Final FMCG Project Report

7/30/2019 Final FMCG Project Report

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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


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


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


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


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


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

Documents

Final FMCG Project Report