Naukri Hub, IBEF, Chennai Online
Sources: Statistical Outline of India (2001-02), NCAER
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Advantages To The Sector
Governmental Policy
Indian Government has enacted policies aimed at attaining international
competitiveness through lifting of the quantitative restrictions, reducing excise duties,
automatic foreign in-vestment and food laws resulting in an environment that fosters
growth. 100 per cent ex-port oriented units can be set up by government approval and
use of foreign brand names is now freely permitted.
Central & State Initiatives
Recently Government has announced a cut of 4 per cent in excise duty to fight with the
slowdown of the Economy. This announcement has a positive impact on the industry.
But the benefit from the 4 per cent reduction in excise duty is not likely to be uniform
across FMCG categories or players. The changes in excise duty do not impact
cigarettes (ITC, Godfrey Phillips), biscuits (Britannia Industries, ITC) or ready-to-eat
foods, as these prod-ucts are either subject to specific duty or are exempt from excise.
Even players with manu-facturing facilities located mainly in tax-free zones will also
not see material excise duty savings. Only large FMCG-makers may be the key ones to
bet and gain on excise cut.
Foreign Direct Investment (FDI)
Automatic investment approval (including foreign technology agreements within
specified norms), up to 100 per cent foreign equity or 100 per cent for NRI and
Overseas Corporate Bodies (OCBs) investment, is allowed for most of the food
processing sector except malted food, alcoholic beverages and those reserved for small
scale industries (SSI). There is a continuous growth in net FDI Inflow. There is an
increase of about 150 per cent in Net Inflow for Vegetable Oils & Vanaspati for the
year 2008.
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As their incomes and standards of living improve, Indian customers for FMCGs are
shifting towards higher lifestyle categories like skin care, hair care, deodorants,
convenience foods, health foods etc.
In fact, skin care, hair care, deodorants, convenience foods, and health foods are
expected to experience notably higher growth than others in the near term, spurring
various types of MNC investments to improve their lifestyle products businesses.
For personal care lifestyle products, consumers are becoming increasingly willing to
pay premium prices for them. This trend has compelled some companies to raise
prices and even create products aimed at the premium segment.
In fact, deodorants, hair dyes and shampoos alone helped the FMCG industry to grow
by 16% in 2007-08 (April-February), and 15% in the same period in 2006-079.
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Market Opportunities
Vast Rural Market
Rural India accounts for more than 700 Million consumers, or ~70 per cent of the
Indian population and accounts for ~50 per cent of the total FMCG market. The
working rural population is approximately 400 Millions. And an average citizen in rural
India has less then half of the purchasing power as compare to his urban counterpart.
Still there is an untapped market and most of the FMCG Companies are taking different
steps to capture rural market share. The market for FMCG products in rural India is
esti-mated ~ 52 per cent and is projected to touch ~ 60 per cent within a year.
Hindustan Unilever Ltd is the largest player in the industry and has the widest market
coverage.
Export - Leveraging the Cost Advantage
Cheap labor and quality product & services have helped India to represent as a cost ad-
vantage over other Countries. Even the Government has offered zero import duty on
capital goods and raw material for 100% export oriented units. Multi National
Companies out-source its product requirements from its Indian company to have a cost
advantage. India is the largest producer of livestock, milk, sugarcane, coconut, spices
and cashew apart from being the second largest producer of rice, wheat, fruits &
vegetables. It adds a cost advantage as well as easily available raw materials.
Sectoral Opportunities
Major Key Sectoral opportunities for Indian FMCG Sector are mentioned below:
Dai ry Based Products
India is the largest milk producer in the world, yet only around 15 per cent of the milk
is processed. The organized liquid milk business is in its infancy and also has large
long-term growth potential. Even investment opportunities exist in value-added
products like desserts, puddings etc.
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Packaged Food
Only about 10-12 per cent of output is processed and consumed in packaged form, thus
highlighting the huge potential for expansion of this industry.
Oral Care
The oral care industry, especially toothpastes, remains under penetrated in India with
penetration rates around 50 per cent. With rise in per capita incomes and awareness of
oral hygiene, the growth potential is huge. Lower price and smaller packs are also
likely to drive potential up trading.
Beverages
Indian tea market is dominated by unorganized players. More than 50% of the market
share is capture by unorganized players highlighting high potential for organized
players.
The Indian FMCG sector is the fourth largest sector in the economy with a total market
size in excess of US$ 13.1 billion. It has a strong MNC presence and is characterised by
a wellestablished distribution network, intense competition between the organised and
unorganised segments and low operational cost. Availability of key raw materials,
cheaper labour costs and presence across the entire value chain gives India a
competitive advantage.
The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in
2015. Penetration level as well as per capita consumption in most product categories
like jams, toothpaste, skin care, hair wash etc in India is low indicating the untapped
market potential. Burgeoning Indian population, particularly the middle class and the
rural segments, presents an opportunity to makers of branded products to convert
consumers to branded products.
Growth is also likely to come from consumer 'upgrading' in the matured product
categories. With 200 million people expected to shift to processed and packaged food
by 2010, India needs around US$ 28 billion of investment in the food-processing
industry.
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Consumption pie:
Source: KSA Technopak Consumer Outlook 2004.
Source: Euro monitor.
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Change in the Indian consumer profile:
Source: Statistical Outline of India (2002-03).
Rapid urbanisation, increased literacy and rising per capita income, have all caused
rapid growth and change in demand patterns, leading to an explosion of new
opportunities. Around 45 per cent of the population in India is below 20 years of age
and the young population is set to rise further. Aspiration levels in this age group have
been fuelled by greater media exposure, unleashing a latent demand with more money
and a new mindset.
Demand-supply gap
Currently, only a small percentage of the raw materials in India are processed into
value added products even as the demand for processed and convenience food is on the
rise. This demand supply gap indicates an untapped opportunity in areas such as
packaged form, convenience food and drinks, milk products etc. In the personal care
segment, the low penetration rate in both the rural and urban areas indicates a market
potential.
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INDIA COMPETITIVENESS AND COMPARISON WITH THE WORLD
MARKETS
Materials availabilityIndia has a diverse agro-climatic condition due to which there exists a wide-ranging
and large raw material base suitable for food processing industries. India is the largest
producer of livestock, milk, sugarcane, coconut, spices and cashew and is the second
largest producer of rice, wheat and fruits & vegetables. India also has an ample supply
of caustic soda and soda ash, the raw materials in the production of soaps and
detergents India produced 1.6 million tonnes of caustic soda in 2003-04. Tata
Chemicals, one of the largest producers of synthetic soda ash in the world is located in
India. The availability of these raw materials gives
India the locational advantage.
Source: DIPP.
Apart from the advantage in terms of ample raw material availability, existence of low-
cost labour force also works in favour of India. Labour cost in India is amongst the
lowest in Asian countries. Easy raw material availability and low labour costs have
resulted in a lower cost of production. Many multi-nationals have set up large low cost
production bases in India to outsource for domestic as well as export markets.
Penetration and per capita consumption
Rural - urban penetration (2002)
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Source: HLL, Indian Readership Survey.
Penetration level in most product categories like jams, tooth paste, skin care, hair wash
etc in India is low. The contrast is particularly striking between the rural and urban
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segments - the average consumption by rural households is much lower than their urban
counterparts. Low penetration indicates the existence of unsaturated markets, which are
likely to expand as the income levels rise. This provides an excellent opportunity for
the industry players in the form of a vastly untapped market.
Moreover, per capita consumption in most of the FMCG categories (including the high
penetration categories) in India is low as compared to both the developed markets and
other emerging economies. A rise in per capita consumption, with improvement in
incomes and affordability and change in tastes and preferences, is further expected to
boost FMCG demand. Growth is also likely to come from consumer "upgrading",
especially in the matured product categories.
Household income distribution2003
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Household income distribution2015
Demand for FMCG products is set to boom by almost 60 per cent by 2007 and more
than 100 per cent by 2015. This will be driven by the rise in share of middle class(defined as the climbers and consuming class) from 67 per cent in 2003 to 88 per cent
in 2015. The boom in various consumer categories, further, indicates a latent demand
for various product segments. For example, the upper end of very rich and a part of the
consuming class indicate a small but rapidly growing segment for branded products.
The middle segment, on the other hand, indicates a large market for the mass end
products.
The BRICs report indicates that India's per capita disposable income, currently at US$
556 per annum, will rise to US$ 1150 by 2015 - another FMCG demand driver. Spurt in
the industrial and services sector growth is also likely to boost the urban consumption
demand.
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Rise in Indian disposable income (US$/annum)
MARKET OPPORTUNITIES FOR INVESTMENT
Source: HH Panel data
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HISTORY
The Indian FMCG sector is the fourth largest sector in the economy with
an estimated size of Rs.1,300 billion. The sector has shown an average annual
growth of about 11% per annum over the last decade. Unlike the developed
markets, which are prominently dominated by few large players, Indias FMCG
market is highly fragmented and a considerable part of the market comprises of
unorganized players selling unbranded and unpackaged products. There are
approximately 12-13 million retail stores in India, out of which 9 million are
FMCG kirana stores.
India FMCG sectors significant characteristics can be listed as strong
MNC presence, well established distribution network, intense competition
between the organised and unorganised players and low operational cost. Easy
availability of important raw materials, cheaper labor costs and presence across
the entire value chain gives India a competitive advantage.
Products which have a swift turnover and relatively low cost are knownas Fast Moving Consumer Goods (FMCG). FMCG items are those which
generally get replaced within a year. Examples of FMCG commonly include a
wide range of repeatedly purchased consumer products such as toiletries, soap,
cosmetics, oral care products, shaving products and detergents, as well as other
non-durables such as glassware, bulbs, batteries, paper products, and plastic
goods. FMCG may also include pharmaceuticals, consumer electronics,
packaged food products etc.
Penetration level and per capita consumption in many product categories
is very low compared to world average standards representing the unexploited
market potential. Mushrooming Indian population, particularly the middle class
and the rural segments, presents the huge untapped opportunity to FMCG
players. Growth is also likely to come from consumer 'upgrading' in the matured
product categories like processed and packaged food, mouth wash etc. A distinct
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feature of the FMCG industry is the presence of international players through
their subsidiaries (HLL, P&G, Nestle), which ensures innovative product
launches in the market from their parent's portfolio.
Our country has a varied agro-climatic condition which enables to offer
extended raw material base suitable for many FMCG sub sections like food
processing industries etc. India is the one of the major producer of livestock,
milk, sugarcane, coconut, spices and cashew and is the second largest producer
of rice, wheat and fruits & vegetables. Similarly, India has an abundant supply of
caustic soda and soda ash, the chief raw materials required in the production of
soaps and detergents, which enables the household section of the industry to
excel and grow. The accessibility of these raw materials gives India the
locational advantage.
MAJOR SEGMENTS OF THE FMCG INDUSTRY:
Household Care
The detergents segment is growing at an annual growth rate of 10 to 11
per cent during the past five years. The local and unorganized players accountfor a major share of the total volume of the detergent market. The preference is
given to detergents in urban area compared to bars. Household care segment is
featured by intense competition and high level of penetration. With rapid
urbanization, emergence of small pack size and sachets, the demand for the
household care products is booming. In washing powder segment, HUL is the
leader with ~38 per cent of market share. Other major players are Nirma, Henkel
and Proctor & Gamble.
Personal Care
Personal care segment includes personal wash products, hair care
products, oral care products, cosmetics etc. The Indian skin care and cosmetics
market is valued at $274 million and is dominated by HUL, Colgate Palmolive,
Gillette India and Godrej. The coconut oil market accounts for 72 per cent share
in the hair oil market. The hair care market can be segmented into hair oils,
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shampoos, hair colorants & conditioners, and hair gels. In the branded coconut
hair oil market, Marico (with Parachute) and Dabur are the leading players.
Sachet makes up to 40 per cent of the total shampoo sale. Again the market is
dominated by HUL with around ~47 per cent market share; P&G occupies
second position with market share of around ~23 per cent. Personal wash can be
further segregated into three segments namely Premium, Economy and Popular.
Here also, HUL is the leader with market share of ~53 per cent; Godrej occupies
second position with market share of ~10 per cent. Swelling disposable incomes
of the Indian consumers, growth in rural demand and upgrading to the premium
products are the key drivers for future demand growth in major FMCG
categories.
The skin care market is at a primary stage in India. With the change in life
styles, increase in disposable incomes, greater product choice and availability,
people are becoming more alert about personal grooming. The major players in
this segment are Hindustan Unilever with a market share of ~54 per cent,
followed by CavinKare with a market share of ~12 per cent and Godrej with a
market share of ~3 per cent. The oral care market can be segmented into
toothpaste - 60 per cent; toothpowder - 23 per cent; toothbrushes - 17 per cent.
This segment is dominated by Colgate-Palmolive with market share of ~49 per
cent, while HUL occupies second position with market share of ~30 per cent. In
toothpowders market, Colgate and Dabur are the major players.
Food and Beverages
This segment comprises of the food processing industry, health beverageindustry, bread and biscuits, chocolates & confectionery, Mineral Water and ice
creams. The three largest consumed categories of packaged foods are packed tea,
biscuits and soft drinks. Indian hot beverage market is a tea dominant market.
The major share of tea market is dominated by unorganized players. Leading
branded tea players are HUL and Tata Tea. Mjaor players in food segment are
HUL, ITC, Godrej, Nestle and Amul.
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Manufacturer, exporter and supplier of Fast Moving Consumer Goods.
We have special infrasture for marketing of pre expiry date fmcg products (min
6 months earlier) direct to consumer & actual user with special scheme of buy
one & get one free. We also have coverage for special retail & outlets including
super markets and departmental stores coverage for promotions launching of
new fmcg products in prime locations in mumbai.
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FMCG Products
We Buy & Sell FMCG Products like all soaps, detergents, personal
products, tooth paste, shampoos, vaseline, etc. We also buy odd lots of damaged
& non moving stocks from fmcg sector for total reprocessing.
We have special infrasture for marketing of pre expiry date FMCG
Products (Min 6 Months earlier) direct to consumer & actual user with special
scheme of buy one & get one free. We also have coverage for Special Retail &
Outlets including super markets and departmental stores coverage for
promotions launching ofNew FMCG Products in prime locations in Mumbai.
Marketing & special price shops with attractive offers display also home
to home supply arrangements.
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Top 10 Fast Moving Consumer Goods
FMCG (fast moving consumer goods) is a term that is used to refer to
those goods which are sold through retail stores. These goods have a short period
of shelf life and as such are used up within days, weeks, or months. At the most
it lasts for a year. However there are also durable goods which people replace
after using the same for many years. For example we can cite kitchen or other
household appliances.
Some FMCG products perish within a short time while others have a shelf
life of more than a year. Nevertheless the turnover rates for both these categories
are very high depending on customer demand and brand loyalty.
FMCG products are made by companies that also make other products as
well. Therefore to determine the best selling brands of fast moving consumer
goods one has to look into the performance of FMCG companies which
manufacture these products. For this market analysts apply different standard
evaluations until they conclude on their findings.
Every year the global market analyst Forbes Global 2000 releases the list
of top ranking companies that make FMCG products and based on the sales and
consumer demand of the respective products the top 10 products are determined.
So here we present the top 10 FMCG companies with their highest selling
product.
1. Proctor & Gamble:
Headquartered at Cincinnati in Ohio, United States, Procter and Gamble
is a Fortune 500 American multinational company. It was founded in October 31
1837 by William Procter and James Gamble. Its flagship and best selling brand
is Ariel laundry detergent which was launched in 1967. This detergent is
available in different variants. The company also manufactures other best selling
products that are highly popular around the world.
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2. Nestl:
Nestle is a Swiss multinational engaged in the production of different
food products. It has its presence in more than 100 countries. It produces several
top selling products in different food categories. Some of its best selling
products are Lean Cuisine, Maggi, Boost, Kit Kat, Friskies, and Nescafe etc.
3. Anheuser-Busch:
Anheuser-Busch which is an American brewing firm is based in Belgium.
Some of the best known beers of the world are manufactured by this company.
The best selling brands of Anheuser-Busch are Budweiser, Natural Light, Bud
Light (Americas best selling beer) and Bacardi etc.
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4. Unilever:
Unilever is a multinational engaged in the manufacture of different
products like foods, personal grooming products, detergents and beverages etc.
This British-Dutch company is the owner of over 400 leading brands in the
world out of which 13 are billion dollar brands. One of its top products is
Aviance which is a beauty product for women. This product is sold in many
countries of Asia, Latin America and the Middle East.
5. Coca-Cola:
Coca-Cola Company which is based in Atlanta in Georgia manufactures
the worlds most popular soft drinkCoca Cola. It was Dr. John S. Pemberton
who created this drink in 1886. Coca Cola touched base in every part of the US
by 1895. The company began its franchisee operations in 1899 and gradually it
opened up bottling plants in every corner of the globe. The universal popularity
of Coca Cola is undisputed. The Coca Cola syrup mixed with carbonated water
created ripples everywhere and today you can get a Coke in any part of theworld.
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6. PepsiCo:
PepsiCo was created out of the amalgamation of two companies named
Pepsi Cola and Frito Lay. The company which was formed in 1965 has its
headquarters at Purchase in Harrison New York. It is a Fortune 500 company.
PepsiCo is engaged in the manufacture of snack foods (grain based), beverages
and other similar products. One of its best known brands is the cola beverage
Pepsi-Cola. Created in 1893 its former name was BradsDrink.
7. Kraft Foods:
Boasting of brands that are over a century old Kraft Foods is a US based
multinational having its presence in over 155 countries. The company is engaged
in the manufacture of confectioneries, food products and beverages. It had gone
for several acquisitions which has helped the company to increase its product list
with several top notch brands. Kraft Foods is known worldwide for products like
Cadbury, Jacobs, Kraft Dinner (in Canada), Oscar Mayer, Oreo etc. All the
products are available in several continents.
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8. Philip Morris International:
Philip Morris International is one of the best known tobacco companies of
the world. This tobacco multinational sells its products in more than 160
countries. Some of its best known cigarette brands are Marlboro, Philip Morris,
Chesterfield, Virginia Slims etc.
9. British American Tobacco:
Another multinational tobacco major is the British American Tobacco
company which is the worlds second largest tobacco company. It sells its
tobacco products in several top markets across the globe. Many world-famous
cigarette brands are manufactured by BAT. One of its top selling cigarette
brands is Pall Mall. Some other leading cigarette brands manufactured by the
company are Dunhill, Kent, Lucky Strike and Vogue.
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CONSUMER SALES PROMOTINAL ACTIVITIES
The importance of consumer sales promotion in the marketing mix of the fast moving
consumer goods (FMCG) category throughout the world has increased. Companies
spend considerable time in planning such activities. However, in order to enhance the
effectiveness of these activities, manufacturers should understand consumer and retailer
interpretations of their promotional activities. The study here pertains to consumers
perceptions regarding sales promotion. Some past researches have suggested that
promotion itself has an effect on the perceived value of the brand. This is because
promotions provide utilitarian benefits such as monetary savings, added value,
increased quality and convenience as well as hedonic benefits such as entertainment,
exploration and self-expression.
Broadly speaking most of the companies using Marketing Mix which includes
Price
Place (Channel of Distribution)
Product
Promotion
These are the four basic pillar of marketing mix. Most of the marketing strategies are
built on the basis of these criteria.
Promotion is one of the important elements of marketing mix. There are so manyelements of promotion such as
Advertising
Direct Marketing
Public Relations
Sales Promotion
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Traditionally, sales Promotions have been used by marketer to increase sales in the
short term. However, in the last few decades this communication tool has evolved and
now is considered from a strategic point of view. For this reason, it is necessary to
realize new studies in this area and study how consumers evaluate sales promotions.
Sales promotions have grown in both importance and frequency over the past few
decades. Although an accurate estimate for total sales promotions expenditures does
not exist, we can be sure that the trend is up.
Sales promotion serves three essential roles: It informs, persuades and reminds
prospective customers about a company and its products. Even the most useful product
or brand will be a failure if no one knows that it is available. As we know, channels of
distribution take more time in creating awareness because a product has to pass through
many hands between a producer and consumers.
Therefore, a producer has to inform channel members as well as ultimate consumers
about the attributes and availability of his products. The second purpose of promotion
is persuasion. The cut throat competition among different products puts tremendous
pressure on their manufacturers and they are compelled to undertake sales promotion
activities. The third purpose of promotion is reminding consumers about products
availability and its potential to satisfy their needs.
From these elements Sales Promotion is the element which is in the focus of this
project. Further Sales Promotion is quite broad term it includes
Trade Oriented Sales Promotion:
Trade Oriented Sales Promotion aimed to motivate channel member of the
company and to encourage them to push companys product. Trade Oriented Sales
Promotion includes dealer contest and incentives, trade allowances. Point-of-purchase
displays, sales training programs, trade shows, cooperative advertising, and other
programs designed to motivate distributors and retailers to carry a product and make an
extra effort to push it to their customers
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Consumer Oriented Sales Promotion:
Consumer Oriented Sales Promotion is the main topic of this project. Here
emphasize is given to motivate consumer to increase sales. Consumer Oriented Sales
Promotion includes Sampling, Couponing, Premiums, Contest, Refunds, Rebates,
Bonus Packs, Price-off, Event marketing etc.
Definition:
For the purpose of this study, following definitions of sales promotion were kept in
mind.
Kotler defines sales promotion as: Sales promotion consists of a diverse collection of
incentive tools, mostly short-term designed to stimulate quicker and/or greater purchase
of particular products/services by consumers or the trade.
Roger Strang has given a more simplistic definition i.e. sales promotions are short -
term incentives to encourage purchase or sales of a product or service.
Hence, any forms of incentives (price cut or value added nature) offered for short
period either to trade or consumers are considered as sales promotion activities.
Marketers uses consumer oriented sales promotion tools for the following
reasons:
To increase short term sales
To induce trial
To reduce inventory
To establish a brand name
To make cross selling
To cope up with competition
To avoid advertising clutter
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Tools of Consumer Oriented Sales Promotion:
There are so many tools or technique available to the marketers for achieving objective
of sales promotion. These tools should be used considering all other factors affecting
such as cost, time, competitors, availability of goods etc. These tools are as under
1. Sampling
2. Couponing
3. Price-Off
4. Premium
5. Contest
6. Bonus Pack
Lets have look at each tool
1. Sampling:
Sampling is an important and very frequently used sales promotion tool. In sampling
consumers are given some quantity of a product for no charge to induce trial. Sampling
is the most effective way to generate trial, at the same time it is most expensive tools.
Sampling is also used for established product. Marketers of packaged-goods products
such as food, health care items, cosmetics, and toiletries are heavy users of sampling.
Benefits of Sampling:
From the consumers point of view Sampling is risk free way to try new
product.
With the help of sampling scheme consumer can experience directly
which is not possible in any kind of advertisement.
Sampling is best way to induce trial when product feature are very
difficult to describe through advertisement.
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Limitation of Sampling:
The main drawback of sampling is of cost. While giving free sample it
requires financial soundness because otherwise company cant afford it.
While giving free sample it is necessary that brand have some uniquequality.
There is some product which requires long time to show result due to
that it is possible that the sampling scheme may not give benefit as
expected. E.g. Skin cream requires time to show result in this case it is
possible that customer might not respond when there is no such scheme.
Distribution of Samples:
Door-to-door sampling: Here product is directly delivered to the
prospects residence. This distribution method is very expensive because
of labour cost. But it can be cost effective if marketer has exact
information of target market.
Sampling through the mail: Thismethod can be used when product is
comparable small, lightweight, and nonperishable. In this method
marketer has control over where and when the product will be
distributed. The main drawback is of postal restrictions and increasing
postal rates.
In-store sampling: This method requires great support from retailers.
This method is more used in product like food, perfume, etc. Here table
or booth set-up in the store. In this method consumer can directly taste
and than can purchase.
On-package sampling: In this method free sample is attached to
another product. This is cost effective method but it is also not free
from drawback as it is distributed only to consumers who purchase the
item to which it is attached the sample will not reach nonusers of the
carrier brand.
Other Methods: To distribute free sample, methods like newspaper,
magazine are used. Send sample to those who call tall free number.
Thorough internet free sample can be distributed like film clip.
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2. Couponing:
Couponing is the oldest and most widely used way of sales promotion. Coupons have
been used since 1895. It is mostly used by packaged goods. It is worthwhile to use
coupon as a promotion tool because data shows that market for packaged goods
increased from 16 billion in 1968 to 310 billion in 1994. To boost up the sales not only
manufacturer but retailers personally can also used.
Benefits of Couponing:
Couponing leads to price reductions so as to encourage price sensitive
customers.
Non users can try a product which may leads to regular sales.
Reduction in price reduces the consumers perceived risk associated
with new product such as financial risk, social risk, psychological risk
etc.
Coupons can be used not only for newly launched product but it can also
use for already established brand.
Limitations of Couponing:
It is very difficult to estimate number of buyers.
Cost of coupon and reduction given as per scheme leads to
reduction in over all profit of the firm.
It may to target towards actual buyers, some other may got benefit
of it who are actually not interested.
It can be manipulated by retailers and company may not get the
result expected.
Distribution of coupons:
The use of newspaper and magazine as a vehicle for distributing coupon
was used quite freely. Newspaper and magazine gives advantage of
market selectivity, shorter lead time and cost efficiency. But now a day
these media is not so much effective.
Very widely used method for distributing coupon is placing coupons
either inside or on the outside of the package.
Distribution through newspaper freestanding inserts is by far the most
popular method for delivering coupons to consumers.
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3. Price-off:
A price-off is simply a reduction in the price of the product to increase sales and is very
often used when introduction a new product. A reduction in price always increases
sales but the use of this technique should be carefully considered in the current market
situation.
Price-off is the most preferred sales promotion technique because consumers response
very positively to this scheme. Not only that but it also cause large increase in sales
volume. Price-off reductions are typically offered tight on the package through
specially marked price packs. E.g. Krack Jack offers 30% Price-off.
Generally Price-offs given from 10 to 50 percent of the regular price. Here reduction is
coming out from manufacturers profit margin, and not the retailers.
Benefits of Price-off:
Since marketers bare the probable reduction in price at cost of his own
profit so he can control over the price-off scheme.
Price-off can be a strong influence at the point of purchase when price
comparisons are being made.
Price-off promotion can also encourage consumers to purchase larger
quantities.
Limitation of Price-off:
Retailers may create pricing and inventory problems because retailers
will not accept packages with a specific price shown.
To the company it is very expensive tool of sales promotion
4. Premium:
Premium is an offer of an item either free or at a low price .With consumer spending
more, companies will look to incentive programs as a way to maintain customer loyalty
and capture a greater share of the market. Creative and will-constructed premium
promotions are known delivering brand enhancing and sales building results.
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Currently marketers ask themselves how to select a premium. There are some
guidelines for choosing a premium: Offer a brand that enhances your brand, and
capitalize on the equity of the brands logo by incorporating it into the premium item.
Two basic type of premium:
1. Free Premium: Free premiums are small gifts included in the product
package or sent to consumers who mail in a request along with a proof
or purchase. Free Premium includes toys, balls, trading card or other
items. Free premium have high impulse value and can provide an extra
incentive to buy the product. Even though it is also facing some
problems like cost factor, which results from the premium itself as well
as from extra packaging that may be needed. Again retailers can
manipulate with customer and with the free premium scheme.
2. Self-Liquidating Premiums: In Self-Liquidating Premiums consumers
are requires to pay some or all of the cost of the premium plus handling
and mailing costs. This tool is more useful to the retailers to gain extra
profit as he can purchase from manufacturer and than can sale it to final
user at lower cost. Here the aim is not to make profit on the premium
item but rather just to cover costs and offer a value to the consumer.
Offering values to consumers through the premium products can create
interest in the brand and goodwill that enhances the brands image.
Self-Liquidating Premiums also has some limitation. It has very low
redemption rate. Consumers are not always responds to this type of sales
promotion scheme.
5. Contest:
A contest is a promotion where consumers compete for prizes or money on the basis of
skills or ability. To the customers contest is more attractive because they have
mentality that they can win big prizes being offered. Contest usually provide
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a purchase incentive by requiring a proof of purchase to enter or an entry form that is
available from a dealer or advertisement; some contest require consumers to read an ad
or package or visit a store display to gather information needed to enter. Marketers
must be careful not to make their contests too difficult to enter, as doing so might
discourage participation among key prospects in the targets audience.
There is another term called Sweepstakes which is promotion where winners are
determined purely by chance; it does not require a proof of purchase as condition for
entry. Entrants need only submit their names for the prize drawing. It is easier to enter
thats why sweepstakes more customers than contest.
Benefits of Contest:
Contest and sweepstakes can get the customers involved with a brand by
making the promotion product relevant.
Marketers can use contests and sweepstakes to build brand equity by
connecting the prizes to the lifestyle, needs or interests of the target
audience.
Consumers can know more about the product as well as about company
as direct involvement increases.
Limitation of Contest:
In contest and sweepstakes winners are given prizes randomly so
customers reluctant to pay more attention towards it.
Marketers have cut back the uses of these promotional tools due to its
lower effectiveness and fears that consumers might become dependent
on them.
A major problem in contest and sweepstakes is that of participation by
professionals or hobbyists who submit many entries but have no
intention of purchasing the product.
Further, for marketers it increases so many other activities like
managing all the entries and selecting winner from them and delivering
prize to them which also requires so many time and it also increase
cost.
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6. Bonus Pack:
Bonus packs offer the consumer an extra amount of a product at the regular price by
providing larger containers or extra units. Bonus is also frequently used sales
promotion tool because consumer response towards bonus pack is very positive. The
additional value of a bonus pack is generally obvious to the consumer and can have a
strong impact on the purchase decision at the time of purchase.
Benefits from Bonus Pack:
It gives a direct way to provide extra value without having to get
involved with complicated coupons or refund offers.
Bonus can be a good answer to competitors promotion or introduction
of a new brand.
Bonus packs result in larger purchase orders and favorable display space
in the store if the relationships with retailers are good.
Limitation of Bonus Pack:
It requires additional space so retailers or distributors may create
problem if the relation with distributors are not good as it does not give
any extra benefit to them.
Another problem is that bonus packs may appeal primarily to current
users who probably would have purchase the brand anyway or to
promotion sensitive consumers who may not become loyal to the brand.
A common limitation is of cost. As marketers giving extra quantity it
makes cost to the company.
These are the main consumer oriented sales promotion tools Marketers use any of them
or more then one at a time depending on the sales promotion strategy. There are some
other sales promotion tools like Refunds and Rebates, Frequency Programs, Event
Marketing etc to name a few, but these tools are used very less compared to earlier
noted main tools.
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Factors Influencing Consumer Oriented sales promotion:
Mainly four factors should be taken into account while determining the sales promotion
programme.
> Target market
> Nature of product
> Stage of product life cycle
> Budget available for promotion
1. Target Market:
While doing sales promotion, marketer must know who their target market is,
otherwise there is no use of all effort because it leads to no where. A target market can
be in any of the stages of buying hierarchy i.e. awareness, knowledge, liking,
preferences, conviction and purchase. Each stage defines a possible goal of promotion.
2. Nature of the product:
There are various product attributes which influence sales promotional strategy.
When the unit price is low the manufacturer as well as the customer has low risk but he
can get the benefit of mass marketing. Therefore, mass marketing requires mass sales
promotion schemes. Sales promotion scheme differ for products like its durability,
perishable goods etc.
3. Stage of product Life Cycle:
Sales promotion strategies are influenced by the life cycle of a product. When a
new product introduced, prospective buyers must be informed about its existence and
its benefits and middlemen must be convinced to stock it. Later, if a product becomes
successful, competition intensifies and more emphasis is placed on sales promotion to
increase its sales.
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4. Budget Available for Promotion:
The funds available for promotion are the ultimate determinant of the
promotional programme. A business with ample funds can make more effective use of
sales promotion programme than a firm with limited financial resources. The budget for
sales promotion can be prepared by the following methods
Percentage of Sales
Fixed funds available for sales promotion
Following the competition, and
Budgeting by objective.
Why do Sales promotion schemes affect sales?
There are three mechanisms behind these facts. It is Purchase quantity, Brand switching
and Category expansion.
First, consumer can increase the quantity they buy just because the product is on sale.
Second, consumers are inducing to purchase another brand different from the one they
would have purchased when there is no promotional incentive.
Finally, consumers total consumption of the product category is increased by the
promotion. However, in the long term this positive effect may be diluted because a
promotional campaign has no permanent effect in the sales of the firm
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Sales Promotion Strategy:
Sales are the lifeblood of a business, without sales there would be no business in the
first place; therefore it is very important that if a business wants to succeed, it shouldhave a sales promotion strategy in mind. The primary objective of a sales promotion is
to improve a companys sales by predicting and modifying your target customers
purchasing behavior and patterns.
Sales promotion is very important as it not only helps to boost sales but it also helps a
business to draw new customers while at the same time retaining older ones. There are
a variety of sales promotional strategies that a business can use to increase their sales,
however it is important that we first understand what a sales promotion strategy
actually is and why it is so important.
A sales promotion strategy is an activity that is designed to help boost the sales of a
product or service. This can be done through an advertising campaign, public relation
activities, a free sampling campaign, a free gift campaign, a trading stamps campaign,
through demonstrations and exhibitions, through prize giving competitions, through
temporary price cuts, and through door-to-door sales, telemarketing, personal sales
letters, and emails.
The importance of a sales promotion strategy cannot be underestimated. This is because
a sales promotion strategy is important to a business boosting its sales.
When developing a sales promotion strategy for your business, it is important that you
keep the following points in mind.
Consumer attitudes and buying patterns
Your brand strategy
Your competitive strategy
Your advertising strategy
Other external factors that can influence products availability and pricing.
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There are three types of sales promotion strategies:
A push strategy
A pull strategy or
A combination of the two
A Push Strategy:
A push sales promotion strategy involves pushing distributors and retailers to sell
your products and services to the consumer by offering various kinds of promotions
and personal selling efforts. What happens here is that a company promotes their
product/services to a reseller who in turn promotes it to another reseller or to the
consumer. The basic objective of this strategy is to persuade retailers, wholesalers and
distributors to carry your brand, give it shelf space, promote it by advertising, and
ultimately push it forward to the consumer. Typical push sales promotion strategies
include; buy-back guarantees, free trials, contests, discounts, and specialty advertising
items.
A Pull Strategy:
A pull sales promotion strategy focuses more on the consumer instead of the reseller
or distributor. This strategy involves getting the consumer to pull or purchase the
product/services directly from the company itself. This strategy targets its marketing
efforts directly on the consumers with the hope that it will stimulate interest and
demand for the product. This pull strategy is often used when distributors are reluctant
to carry or distribute a product. Typical pull sales promotion strategies include;
samples, coupons, cash refunds or rebates, loyalty programs and rewards, contests,
sweepstakes, games, and point-of-purchase displays.
A Combination of Two Strategies:
A combination sales promotion strategy is just that; it is a combination of a push and
a pull strategy. It focuses both on the distributor as well as the consumers, targeting
both parties directly. It offers consumer incentives side by side with dealer discounts.
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Sales Promotion and different theories:
There are certain theories which can be considered by the marketers while deciding
sales promotion strategies. It should be noted that these theories are not final
conclusion but it helps in making better decisions. Here I will try to elaborate on two
theory i.e. theory of attitude and theory of prospects.
Sales Promotion and theory of Attitude:
Multi attribute models of attitude (Fishbein and Ajzen, 1975) depict the consumers
decision to perform a specific behavior as the logical consequence of beliefs, attitudes
and intentions with regard to the behavior. As per this model, a consumers intention to
buy a brand may be based on positive/negative attitudes towards a promotion.
Attitude Model:
Behavior Reward or Purchase
Punishment Not Purchase
It is found that the impact of three attitudinal dimensions price consciousness, time
value and satisfaction/pride on consumers decision to use coupons. Results of their
study showed that there was a positive relationship between coupon usage and
consumer price consciousness. There was a significant
negative relationship between coupon usage and perceived value of time indicating that
the more a consumer valued his or her time, the lesser was the tendency to use coupons.
The authors found that coupon usage increased when the consumer perceived higher
satisfaction and pride with the use of coupons.
Some marketers applied the theory of reasoned action to understand consumers
decision to use coupons. As per the model, behavior towards coupons would be
influenced by consumer intentions to use coupons. Consumers intention to use
coupons would be determined by their attitudes and subjective norms. Consumers
attitudes would be formed through their beliefs in the rewards and costs of using
coupons while subjective norms would be formed through consumers perception of
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whether important others think they should expend the effort to clip, save and use
coupons. It is found that beliefs in the rewards of using coupons had high positive
correlation with attitude while inconveniences and encumbrances had weak negative
correlation with attitude
Although attitude models provide important insights into the consumer decision-
making process, researchers have found discrepancies between stated attitudes and
actual behavior. in several studies (Perry and Gillespie, 1976; Keesling and Kaynama,
2003). Studies in different contexts have shown that attitudes are actually poor
predictors of behavior. This possibly accounts for the limited application of attitude
models to examine consumer response to sales promotions.
Sales Promotion and Prospect Theory:
This theory proposes that people perceive outcomes of a choice as perceived losses
and Gains relative to a subjective reference point/price.
As per this theory of sales promotions it is stated that consumers perception of
promotion as a loss or gain is a function of the type of the promotion. They
proposed that non price promotions such as premium offers which segregate the
promotional gain from the purchase price will be viewed as gains. On the other hand,
price promotions such as price off, which integrate the promotional gain with the
purchase price will be viewed as reduced losses.
The impact of price versus non price promotions on a consumers reference price
reasoned that price promotions would be integrated with the purchase price of the
product and lead to a reduction of internal reference price. While non price promotions
would be segregated from the purchase price of a product and not lead to a reduction of
internal reference price. Results showed that price promotions led to a lower internal
reference price while non price promotions did not affect internal reference price.
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Sales promotion from the retailers point of view:
Perceptions on Scheme Preference
It was found that retailer perceived price offs as a better form of sales
promotion activity. Price offs in their opinion had relatively a greater impact compared
to any other form of sales promotion activity like Bonus packs, Premium, Contests etc.
Retailers preferred price offs the most, then bonus pack, premium, contests, in order of
importance.
Perceptions about Buying Roles
Retailers viewed that the person who came to the shop (who may be a maid,
son, daughter, daughter-in-law and child) was the decider of a toilet soap brand and not
the Income provider (e.g. head of the family). It could be inferred that visibility of
information about the sales promotion activity at the point of purchase could result into
the purchase of a promoted brand.
Perceptions about their role in decision-making
Retailer had relatively very low influence in affecting choice. It could be
inferred that visibility and awareness about the scheme were the critical success factors
so that pull could be created.
Perceptions about Response to Sales Promotion Offers
They believed that younger age-groups were more experimental in nature,
amenable to trying new brands, and sought/looked for or asked whether there were any)
sales promotion schemes running on any toilet soap at the time of purchase.
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Perceptions about Communications of Sales Promotion Schemes
Retailers perceived that role of word of mouth and television advertising played
an important part in providing information inputs to consumers regarding sales
promotion activities.
Variations in Information Flow
Smaller (non-supermarket, small format store) retailers received relatively less
support compared to supermarkets in terms of servicing, margins, information about
sales promotion activities from the dealers. Many a times small retailers were only
informed verbally about sales promotion schemes by the dealer salesmen during the
scheduled weekly visits.
Dealer-Retailer Dynamics
At the time of sales promotion activities, dealers had tendency to push
unwanted stocks onto the smaller retailers. In fact these retailers preferred to stock
variety of brands and wanted payment for shelf and window display to increase traffic
into their store. However, supermarkets and big retailers were pampered and given
special services and given better margins and better allowances.
Margins
It was found that in sales promotion schemes margins varied from 6 to15%
depending of the size of the retail outlet, bargaining power of a retailer, quantity
ordered by him etc. Mostly margins were linked to size of the volumes that were
ordered.
Perceptions about terms and conditions
Retailers were not found to be happy with sales promotion schemes where their
margins were cut on the pretext of just fast movement of inventory of the brand being
promoted. Also if additional incentive was offered it was subject to minimum
performance requirement.
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Nature of POP
Retailers indicated that most of the POP (Point of Purchase) materials were
meant for brand advertisement and not for giving information regarding the schemes.
Thus it could be inferred that companys follow up was not adequate.
Servicing during duration of Scheme
In stock-out situation during the running of the sales promotion schemes,
smaller retailers had to wait for replenishment of stocks till the next scheduled weekly
visit by the dealer salesman but big retailers were serviced on telephonic request for
replenishment of stocks. This clearly indicated the disparity in treatment.
Problem of left-over
A leftover stock at the end of any scheme was required to be sold by the
retailers before they ordered fresh stocks. In case of bonus packs scheme, leftover stock
was often dismantled (cut open buy one get one free) and sold them individually as a
regular soap. This approach of the company leads to misappropriation which in turn
could result in adverse brand image.
Gifts for Retailer motivation
Companies at times were rewarding retailers by giving free gifts like thermos
flasks or clocks if they sold more than certain quantity in a given period. Companies
were making a half-hearted effort to motivate retailers.
Perceptions about mass media announcements
Retailers viewed that whenever sales promotion scheme was announced on TV,
it created pull and they were more than willing to stock such brands. For example
Medimix and Dettol contest was not advertised on TV, hence there was very little
awareness leading to unsold stock till 6 months. While Lux Gold Star which was
heavily promoted on T.V. is recalled even today.
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Sales Promotion from the Consumers point of view:
Willingness to buy on sales promotion offer
Sixty per cent of the sample did not show willingness to buy a brand due to
promotion while 30% showed willingness and 10% were not sure. This indicates that
when 30% showed willingness and 10% consumers who were not sure, these groups
might be lured through innovative and lucrative sales promotion offer.
Ability to induce trial
Forty per cent of the respondents had said that sales promotion had the ability to
induce trial which reinforces the above inference.
Long-term impact
In order to understand ability of the promotions to increase long-term sales,
respondents were asked about continuity of purchase of a brand after the withdrawal of
promotion. Eighty per cent of the respondents indicated that they would not continue.
But 20% said they would. Thus, it could be inferred that promotions in this category
(low involvement products) might encourage trial and brand switching but not long
term loyalty.
Preference of Schemes:
Price off was the most preferred type of scheme. Maximum customers ranked
price-offs as number one or two.
Perceived Quality:
Majority of respondents had a perception that the quality of the promoted
brands remained the same during promotion, while some of them felt that it was
inferior than before. It can be inferred that promotions were not leading to negative
brand quality perceptions. It is found that some customer strongly preferred to buy their
regular brand and said that sales promotion would not weaken their loyalty towards the
brand.
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Perceptions regarding underlying company motivations
On tapping perceptions regarding underlying company motivations for sales
promotion, to increase sales was ranked highest followed by to attract switchers
and to sell excess stocks. While providing value to customers and
to reinforce company image were ranked lowest. This indicates that consumers
believed that companies were undertaking such activities only for their own benefit and
not for the benefit of consumers.
Findings from retailer and consumer perception studies, it is evident that there was a
matching of perceptions regarding nature of scheme (price offs as most preferred type
of scheme mentioned by consumers and retailers perceptions about consumer
preferences). Since retailers observe consumers in store behaviour were frequently and
directly, their perceptions regarding providing consumer behaviour are likely to be
accurate. Such inputs from the retailers would be useful to companies.
The retailers had the perception that those schemes which were announced through
mass media had better response. This was reinforced by the consumer survey which
showed that recall in case of heavily promoted schemes on TV was found to be very
high.
Retailers prediction of companies motivation for offering sales promotion were
matching with the consumer perception regarding the same. Thus both viewed that
companies were using sales promotion activities mainly to increase short term sales or
encourage switching or selling excess stock and not really to give value benefit or
enhance/reinforce brand/company image.
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KEY FINDINGS
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Q.1 Do you purchase the same brand every time?
Statistics
SOAP TOOTHPASTE
PACKED
MASALA PICKLE
MOSQUITO
REPELLENT
HOUSE
CLEANING
PRODUCTS
N Valid 80 60 45 35 30 65
Missing 22 42 57 67 72 37
Frequency Table
SOAP
Frequency Percent Valid Percent
Cumulative
Percent
Valid yes 20 19.6 25.0 25.0
no 60 58.8 75.0 100.0
Total 80 78.4 100.0
Missing .00 20 19.6
System 2 2.0
Total 22 21.6
Total 102 100.0
TOOTHPASTE
Frequency Percent Valid Percent
Cumulative
Percent
Valid yes 35 34.3 58.3 58.3
no 25 24.5 41.7 100.0
Total 60 58.8 100.0
Missing .00 40 39.2
System 2 2.0
Total 42 41.2
Total 102 100.0
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PACKED MASALA
Frequency Percent Valid Percent
Cumulative
Percent
Valid yes 20 19.6 44.4 44.4
no 25 24.5 55.6 100.0
Total 45 44.1 100.0
Missing .00 55 53.9
System 2 2.0
Total 57 55.9
Total 102 100.0
PICKLE
Frequency Percent Valid Percent
Cumulative
Percent
Valid yes 20 20.0 57.1 57.1
no 15 15.0 42.9 100.0
Total 35 35.0 100.0
Missing .00 65 65.0
Total 100 100.0
MOSQUITO REPELLENT
Frequency Percent Valid Percent
Cumulative
Percent
Valid yes 25 24.5 83.3 83.3
no 5 4.9 16.7 100.0
Total 30 29.4 100.0
Missing .00 70 68.6
System 2 2.0
Total 72 70.6
Total 102 100.0
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HOUSE CLEANING PRODUCTS
Frequency Percent Valid Percent
Cumulative
Percent
Valid yes 30 29.4 46.2 46.2
no 35 34.3 53.8 100.0
Total 65 63.7 100.0
Missing .00 35 34.3
System 2 2.0
Total 37 36.3
Total 102 100.0
48%
52%
YES
NO
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INTERPRETATION:
Soap: 75% of the respondents said that they do not purchase the same brand every time
while 25 % said that they do purchase the same brand every time.
Toothpaste: 41.7% of the respondents said that they do not purchase the same brand
every time while 58.3 % said that