fmcg: swot analysis
TRANSCRIPT
BITS PilaniPilani Campus
FMCG: SWOT AnalysisSAGAR KUMAR SHARMA2012H142136P
BITS Pilani, Pilani Campus
What is FMCG ?
FMCG @ world
FMCG @ India
SWOT analysis
Proposed strategies
Agenda
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− FMCG is Fast Moving Consumer Goods.− It also called the consumer packaged goods sector.
What is FMCG
Definition: Fast Moving Consumer Goods (FMCG) as
“products that have a quick shelf turnover, at relatively low
cost and don’t require a lot of thought, time and financial
investment to purchase. Fast Moving Consumer Goods is a
classification that refers to a wide range of frequently
purchased consumer products…”
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Key Segments Of FMCG Sector
Household Care Personal Care Food & Beverages
•Fabric wash (laundry soaps and
synthetic detergents)
•Household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellents, metal polish and furniture polish)
•Oral care• Hair care• Skin care• Personal wash
(soaps)•Cosmetics• Toiletries•Perfumes• Deodorants•Feminine hygiene
•Health beverages•Soft drinks•Staples/cereals•Bakery products (biscuits,
bread, cakes)•Snack food•Chocolates•Ice cream•Tea & Coffee•Processed fruits &
vegetables•Dairy products•Bottled water•Branded flour•Branded rice•Branded sugar•Juices
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From the consumers' perspective:– Frequent purchase– Low involvement (little or no effort to choose the item)– Low price
From the marketers' angle:– High volumes– Low contribution margins– Extensive distribution networks– High stock turnover
Main characteristics of FMCGs
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Ranking Company Name 2011 sales1 Procter & Gamble $82.6 B2 Pfizer $67.4B 3 Unilever $64.7 B 4 L'Oréal $25.8 B 5 Kimberly-Clark Corp. $20.8 B6 Reckitt Benckiser $15 B 7 Johnson & Johnson $14.9 B 8 Avon Products, Inc. $11.3 B 9 Henkel $10 B
10 Alcon Laboratories, Inc. $9.9 B
Top 10 FMCG companies in world
Source: Hunt Executive Search, 2012
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Source: Global Growth Compass, Mckinesy analysis
FMCG growth in Emerging and developed Markets
− Roughly 70 percent of the world’s population in emerging-market account for only 35 percent of the world’s GDP.
− By 2020 the collective GDP of the emerging markets will overtake that of the developed economies
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− Fourth largest sector in the economy.
− Market size US$ 13.1 billion as of the year 2012.
− Expected market USD 33.4 billion by the year 2015
− Market growth rate : Rural ---40%, urban ---25%
FMCG in India
Source: 1. The Confederation of Indian Industry (CII)2. Industry Practices | Altavis
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Top 10 FMCG companies in India:
Rank Company Name 2012 sales(Rs.Cr)
1 India Tobacco Company (ITC) 151,078
2 HINDUSTAN UNILEVER 67,858
3 NESTLE INDIA 39,819
4 DABUR INDIA 18,632
5 GODREJ CONSUMER PRODUCTS 13,335
Rank Company Name 2012 sales(Rs.Cr)
6 PROCTER & GAMBLE INDIA 12,838
7 COLGATE-PALMOLIVE 12,764
8GLAXOSMITHKLINE CONSUMER HEALTHCARE (GSK)
9,842
9 MARICO 9,078
10 EMAMI 6,836
Source: AC Nielsen Report 2012
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Other FMCG companies in India
• Britannia Industries Ltd.
• Parle Agro
• Nirma
• Johnson & Johnson
• Himalaya Herbal Healthcare
• Amul India
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SWOT analysis
Strengths Weaknesses1. Low operational costs2. Presence of established distribution networks in both urban and rural areas3. Presence of well-known brands in FMCG sector4. Deep roots in local culture & great understanding of consumer needs
1. Lower scope of investing in technology and achieving economies of scale, especially in small sectors2. Low exports levels3. Counterfeit Products. These products narrow the scope of FMCG products in rural and semi-urban market.
Opportunities Threats1. Untapped rural market2. Rising income levels, i.e. increase in purchasing power of consumers3. Large domestic market- a population of over one billion.4. Export potential5. High consumer goods spending
1. Removal of import restrictions resulting in replacing of domestic brands2. Slowdown in rural demand3.Tax and regulatory structure
Source: The Confederation of Indian Industry (CII)
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1. Low operational costs
2. Presence of established distribution networks in both urban and rural areas
3. Presence of well-known brands in FMCG sector
4. Deep roots in local culture & great understanding of consumer needs
Strengths
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WEAKNESSES
"Me-too" products: which illegally mimic the labels of the established brands, narrow the scope of FMCG products in rural and semi-urban market. Detention of counterfeit and pirated goods at EU borders in
2010
Source: Europa Press releases
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High Advertising Costs. Increase in Ad spending, which may affect the margins
WEAKNESSES
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OPPORTUNITIES
1. High consumer goods spending
1510
11168
40
Savings OthersClothings EntertainmentPersonal Care Grocery
Source: Consumer Survey 2010 by KSA-Technopak
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2. Changing Lifestyles & Rising income levels
OPPORTUNITIES…
DEODRANTS
TOOTH
PAST
E
SKIN
CREA
M
SHAM
POO
UTENSI
L CLE
ANER
INST
ANT COFF
EE
WASH
ING P
O...
DETER
GENT
BAR
TOILET
SOAP
0
10
20
30
40
50
60
70
80
90
100
0 2.1
48.6
22
38
28
6.6
86.1 88.6 91.5
5.5
74.9
31.5
52.159.9
15.5
90.7 91.497.4
0.600000000000001
37.6
17.8
31.9
14.6
2.8
84.1 87.4 88.9
ALL INDIA URBAN % RURAL %
SOURCE:HLL INVESTOR MEET 2006
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3.Large domestic market- a population of over one billion.4. Large untapped market available, especially the rural areas.
5. Export potential- expansion of horizons towards more and more countries.
6. Opportunity in food sector.
OPPORTUNITIES…
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− Intense and increasing competition from local as well as MNC players
− The standardization of packaging norms that is likely to be implemented by the Government by Jan 2013 is expected to increase cost of beverages, cereals, edible oil, detergent, flour, salt, aerated drinks and mineral water.
− Steadily rising fuel costs, leading to increased distribution costs.
− The declining value of rupee against other currencies may reduce margins of many companies, as Marico, Godrej Consumer Products, Colgate, Dabur, etc. who import raw materials.
THREATS
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Issues in Tax Policy in India
Major Threat: Tax and regulatory structure1) Extremely high incidence of tax on certain product categoriesSome FMCG products such as shampoos, processed food, soft drinks and toiletries containing alcohol attract high rates of excise duty and sales tax. The total tax incidence in some cases is more than 60 per cent of the cost or more than 30 per cent of MRP. Such high tax incidence hampers growth of these product categories besides encouraging manufacture of spurious products and smuggling.
Source: 1. India Policy Forum2. "IMF lowers India's growth forecast to 6.1% for 2012". The
Hindustan Times. 16 July 2012
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Issues in Tax Policy
2) Cascading effect of Special Excise Duty− In production process, raw material passes through
various processes stages till a final product emerges. Thus, output of the first manufacturer becomes input for second manufacturer and so on.
− In other words, the tax burden goes on increasing as raw material and final product passes from one stage to other because, each subsequent purchaser has to pay tax again and again on the material which has already suffered tax. This is called cascading effect or double taxation.
Source: Business portal of India
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Issues in Tax Policy in India
3) Inverted Duty structure for selected inputsDuty on certain raw materials is higher or the same as compared to finished products in which these materials are used. Such raw materials include oils and chemicals like Soda ash, caustic soda etc. In addition to customs duty, raw materials are also subject to sales tax and therefore total tax incidence and cost of local manufacture goes up.
4) High taxes on processed foodsThe existing tax structure and its high overall incidence, hampering the growth of the processed industry. The increase in excise duty in last year’s budget from 8% to 16% has adversely affected the growth of processed foods industry.
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Issues in Tax Policy in India
5) Irrational domestic tax structure encouraging imports − Significant reduction in custom duty rates of consumer goods
has made imported product cheaper as compared to local manufactured products.
− For instance, goods manufactured in India suffer from cascading effects of taxes on inputs as additional cost compared to imports.
BITS Pilani, Pilani Campus
The main objective is to generate a competitive advantage, increase the loyalty of customers and to beat competitors.
1. Expansion Strategies
2. Distribution Strategies
3. Innovation Strategies
4. Promotional Strategies
5. Pricing Strategies
6. Digital Strategies
7. Sustainable Growth Strategies
Proposed strategies
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1.1 Expansion through Concentration
1.2 Expansion through integration
1.3 Expansion through diversification
1. Expansion strategies
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• When an organisation focuses on intensifying its core businesses with a view on expanding through either acquiring a new customer base or diversifying its product portfolio, it is having a concentration strategy
CONCENTRATION STRATEGIES
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MARKET PENETRATION – Selling more products in the same market
MARKET DEVELOPMENT – Selling same products to new markets
PRODUCT DEVELOPMENT – Selling new products to the same market
Example:
Bajaj Auto has undertaken all the above mentioned strategies
TYPES OF CONCENTRATION STRATEGIES
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• Integration means combining activities related to the present activity of a company
• Integration is part of the diversification strategy• It widens the scope for a company as far is the market
penetration is concerned.
INTEGRATION STRATEGIES
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Horizontal Integration
Vertical Integration
TYPES OF INTEGRATION STRATEGIES
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Horizontal Integration: When an organization takes up the same types of products at the same level of production or marketing process, it is said to follow a strategy of Horizontal Integration (Also known as Merger/Acquisition)
Example: Takeover of Satyam by Mahindra
HORIZONTAL INTEGRATION
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Vertical Integration: Expansion to serve its own needs. Vertical Integration is of two types, namely Backward and Forward Integration
- Backward Integration means going back to the source of raw materials
(Example: A Thermal power company may do coal-mining)
- Forward Integration implies moving closer to the finished product (example: A car spare parts manufacturer would start manufacturing passenger cars)
VERTICAL INTEGRATION
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• A plan created by the management of a manufacturing business that specifies how the firm intends to transfer its products to intermediaries, retailers and end consumers.
• Larger companies involved in making products will usually also put together a detailed production distribution strategy to guide its entry into its intended market.
2. Distribution Strategies
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Basic Channels of Distribution
Manufacturers/products
Agents/brokers
Wholesalers/distributors
RetailersRetailers
Consumers and organizational end users
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Exclusive Distribution
• Limiting the distribution to only one intermediary in the
territory
Intensive distribution
• Distribute from as many outlets as possible to provide
location convenience
Selective distribution
• Appoint several but not all retailers
Distribution Strategies
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• It is a situation where suppliers and distributors enter into
an exclusive agreement that only allows the named distributor
to sell a specific product
• Means that the producer selects only very few intermediaries.
• Exclusive distribution is often characterised by exclusive dealing
where the reseller carries only that producer's products to the
exclusion of all others
Exclusive Distribution
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• Maximize control over service level/output
• Enhance product’s image & allow higher
markups
• Promotes dealers loyalty, better forecasting,
better inventory and merchandising control
• Restricts resellers from carrying competing
brands
Exclusive Distribution:Advantages
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• Betting on one dealer in each market• Only suitable for high price, high margin, and
low volume products
Exclusive Distribution: Disadvantages
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• The producer's products are stocked in the majority of outlets.
• It is a strategy under which a company sells its product through as many outlets as possible so that the customers encounter the product virtually everywhere they go.
Intensive Distribution
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Advantages:
Increased sales, wider customer recognition,
and impulse buying
Disadvantages:
Characteristically low price and low-margin
products that require a fast turnover
Difficult to control large number of retailers
Intensive Distribution
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• Newspapers, soft drinks• Most of the fast moving consumer goods
Example of Intensive Distribution
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• Selective Distribution is a type of distribution
that lies between intensive and exclusive
distribution.
• This basically involves using more than one,
but lesser than all the intermediaries who carry
the company’s products
Selective Distribution
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• Advantages:
• Better market coverage than exclusive distribution
• More control and less cost than intensive
distribution
• Concentrate effort on few productive outlets
• Selected firms capable of carrying full product line
and provide the required service
Selective Distribution
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Disadvantages:
– May not cover the market adequately
– Difficult to select dealers (retailers) that can
match your requirement and goals
Selective Distribution (cont’d)
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Using two or more different channels to distribute
goods and services
Why? Permits optimal access to each market segment
Increase market coverage, lower channel cost and provide more customized
selling
What to look out for? More channels usually means more conflict and control problems
Multiple-Channel Strategy
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Each channel handles a product or segment that is different
or non-competing e.g.
• Toyota Lexus
• MPH online portals
• Magazine distributions
Complementary Channels
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The same product is sold through two different and
competing channels e.g.• Non-prescriptive drugs
• Electronic goods
• Why? To increase sales
• What to look out for?• Over extending yourself
• Dealers’ resentment
• Control problems
Competitive Channels
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Modify when the following changes occur:
• Consumer markets and buying habits
• Customer needs
• Competitor’s perspectives
• Relative importance of outlet types
• Manufacturer’s financial strength
• Sales volume level of existing products, and
• The marketing mix
Modifying Distribution Strategies
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• One of the importance of any website or business
is to bring the products or services to the right
people and to reach the target audience.
• There are a number of different distribution
channels available on the Internet which could be
utilised efficiently to the benefits of any company
E-Commerce: Online Distribution
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In either the presence or the absence of a traditional channel, a primary constraint is that of the availability of various types of middlemen
Selecting a channel of distribution can hinge on one of these factors Distribution coverage required Degree of control desired Total distribution cost Channel flexibility
Selecting Channels of Distribution
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Distribution coverage – Channel selection may depend upon the nature of market coverage desired Intensive distribution – Using as many
wholesalers and retailers as possible Selective distribution – Using only the best
available per geographic area Exclusive distribution – Selected intermediaries
are given exclusive rights within a particular territory
Selecting Channels of Distribution
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Degree of control desired – Achieved by the seller is proportionate
to the directness of channel
Total distribution cost – Channel should be viewed as a total
system composed of interdependent subsystems
Objective should be to optimize total system performance
Generally assumed that the total system should be designed to
minimize costs, other things being equal
Channel flexibility – Ability of the manufacturer to adapt to
changing conditions
Selecting Channels of Distribution
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Innovation is introducing something new in the economy, that can be new means of sources of raw materials, new methods of production, etc..
Advantages:• Use open innovation to reduce R&D costs • Use process innovation to reduce operating costs • Use innovation to match supply and demand • Solve your customers’ pain • Use innovation to improve your suppliers’ business
3. INNOVATION STRATEGIES
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1. INVENTIVE (First to market)
2. ADAPTIVE (Second but “best”)
3. ECONOMIC (Low cost producer)
Types Of Innovative Strategies
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Ways Of Innovation Strategies
• (Explore new technology)Radical
• A problem shared is problem solvedOpen source
• Sustaining innovation for a longer timeSustainable
• Exploring the Existing Technology Incremental
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1. Identify and analyze the target market
2. Define advertising objectives
A. Specific, obtainable, measurable
B. Communication and sales
3. Create the advertising platform
4. Determine the advertising appropriation
5. Develop the media plan
A. Type of media
B. Specific vehicles
C. Reach and frequency
D. Message content
4. Promotional Strategy steps
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6. Create the advertising message
A. Consider type of media and platform
B. Copy and artwork
7. Execute the advertising campaign
8. Evaluate the effectiveness of the advertising
A. Extent of reaching objectives
B. Testing procedures
4. Promotional Strategy steps
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5. Pricing Strategies
Market-penetration pricing- setting the price as low as possible to win a large
market share, then cut price further as falling costs are experienced (Ex: IKEA Home Furnishings)
May be adopted under the following conditions:
a. the market is highly price sensitive and a low price stimulates market growth;
b. production and distribution costs fall with accumulated production experience;
c. a low price discourages actual and potential competition.
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5. Pricing Strategies
Mark-up pricing- the most elementary pricing method which adds a
standard mark-up to the product’s cost
- the most popular pricing strategy
Advantages of mark-up pricing:
a. sellers can determine costs much more easily than they can estimate demand
b. where all firms in the industry use this pricing method, prices tend to be similar and price competition is minimized
c. many people feel that cost-plus pricing is fairer to both buyers and sellers
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5. Pricing Strategies
Target-return pricing- determining the price that would yield its
target return on investment (ROI) (Ex. General Motors priced its automobiles 15%-20% ROI)
- tends to ignore price elasticity and competitors’ prices
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Pricing Strategies
Perceived-value pricing- made up of several elements, such as the buyers’ image of the product performance, the warranty quality, customer support, and softer attributes such as the suppliers’ reputation, trustworthiness, and esteem.
- firms use the other marketing mix elements, such as advertising and sales force, to communicate and enhance perceived value in buyers’ minds.
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Pricing Strategies
Value pricing- charging a fairly low price for a high-quality offering
- reengineering the company’s operations to become a low-cost producer without sacrificing quality, to attract a large number of value-conscious customers
Practitioners of value pricing: IKEA Home Furnishings, Procter & Gamble
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Pricing Strategies
Going-rate pricing
- the firm bases its price largely on competitors’ prices, charging the same, more or less than major competitors
- smaller firms “follow the leader” when the market leader’s prices change rather than when their own demand or costs change
- where costs are difficult to measure or competitive response is uncertain, firms feel the going price is a good solution because it is thought to reflect the industry’s collective wisdom
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Pricing Strategies
Auction-type pricing- usually done using the Internet (Ex. Ebay) to dispose of excess inventories or used goods.
3 major types of auctions:
1. English auctions (ascending bids) where there is one seller and many buyers
2. Dutch auctions (descending bids) where there is one buyer and many sellers. The buyer announces what he/she wants to buy and potential sellers compete by offering the lowest price
3. Sealed-bid auctions – would-be suppliers can submit only one bid and cannot know the other bids
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Pricing Strategies
Geographical pricing
- the company decides how to price its products to different customers in different locations and countries
- company may charge higher prices to distant customers to cover the higher shipping costs
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Pricing Strategies
Geographical pricingPricing options for geographical pricing:
Barter – the buyer and seller directly exchange goods, with no money and no third party involved
Compensation deal– the seller receives some percentage of the payment in cash and the rest in products
Buyback arrangement – the seller sells a plant, equipment, or technology to another country and agrees to accept as partial payment products manufactured with the supplied equipment
Offset – the seller receives full payment in cash but agrees to spend a substantial amount of the money in that country within a stated time period
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Pricing Strategies
Promotional pricing- companies use several pricing techniques to stimulate early purchase
Techniques:Loss-leader pricingSpecial-event pricingCash rebatesLow-interest financingLonger payment termsWarranties and service contractsPsychological discounting
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Pricing Strategies
Differentiated pricing- companies often adjust their basic price to accommodate differences in customers, products, locations, and so on
Customer-segment pricingProduct-form pricingImage pricingChannel pricingLocation pricingTime pricing
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“Digital marketing is marketing that makes use of electronic devices such as computers, tablets, smartphones, cellphones, digital billboards, and game consoles to engage with consumers and other business partners. Internet Marketing is a major component of digital marketing.”
6. Digital marketing
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Why is digital marketing so important?
• It’s targeted, scalable and trackable
• Consumers search products/services online
• 86% of mobile internet users are using their devices
while watching TV
6. Digital marketing
BITS Pilani, Pilani Campus
• Facebook Advertising
• Paid Search
• Mobile Marketing
• Your Website
Types of digital marketing efforts
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• Two Types of FBA - Ads & Sponsored Stories• Drives engagement to page and posts• Supports branding, showcasing product & events• Target based on location, age, status, etc.• Only pay for click throughs, which are a fairly engaged
consumer.
Facebook Advertising
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• Nearly all consumers (97 percent) now use online media
when researching products or services in their local area
BIA/Kelsey and ConStat.
• Among consumers surveyed, 90 percent use search
engines with 67% being Google
Paid Search
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More than just keywordsBroad matchEg. women's jewelry: our ad may show if a search term
contains your keyword terms in any order, possibly along with others buy ladies jewelry
Paid Search Inches
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• Smartphone ownership has surpassed 50
percent and growing.
• 70 percent of mobile searches lead to action
within an hour, in comparison to 30 percent
from desktop searches. (Mobile Marketer 2012)
• 61 percent of smartphone users perform local
searches on their device. (ComScore, January
2012)
Mobile Marketing
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Pay Per Call Mobile - A form of mobile marketing where a potential customer can directly tap or click a phone number placed in the mobile ad
Mobile Banner Ads - Like a standard banner ad but now customized to fit and cater to mobile websites.
Mobile Applications - A from of mobile marketing that involves placing ads inside of an application design.
Text/SMS Marketing - Advertisers can send relevant marketing messages in form of texts.
Barcodes/QR (quick-response barcodes) - allows mobile users to easily obtain information via the use of their mobile.
Types of Mobile Marketing
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Our website and its importance
• Is now the first exposure to YOUR brand• Content is more important than ever• Web responsive design
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• Within the next few years digital media spends will account for 25% or more of overall marketing budget. (ComScore, February 2013)
Budgeting for digital marketing
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• SGS provides strategic, analytic and executive management services to for-profit, non-profit and entrepreneurial organizations. SGS focuses on long-term, sustainable business strategies through the multi-functional integration of corporate strategy, business development, marketing, multi-channel sales, operations, finance and competitive and industry research.
7. Sustainable Growth Strategies
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Step 1 - Determine Business Drivers
Identify the pressures that are driving your business to become more sustainable. They may include:
• Potential to improve the bottom line through increased efficiencies;
• Demonstrating leadership and improving your image and reputation;
• Compliance and risk management;
• Personal passion and commitment to making a difference.
Developing a Sustainability Strategy
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Step 2 - Set a Vision• A vision statement announces your future goals – it is
your ‘compass’ to show the outside world where your organisation is heading. The best vision statements are short, clear and concise, realistic and have measurable outcomes.
• You may choose to draft a sustainability policy that formalizes your company’s commitment to the vision, and display it prominently in your workplace.
Developing a Sustainability Strategy
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Step 3 - Set Objectives• Your objectives relate to your sustainability goals. They are
more specific than your goals as they contain numbers and dates.
Step 4 - Establish Current Position• In order for you to reach your goals, you will need to
develop a good understanding of the current position of your business – which includes an understanding of its key impacts. Use the Sustainability Self Assessment tool to establish benchmarks and raise awareness about what sustainability means in the context of running your business.
Developing a Sustainability Strategy
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Step 5 - Analyse Gaps• Identify the areas of your business that have the greatest
impacts - these areas are likely to reap the greatest potential benefits.
Step 6 - Develop Strategies• Now it’s time to develop appropriate strategies to
address the most significant impacts of your business. A strategy describes how you will reach your objectives and should be aligned to the business drivers identified in Step 1.
Developing a Sustainability Strategy
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Step 7 - Develop Action Plan
The action plan is the key planning document that describes what actions you will undertake to achieve your objectives. It identifies aspects required for implementation including:
• Cost/benefit calculations and payback periods
• Targets, milestones and target dates
• Budgets
• Other resources, including staff, technical expertise, external agencies
• Monitoring, evaluation and reporting processes
Developing a Sustainability Strategy
BITS Pilani, Pilani Campus
Step 8 - Implementation• After all this planning, it’s now time for the doing! Integrate
actions into core business processes and regular reporting cycles. This is also where you may need to develop or adjust policies and procedures for the various aspects of your business to ensure that each staff member understands their role in the business.
Step 9 - Monitoring and Review• This is critical to gauge your progress towards your overall
objectives. Regularly monitor using graphs and diagrams to help with the communication process. You can use your Sustainability Self Assessment tool to track and monitor your progress.
Developing a Sustainability Strategy
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Step 10 - Improve
Incorporate this process into the company’s overall continuous improvement process.
Tips• Gain senior management support at every step• Be realistic about the time and effort required for
implementation• Involve others• Display simple reports in staff room• Acknowledge & reward outcomes• Share your successes with others
Developing a Sustainability Strategy
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956