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DESSERTATION PROJECT REPORTS
Effect of Merchandising on Consumer Buying Behavior
TABLE OF CONTENTS
• Executive Summary • FMCG Sector in India • Consumer Expectation and Indian FMCG Sector • Budget 2007-08 : FMCG • Merchandising as a component of Marketing Communication • Consumer Buying Behaviour
• Defining Research Problem • Survey Plan • Specimen Questionnaire (Retailers) Specimen Questionnaire (Consumer) • Retailer Survey Analysis
Survey Analysis Findings Analysis • Consumer Survey Analysis Survey Analysis Findings Analysis • Conclusion • Suggestions and Recommendations
EXECUTIVE SUMMARY
The FMCG sector has been the cornerstone of the Indian economy. Though, the sector has been in existence for quite a long time, it began to take shape only during the last fifty-odd years. To date, the Indian FMCG industry continues to suffer from a definitional dilemma. In fact, the industry is yet to crystallize in terms of definition and market size, among others. Generally, FMCG refers to consumer non-durable goods required for daily or frequent use. The sector touches every aspect of human life, from looks to hygiene to palate. Perhaps, defining an industry whose scope is so vast is not easy. Post-reforms, the industry's growth has been hinging around a burgeoning rural population which has witnessed significant rise in disposable incomes. Consequently, the rural markets have been witnessing intense competition in almost all the consumer product classes. Another reason which has led to rise in this trend is the saturation in urban markets in most of the consumer non-durable goods categories. This has led to the industry players scrambling for greater rural penetration as a future growth vehicle, the area which accounts for 70% of the total Indian households.
The FMCG sector consists mainly of subsegments viz. personal care, oral care and household products. This can be further sub-divided into oral care, soaps and detergents, Health and Hygiene products, beauty cosmetics, hair care products, food and dairy-based products, cigarettes, and tea and beverages. Of late, there seems to be a liberal approach towards branding of the companies/products as FMCG; companies in businesses like liquors (United Breweries), paints (Asian Paints), adhesives (Fevicol) too are being labeled as FMCG stocks in the stock market parlance. Quite interestingly media stock Zee Telefilms was labelled as FMCG stock by a mutual fund, which had Zee as its top holdings in its FMCG sector scheme at one point of time!
So far, it has been a chequered graph for the MNCs operating in the Indian FMCG industry. Domestic companies are only beginning to make their presence felt in the industry. It has taken tremendous consumer insight and market savviness for the FMCG players to reach where they are today. But, the journey seems to have just now begun for the players as the majority of the rural populace are yet to get access to the items of daily usage like toothpastes, soaps and shampoos.
Things however began to change post-reforms during the nineties. The floodgates were opened. And MNCs with saturating homemarkets who were hungrily looking for markets elsewhere rushed in. Categories within categories were created in products such as hair-oil and skincare, and many new product categories were also created. Untouched facets of the Indian consumer were explored. The FMCG players had in front of them not only a vast untapped market but also a market that was fast growing. Income-levels were rising. A new class of upwardly mobile was emerging. Television and, satellite and cable television were helping the market to grow further in rural areas by changing aspirations and lifestyles.
The canvas did widen for the FMCG players, but so did the challenges. Rules of the game changed. Strategies, in their true sense, came to the fore. Quite unlike in the past, companies began looking for ways to expand their product-portfolios and distribution reach. Acquisition of brands became the order of the day as it gave the players easy options of attaining growth in the FMCG sector. That is true of the MNCs who are known for their deep pockets .
With domestic consumption close to Rs 80,000 crore, the FMCG sector today is one of the largest in the country. In terms of size and importance, it is only going to grow. Notwithstanding experts' pronouncements that there would be enough room for everybody to co-exist, the name of the game is going to be competition and more competition. One of the biggest challenges facing the Indian FMCG industry is this: get to the next level of innovation. "You need strong local product ranges," says McKinsey's Fernandes.
So, the key to success in the Indian FMCG industry lies in: cutting costs, investing in brand building in the form of marketing, advertisements and promos, providing good price points and aggressive pricing, offering products such as packaged atta and milk that add value and convenience and protecting their human talents from poachers.
Alongside, FMCG players need to go in for new initiatives. Consider HLL for instance. The company has made it clear that Internet is going be its key delivery vehicle which would expedite its distribution and sales efforts. Sure, Internet is going to change the way FMCG companies strategise and do business. With reasons. Internet
presents vast opportunities to FMCG companies in the areas of logistics, interface with consumers and value chain.
Consider Internet's role in logistics. FMCG players can leverage Internet to extend their logistics network beyond the traditional expensive EDI-based solutions. Says Fernandes: "It is a huge valuedriver for an industry with such a wide reach and a huge SKU complexity." This would start from connections between the factory and C&F and then move on to more complex networks reaching out to key urban distributors and wholesalers. And over time, even to rural wholesalers and retailers.
As far as interface with consumers is concerned, Internet can work wonders here. Over time, successful e-marketeers can leverage the Internet to develop user-communities, which are invaluable in creating loyalty and in testing products. What more, FMCG companies can come together to form e-purchasing portals and increase their purchasing power and ability to find smaller suppliers.
Fine. All these call for a productive partnership between the FMCG industry and the government. Experts see this as an emerging
opportunity. A partnership between the government, which wants to drive Internet penetration into smaller towns, and FMCG companies who want to ride off a shared infrastructural network to enable superior logistics and drive product communications. Such a partnership can jointly drive the Internet network deeper into the Indian heartland.
It seems the excitement is just beginning in the Indian FMCG industry.
FMCG Sector in India
The fast moving consumer goods (FMCG) sector, which was beginning to be derisively referred to as the SMCG industry (slow moving consumer goods) as it didn't exceed a flaccid 1 to 1.5 per cent growth rate in the past four years, began to witness a slow revival in 2004. The revival was not without its share of pain though as companies in the sector resorted to price cuts, small packs, and offering freebies to push products.
Detergents and shampoos saw the maximum action as Procter & Gamble (P&G) and Hindustan Lever (HLL) went to war with each
other with discounts to cut each other's market share. P&G began by slashing prices of detergent brands Ariel and Tide by 50 per cent in March 2004 and was able to improve its market share in the detergents market to 10 per cent by October 2004 against 6 per cent in October '03 (source: AC Nielsen). HLL, while asserting that price cuts were unsustainable, followed suit and cut prices of its bestselling detergent Surf Excel. The slashed prices stay to this day while detergent volumes have grown by 11 per cent.
Next HLL initiated a price war in shampoos with its 'buy-one-get-onefree offer,' that effectively offered a discount of 25 per cent. However, P&G and other players refused to follow suit and instead P&G began focusing more heavily on its' Rejoice shampoo and even launched a new variant of Pantene with a promise to stop falling hair.
Analysts say the Rs1,000-crore shampoo industry grew between 1015 per cent in volumes in 2004 largely due to price cuts and small packs. Despite price cuts, freebies and promotional offers by Hindustan Lever (HLL), the company's brands together lost market share in
terms of volume as well as value in 2004. The major gainer in terms of market share was, which improved market share to 20 per cent in October '04 against 16 per cent in October '03 in shampoos. Subsequently HLL tried increased its advertising budget by more than 25 per cent and introduced a half-dozen new creams, soaps, and detergents. These moves helped stop market share erosion, but hit earnings.
Industry experts said while the market for shampoos grew by 10 per cent over the whole year, the last three months saw a growth of 11.5 per cent. Indian FMCG companies like Dabur and Cavinkare for the first time found themselves under severe pressure as MNCs went on price slashing spree. In previous years the price value-equation was in favour of Indian brands but this trend was reversed in 2004. Some companies responded with their own price cuts, but these came late in the year and could not match those of the multinationals. Market research agency ORG data revealed that brands like Vatika, Dabur Anmol, Ayur, Chik and Nyle together lost 2.3 percentage
points in volume terms whereas the value gain was merely 0.1 percentage points during January-October. Future shampoo price cuts may be in the offing since many companies including HLL, P&G, Dabur and CavinKare have set up facilities in excise-free zones.
Such aggressive price cuts also saw companies investing heavily in brand building and aggressive product promotions through advertising to attain higher sales.
The small packs strategy
Apart from price cuts, small packs priced at Rs5 - in recent times even Rs3 - have been changing the rules of the FMCG market. For companies, small packs in the long run do not make sense, as they prove unprofitable. Yet, at present nearly all consumer goods are available in small packs right from facial creams to shampoos, detergents, tea, coffee and chocolates. For consumers small packs make a great deal of sense as they cost a lot less than their large counter-packs across all FMCG categories and offer consumers a chance to try out the
products before graduating to larger packs. Some buyers purchase premium products such as expensive creams or shampoos for occasional use. Without sachets such buyers might not have bought the product. Research reveals that on an average the unit price of large packs is twice that of sachets and it almost seems as if large packs subsidies sachets. HLL for instance charges a premium of nearly 90 per cent on 500gm of Surf Excel family pack, on the same comparable size in sachets while P&G sells a 500gm pack of Tide at a premium of 80 per cent to sachets on a comparable basis. This can be rationalized as plastic / glass bottles cost more than sachet packaging; companies follow a penetration pricing strategy for sachets but have higher margins on the bottles. Sachets account for nearly 70 per cent of shampoo sales. Shampoo were the first products to be offered in sachets, though at the time large bottles worked out to be more economical. Today the reverse is true. For instance Vatika shampoo's 8ml sachet costs Rs2, while its 50 ml bottle comes for Rs25. With this kind of difference available more and consumers are making the shift to sachets.
Despite this, a larger number of consumer goods categories, are being offered in sachets simply to drive consumption and prevent downgrading that has been the bane of FMCG companies in India for the past four to five years.
Industry insiders say companies find the Rs5 price point viable because of consumer buying behaviour. Many consumers are not concerned so much about size as about price. The Rs5 affordability strategy of cola makers Coca-Cola and Pepsi led to a 10 per cent increase in the size of the beverage market. However the year 2004 was not a particularly good one for cola majors. The pesticides controversy continued to persist in hurting sales of both Coca-Cola and Pepsi well into 2004, and the companies abandoned the 'affordability' strategy due to a severe margin squeeze and raised prices in the second half of the year. However, the Rs5 strategy managed to expand the consumer-base for soft drinks from 160 million in 2002 to 240 million in 2004, a two-year period during which the Rs5-price point remained in force.
This squeeze, brought about by a two per cent cess and higher input costs, forced cola companies to hike prices by a rupee each on 200 ml and 300 ml pack sizes. The year also saw the companies increasing focus on non-CSD business, Coca-Cola extending Georgia Gold hot beverage brand to more towns and cities while PepsiCo has been experimenting with a host of new flavours in the snack division besides launching different packs and varieties of packaged fruit juices under brand name Tropicana.
However, the packaged water business of both the cola companies witnessed slower-than-expected growth.
As per figures by market research agency AdEx (division of TAM Media), Coca-Cola India reduced its advertising spend on packaged water brand Kinley between January and August 2004 by 20 per cent as compared with the same period in the previous year while Pepsi's spends were also down by about 8 per cent till July. Pepsi's adspend recovered after that month and its total advertising budget increased by over 12 per cent between January and August 2004.
In terms of new launches, Coke launched Coke Vanilla, whereas Pepsi launched its global sports drink Gatorade. According to industry observers, the Rs5 price point also helps branded FMCG categories battling fakes from the unorganised sector. The FMCG industry in particular HLL, continued to suffer from fake product makers. HLL claimed to be losing close to Rs1,600 crore every year in revenue to counterfeit product makers while the Indian FMCG industry is said to be suffering a loss of around Rs2,500 crore of revenue annually. The negatives for the industry during the year were the spiraling costs of sugar, wheat, edible oil and packaging material as these shot up by as much as 15 per cent. Companies found a way to beat this by reducing the gram size of packs without reducing prices. The FMCG sector also received a boost by government led initiatives in the 2003 budget such as the setting up of excise free zones in various parts of the country that witnessed firms moving away from outsourcing to manufacturing by investing in the zones.
ASSOCHAM has indicated that the FMCG industry will achieve a growth of 3-4 per cent in 2005-06. However, FMCG companies will face the challenges of sharp swings in commodity prices, expected to impact profits like never before.
Consumers’ Expectations and Indian FMCG Sector
The ever-increasing pressure on marketers on enhancing product offerings in order to differentiate has continued to, in turn, increase expectations from market support services such as packaging. Consumers' expectations continue to grow on every facet of the product or service being sought, be it in terms of intrinsic or physical characteristics of the product such as greater effectiveness, longer life, more quantity, greater variants, etc. or in terms of the external values being reinforced by packaging or for that matter, advertising and sales promotion. Further, the advent of the e-age has added an altogether new dimension to the facet of marketing for most "erelevant”‘ prod ucts and services.
As in the case of many other sectors, the market for consumer goods in the Indian FMCG (Fast Moving Consumer Goods) industry also faces the "multi-technology coexistence syndrome". This refers to the
coexistence of the hand-pulled rickshaw along with the aircraft, or that of the manual -washing machine selling along side the state-ofthe-art fuzzy logic-driven fully automatic washing machine. In the case of the FMCG industry, it finds itself initiating the concept of branding in some categories alongside developing niche brands or variants, and differential strategies in the case of others more mature branded categories. Ipso facto, this translates into a varied crosssection of challenges for the support services such as Packaging. On the one hand, it relates to initiation of designing packs for hitherto commodity categories and on the other, also expects packaging to meet needs of innovation and differentiation in a multitude of competing mediums to reach the consumer.
The tea market lends itself to benchmarking the complexity of the FMCG set of products. The product necessitates packing of a type, which ensures the freshness of the tea (flavour and fragrance) as well as secure packaging to prevent loss. Also given its mass acceptance across various spectrums of society, there is a spectrum of pack types as well as sizes required to meet the varied segments.
Total domestic tea market amounts to 870 thousand tonnes. The packaged segment accounts for an estimated 237 thousand tonnes. The value of the packaged tea market comes to around Rs. 33 billion. The Compounded Annual Growth Rate (CAGR) for this category over the last five years is 14%. The urban-rural split has c hanged from 48:52 from 1995 to 51:49 in 2000. The tea market can be divided into various segments on the basis of the pack sizes. Available pack sizes range from 50 grams to 2 Kgs. The contribution of 200/250 grams pack is 38% followed by 50 grams pack with 31 % contribution
Rural India shows preference for small pack sizes, which can be seen from the absence of I kg and 2 kg packs from the rural market. The smaller packs of 50 grams and less exhibit an increasing trend with their respective contributions increasing from 32% to 45% from 1995 to 2000 respectively. Whereas in urban India the preference is for 200/250 grams, which contributes 48% to the total market
The pack types prevailing in the industry today are jars, bottles, boxes, sachets, pouches, strips, envelopes and tins. Poly p ouches introduced in 1985, has captured 12% of the tea market from the
loose tea segment as they were not only cost-effective, but were also effective in retaining freshness.
The number of players in the organised sector is 40 having 80 brands in all. There is an increase of 3 brands in the year 2000. The number of packs has increased from 897 in 1999 to 1025 in2000. There are 17 packtypesand21 pack sizes prevailing in the category. In the year 2000, the count of unique brand-wise pack sizes have gone up from 333 to 349 whereas number of unique brand-wise pack types increased from 234 to 248 in the same period.
COFFEE MARKET: This category specifically packaged coffee is relatively premium requiring a premium nature 6f packaging material. Also the product necessitates packaging to be secure and airtight.
1 .Total market for packaged coffee is estimated at 19600 tonnes and amounts to Rs. 4 Billion. The CAGR (Compound Annual Growth Rate) for the last five years is 11% in terms of value and 1.5% in terms of weight. The urban-ruralsplitis61: 39m2000asagainst59: 41 in 1995.
2. The Indian hot beverage market is a tea dominant market and coffee is consumed infrequently (expect for south zone). It is also a very price sensitive category. Hence the preference for the small pack sizes. The most preferred pack size is 50 grams and below accounting for 60% of the category sales. Unlike tea, the dominance of the small pack is evident in both the urban and the rural market.
3. Foil pouches, jars, boxes, poly pouches and bottles are the pack types prevailing currently in the market. Given the nature of the product, the foil pouch is the most popular pack type having 32% value contribution. In terms of volume the contribution of foil pouch is around 59%. The Preference is same both in rural and the urban market.
4. The organised coffee market is not as fragmented as the tea market. The number of players present in the category are just II with an average of 2 brands each. The number of SKU's are near 165 with 9 SKU's having been launched in 2000. The number of pack types and sizes available are 12 and 20 respectively. In the case of unique brand-wise pack types there is an addition of 7 such unique
combinations in the year 2000 which took the number to 53 while in the case of pack sizes the count increased by 4 taking the count to 89 in 2000.
MINERAL WATER: This category is one of the new emerging stars in the FMCG basket. It has recorded the best growth in its volume class and shows little evidence of slowing down. The hygiene aspect as well as the fear of pilferage makes it unique case for the packaging industry. In addition, are the number of players in the segment. The total market for mineral water is 65 million. crates valued at Rs. 2.3 billion. On an average the monthly consumption is an estimated 4.9 million. Crates, which increases to 5.2 million. during peak season. The penetration is restricted to rural India. There are close to 400 companies, 550 brands and SKU's in this market. These SKU's span near 18 pack sizes and 4 pack types at an overall level for the category. The pack type prevailing in the category is CRB (Carbo), PET bottles and pouches. (It ought to be mentioned that Carbo packs are the 20 liters packs, which are also sold through direct marketing channels to the end of consumers, the inclusion of which would increase its contribution.) PET bottles dominate the market with 45% of the
contribution. The rest of the market is di vided between CRB and pouches. The seasonal nature of the product (CRB gains largely due to shortages) is depicted from the pack type shift across seasons.
SOFT DRINKS: The dominance of the two world majors in this category and the resultant noise generated by this category necessitates the study of this category. Further the aspects of preserving carbonation (in the respective segment) as well as the f ragile nature of the conventional packaging are contributors to the complexity of packaging in this segment.
1. The total soft drink market is estimated 284 million. Crates a year, which is valued at Rupees. 47 billion. The seasonal nature of the category is evident from the variation observed in the consumption from 25 million crates per month during peak season dipping to a low of 15 million. Crates per month during off-season. The soft drink market is predominantly urban with just 25% contribution from rural.
2. There are close to 370 companies, 650 brands and 2000 SKU's in this market. These SKU's span near 26 pack sizes and 8 pack types at an overall level for t he category.
3. The glass bottle segment contribution the highest with around 82% followed by PET with 12%. The tetra pack segment has a small contribution of 2%. Cans are yet to make significant inroads. The similar pattern is observed in both urban and rural markets.
4. It is observed that in peak season the contribution of all the nonconventional pack types does show an increase resulting in the drop of contribution in glass bottles.
TheChallengesAhead The FMCG industry as a whole continues to grapple with low growths. The heady days of double-digit growth witnessed in the early 90's are well and truly behind us. All around, there are pressures of better efficiencies in an effort to boost bottom lines as top lines continue to struggle. More efficiency will be called for from the packaging industry in order to bring down Per unit packaging costs.
Globalisation will have its role to play too. The impending lowering of tariff barriers as per the WTO agreement will undoubtedly bring in fresh opportunities as well as challenges. We are already witnessing numerous FMCG products being imported and sold in the Indian market. The packaging industry will have to pr oactively team up with the local Indian manufacturer in order to bring in state-of-the-art technology as well as provide innovative solutions to combat the new entrants. The retail sector is also attempting in bits and pieces to organise themselves. Noteworthy is the interest and inclination shown by large corporates to enter organised retail with some of them making
impressive debuts in the south. The supermarket and its resultant pressures of "look & attract" will have its role to play in increasing demands from the packaging sector.
The Internet and the advent of e-commerce is another dimension, which the packaging industry has to contend with. It presents an immense opportunity as packaging assumes a much higher weightage in the marketing mix of marketers pursuing the ecommerce option. Packaging assumes criticality in this medium, in light of it connoting the value proposition in the absence of the "feel" option for the browser customer. Further, e-commerce also opens up a new opportunity for packaging in terms of consignment packaging (to ensure the promised delivery) of the e-commerce transaction. The packaging industry thus can look forward to, as well as prepare for, its rightful place in cyberspace.
Budget 2007-08: FMCG
The government focus so far has been to provide protection to the domestic companies by managing the import duty structures to the domestic advantage. In the last budget (2007-08), the government laid stress on agriculture reforms, in a bid to integrate the countrywide food market. The government also took its first tentative steps towards a VAT regime, addressing the long time demand from the industry. But the tax regime is marred by ambiguity and government's inability to get the message across to the small producers. The government's focus on road, rail and power development will indirectly benefit the FMCG industry in the long run.
Budget Measures
• Surcharge of Re 1 on per kg of tea abolished • Massive 'replantation and rejuvenation' for domestic tea plantations • Excise duty on refined edible oils (Re 1 per kg) and vanaspati (Rs 1.25 per kg) scrapped • Implementation of VAT from April 1, 2006 • Import duty on cloves cut to 35%
• Import duty on refrigeration van halved to 10% • Area specific excise duty exemption to continue • To form 'National Fund for Agri Research' with initial outlay of Rs 500 m • National Horticulture Mission to be commissioned in April 1 • Focus on development of agriculture, manufacturing and infrastructure • Corporate tax cut to 30% from 35%
Budget Impact • The removal of surcharge on tea and duty on vanaspati and refined edible oils will have a marginally positive impact on companies like Tata Tea, HLL and Marico. • The focus on replantation and rejuvenation of tea plantations will benefit the sector over the long term, but there is nothing material in it for companies immediately. • Implementation of VAT is a positive move over the long term. This is likely to pave the way for a singular tax going forward, which will help companies cut costs ands become more competitive in the long run. • Reduction in duty on refrigerated vans will give a boost to the processed food industry. A positive for players like Amul, Nestle, HLL and Britannia. • Area specific excise exemptions for North East, J&K, Himachal Pradesh will continue to encourage FMCG companies to relocate to these areas. • The corporate tax rate change is unlikely to benefit the FMCG companies much, as most pay an effective tax rate of less than 30% anyway. • The push to agriculture and rural India is likely to aid rural India's development in the long run. It has the potential to
induce increased usage of FMCG products going forward. Individual tax benefits too are a positive for the sector.
Sector Outlook
• The implementation of VAT at the state level is a positive for the FMCG sector in the long run for reasons mentioned above. Although there might be some initial hiccups, products and brands will become more affordable and this is a step in the right direction.
• Focus on improving sanitation, literacy levels, assured water supply, irrigation facilities, rural electrification and telephone networking are all measures to up India's human development index. All these are likely to positively impact productivity and employment generation in rural India and drive awareness of FMCG products. Again, this is a big positive in the long run. Tax relief to individuals too, may perk up per capita usage. All in all, the industry has much to look forward too in the long run.
Industry Wish List • Complete de-reservation of consumer products sector. If it happens, it will enable Indian companies to undertake manufacturing on a mass scale resulting in operational and quality efficiencies. • Quality check on imported FMCG products and effective enforcement of copyright laws. This would go a long way in filtering out import of sub-quality and discarded products, benefiting both the manufacturers and the consumers. Also, there should be a comprehensive policy to hit out at contraband imports. • More focus towards networking the food supply chain, which will enable free flow of food related products across the country, to the benefit of both manufacturers and consumers. For the government, it will mean effective utilisation of food stocks.
• As per CII, excise duty difference between 'branded' and 'unbranded' food products existing at present should be removed to encourage consumers to move from unhygienic unbranded foods to hygienically packaged processed foods.
Budget over the years Budget 2004-05 • Increased focus on agricultural reforms with an aim to integrate the countrywide food market • Deregulation of the milk processing capacity • Excise duty structure largely untouched. Only for tea, the duty was reduced from Rs 2 per Kg to Re 1 • Customs duty on tea and coffee doubled to 100% • Duty on imported pulses upped to 80% • Import duty on wine and liquor slashed from 210% to 180%
Budget 2005-06
• Excise on biscuits reduced to 8% from 16%. Excise on soft drinks and sugar boiled confectionery also reduced • All states to switch to VAT in FY04 (deadline now has been extended till end FY06) • Loans to agriculture and to small-scale sector will now be available at maximum 2% above prime lending rate (PLR) • Development plans for roads, ports, railways and airports • Customs duty on alcoholic beverages reduced
Budget 2006-07
• Increase in custom duty of refined palm oil to 75% • Concessional rate of 5% custom duty on tea and coffee plantation machinery • Excise duty on dairy machinery reduced from 16% to 0 • Excise duty on preparations of meat, poultry and fish halved to 8%
• Excise duty on food grade hexane (used in the edible oil industry) halved to 16% • Area specific excise duty exemptions to continue • 20% dividend distribution tax for corporates who invest in debt funds
Key Positives
Rural penetration levels are still low. Also, according to estimates, only about 8-10% of the total food production is consumed in processed form (US$ 90 bn). This speaks for itself, highlighting the scope for growth. The planned development of roads, ports, railways and airports, will increase FMCG penetration in the long term. As growth has shown signs of slackening companies are increasingly focusing on key products and brands, cost efficiencies and rural markets. This is a sign of market sophistication, both from the manufacturer's point of view as well as the consumer's point of view
Owing to India's cost advantage, many MNC companies have started using their Indian operations as their manufacturing base. Alternatively, some Indian companies have tested foreign shores like Bangladesh, Sri Lanka and the Middle East among others.
The proposed introduction of VAT at the start of FY06 is a long term positive for the FMCG sector. This had been a long pending demand
of the FMCG sector. Post this, the tax ambiguity will get reduced, benefiting the sector.
Key Negatives Weakness in the economy has led to a slowdown in demand for FMCG products. The topline growth of many FMCG majors has thus, declined. Resurgent economic numbers in FY04 did nothing to change the scenario. New entrants in the sector have heightened competition in key segments like soaps and detergents, putting pressure on profitability.
The infrastructure for free transport of goods is not adequate in the country. Also, the fall in agricultural output continues to cast on FMCG sector's prospects in the short term.
A large part of the branded market continues to be threatened by spurious goods and illegal foreign imports. In times of weakened consumer demand such menaces continue to give nightmares to large companies.
Merchandising as a component of Marketing Communication
Merchandising activity can be rightly described as a ‘clincher’ in the marketing process. After all, the word ‘merchandise’ means ‘ good for sale’, and the term ‘merchandising’ embraces all activities undertaken at a retail shop to promote sales. In particular, it includes two elements – imaginative use of dealer service material, and alluring display of products in the retail outlet. As such, it is but apt that merchandising is well recognized for its sales promotional role. In some cases, merchandising is particularly effective in inducing brand switching. A consumer normally goes to a retail outlet to purchase his usual brand. At the retail outlet, a good display of competing brand can command his attention and he may ultimately buy the competing brand. In other words, merchandising can lead to impulse buying and through that process to brand switching. The Encarta World English dictionary defines merchandising as “the Promotion Of a Product by developing strategies for packaging and displaying it". Effective merchandising can help generate more
customer traffic, amplify repeat business, increase no of customers who make purchases and increase the size of the purchases that take place- all leading to increase sales. In-store merchandising is no longer a commodities-driven method of organizing a product at retail, but rather the last three feet of any comprehensive and integrated marketing plan. Merchandising plays a crucial role in leveraging brands, since it talks to the consumer when money, product and willingness to buy converge at the retail outlet. Good merchandising at the store level often prompts the buyer in different ways: to buy ‘now’ rather than later, buy more than originally intended quantity or buy a particular pack size in preference to another. All these are essentially sales promotion objectives. While advertising can only make a consumer aware of the product or generate in him a desire for it, merchandising in many cases, instantly motivates a customer to buy a product. In other words, merchandising is a most effective tool in the hands of the marketer to amend the customer’s buying pattern at the Point Of Purchase (POP).
Organizing Sales Promotion Campaigns
Though almost all companies resort to sales promotion techniques, only some of them go about the job in a planned way. Others mostly view sales promotion as a weapon that can be taken just like that and used in an emergent situation. Sales promotion yields the intended results only when it meets certain basic requirements that are discussed below.
Identifying The Basic Requirements
The first is to identifying the specific requirement of the firm in resorting to sales promotion. The firm finds out its need: Is it to enhance the dealer’s off-take of the product? Is it to bring in substantial extra sales immediately? Is it to offload accumulated stocks? Is it to regain loosing consumer interest in the product? Etc.
Identifying The Right Promotional Programme
The next step is to identify the appropriate programme. The firm has to select the programme suitable to the current need and the current situation. Should it go in for product demonstration? Or free samples of the product? Or should it go in for a large scale consumer contest? The choice of the programme will be primarily decided by the resources available to the firm. A big consumer contest cannot be organized and implemented unless the firm can command substantial resources and organizing capacity.
Enlisting The Support And Involvement of Salesmen
Often, sales promotion programme are conceived and planned at the head office of the firm and implemented in a hurry without enlisting the cooperation and involvement of the field sales people. For campaigns to succeed, it is essential that salesmen are : (i) briefed on the context and content of the programme, (ii) informed of their roles in the conduct of the programme, and (iii) given detailed
information / working guides, explaining what they are expected to do at different stages of the campaign.
Enlisting the Support of Dealers It is also essential to enlist the support of dealers in any large scale sales promotion venture. This is because a major part of the activity has to take place around the dealer shop, and if the dealer is not motivated to support the campaign, the campaign may flop.
Enlisting the Agency’s Support
Carrying out a sales promotion campaign is as challenging as conducting an advertising campaign. In fact for an add campaign, quite often the results do not lend to immediate measurement. In a sales promotion campaign, the results are readily available to be measured. So campaign while committing heavy funds for sales promotion make it a point to ensure that they derive maximum benefit from the experience and expertise of their add agency.
Launching and Follow Up of Campaigns
Sometimes the sales promotion campaigns are launched with great publicity and fanfare. But subsequently the tempo of the programme is also allowed to die out. It is essential that the initial tempo built around the programme is maintained during the entire period of the campaign, through advertising and POP’s. The campaign tempo can also be kept up by suitably instilling a spirit of competition into salesmen and dealers.
Timing of the Campaign
Timing of the campaign is another factor that decides its success. The sales needs of the company is of course the prime factor that decide the timing. But the firm also has to consider factors like seasonality of purchase of the product, climate conditions, festival season etc., in timing the campaign.
Co-ordination with other Elements of Promotion Sales promotion programmes yield the best results when they are well coordinated with other elements of promotion – Advertising,
Personal selling and Publicity. Sales promotion programmes cannot run independent of these major promotion variables. When used in combination with promotion variables, sales promotion programmes stand a better chance of meeting their aims.
Consumer Buying Behaviour
What influences consumers to purchase products or services? The consumer buying process is a complex matter as many internal and external factors have an impact on the buying decisions of the consumer.
When purchasing a product there several processes, which consumers go through. These are discussed below.
1. Problem/Need Recognition
How do you decide you want to buy a particular product or service? It could be that your DVD player stops working and you now have to look for a new one, all those DVD films you purchased you can no longer play! So you have a problem or a new need. For high value items like a DVD player or a car or other low frequency purchased products this is the process we would take. However, for impulse low frequency purchases e.g. confectionery the process is different.
2. Information search So we have a problem, our DVD player no longer works and we need to buy a new one. What’s the solution? Yes go out and purchase a new one, but which brand? Shall we buy the same brand as the one that blew up? Or stay clear of that? Consumer often go on some form of information search to help them through their purchase decision. Sources of information could be family, friends, neighbours who may have the product you have in mind, alternatively you may ask the sales people, or dealers, or read specialist magazines like What DVD? to help with their purchase decision. You may even actually examine the product before you decide to purchase it. 3. Evaluation of different purchase options. So what DVD player do we purchase? Shall it be Sony, Toshiba or Bush? Consumers allocate attribute factors to certain products, almost like a point scoring system which they work out in their mind over which brand to purchase. This means that consumers know what features from the rivals will benefit them and they attach different degrees of importance to each attribute. For example sound maybe better on the Sony product and picture on the Toshiba , but picture clarity is more important to you then sound. Consumers
usually have some sort of brand preference with companies as they may have had a good history with a particular brand or their friends may have had a reliable history with one, but if the decision falls between the Sony DVD or Toshiba then which one shall it be? It could be that the a review the consumer reads on the particular Toshiba product may have tipped the balance and that they will purchase that brand.
4. Purchase decision
Through the evaluation process discussed above consumers will reach their final purchase decision and they reach the final process of going through the purchase action e.g. The process of going to the shop to buy the product, which for some consumers can be as just as rewarding as actually purchasing the product. Purchase of the product can either be through the store, the web, or over the phone.
Post Purchase Behaviour
Ever have doubts about the product after you purchased it? This simply is post purchase behaviour and research shows that it is a
common trait amongst purchasers of products. Manufacturers of products clearly want recent consumers to feel proud of their purchase, it is therefore just as important for manufacturers to advertise for the sake of their recent purchaser so consumers feel comfortable that they own a product from a strong and reputable organisation. This limits post purchase behaviour. i.e. You feel reassured that you own the latest advertised product.
Factors influencing the behaviour of buyers.
Consumer behaviour is affected by many uncontrollable factors. Just think, what influences you before you buy a product or service? Your friends, your upbringing, your culture, the media, a role model or influences from certain groups?
Culture is one factor that influences behaviour. Simply culture is defined as our attitudes and beliefs. But how are these attitudes and beliefs developed? As an individual growing up, a child is influenced by their parents, brothers, sister and other family member who may teach them what is wrong or right. They learn about their religion and culture, which helps them develop these opinions, attitudes and
beliefs (AIO) . These factors will influence their purchase behaviour however other factors like groups of friends, or people they look up to may influence their choices of purchasing a particular product or service. Reference groups are particular groups of people some people may look up towards to that have an impact on consumer behaviour. So they can be simply a band like the Spice Girls or your immediate family members. Opinion leaders are those people that you look up to because your respect their views and judgements and these views may influence consumer decisions. So it maybe a friend who works with the IT trade who may influence your decision on what computer to buy. The economical environment also has an impact on consumer behaviour; do consumers have a secure job and a regular income to spend on goods? Marketing and advertising obviously influence consumers in trying to evoke them to purchase a particular product or service.
Peoples social status will also impact their behaviour. What is their role within society? Are they Actors? Doctors? Office worker? and mothers and fathers also? Clearly being parents affects your buying habits depending on the age of the children, the type of job may mean you need to purchase formal clothes, the income which is
earned has an impact. The lifestyle of someone who earns £250000 would clearly be different from someone who earns £25000. Also characters have an influence on buying decision. Whether the person is extrovert (out going and spends on entertainment) or introvert (keeps to themselves and purchases via online or mail order) again has an impact on the types of purchases made.
Maslow’s Hierarchy of Needs
Abraham Maslow hierarchy of needs theory sets out to explain what motivated individuals in life to achieve. He set out his answer in a form of a hierarchy. He suggests individuals aim to meet basic psychological needs of hunger and thirst. When this has been met they then move up to the next stage of the hierarchy, safety needs, where the priority lay with job security and the knowing that an income will be available to them regularly. Social needs come in the next level of the hierarchy, the need to belong or be loved is a natural human desire and people do strive for this belonging. Esteem need is the need for status and recognition within society, status sometimes drives people, the need to have a good job title and be recognised or the need to wear branded clothes as a symbol of status.
Self-actualisation the realisation that an individual has reached their potential in life. The point of self-actualisation is down to the individual, when do you know you have reached your point of selffulfilment? But how does this concept help an organisation trying to market a product or service?
Well as we have established earlier within this website, marketing is about meeting needs and providing benefits, Maslows concept suggests that needs change as we go along our path of striving for self-actualisation. Supermarket firms develop value brands to meet the psychological needs of hunger and thirst. Harrods products and services for those who want have met their esteem needs. So Maslows concept is useful for marketers as it can help them understand and develop consumer needs and wants.
Types of buying behaviour. There are four typical types of buying behaviour based on the type of products that intends to be purchased. Complex buying behaviour is where the individual purchases a high value brand and seeks a lot of
information before the purchase is made. Habitual buying behaviour is where the individual buys a product out of habit e.g. a daily newspaper, sugar or salt. Variety seeking buying behaviour is where the individual likes to shop around and experiment with different products. So an individual may shop around for different breakfast cereals because he/she wants variety in the mornings!
To summarise: • There are five stages of consumer purchase behaviour • Problem/Need Recognition • Information search. • Evaluation of purchases. • Purchase decision. • Post purchase behaviour. • Culture has an impact on the company. • Marketers should take into account Maslows hierarchy of needs
International rating agency Fitch has predicted that penetration of organised retail in India will increase to about 10 per cent over the next five years from the present three per cent.
"The penetration of organised retail in India is on track to increase to about eight to 10 per cent over the next five years from an estimated three per cent in 2004 which is about Rs 28,000 crore, Fitch managing director Amit Tandon said in a special report on India's retail sector.
"The rapid growth in the Indian retail sector has been driven by the country's economic fundamentals including a more favourable income distribution and increased consumption expenditure," it said.
The agency said key players have customised the concepts of their outlets to better service their target market and it expects a strong topline growth across the industry including hypermarkets, department stores and supermarkets.
The study, however, warned that the supermarket segment is likely to witness margin pressures and it needed to rapidly scale up its operations and promote instore brands to increase its profitability.
"Retailers are expected to benefit from the increased availability of retail focussed real estates as the rapid development of malls in major cities is expected to continue in the medium term," it added.
Fitch said the industry is gaining acceptance from the investor community and new modes of financing are opening up for the retail sector.
Defining Research Problem
It’s a established fact that 75% of consumers look out for attractive display at the Point of Purchase. Thus the importance of effective merchandising comes into the picture as any marketer or a company may affect its total sales by imaginative use of dealer service material, and alluring display of products in the retail outlet. Mostly merchandising schemes of almost all company’s includes following points: ? Alluring product display at the retail shop ? Effective Price range. ? Eye catching Packaging of the product. ? Schemes for Consumer ? Schemes for Retailer ? Retailer incentives.
Our discussion under ‘FMCG sector in India’ provides us the base to understand in depth about the merchandising and sales promotion campaigns as channelised by the companies, especially in the FMCG sector. But the question arises that shouldn’t we test the effect Merchandising schemes on the Retailers and the Consumer at a large?
Any merchandising scheme can be successful only if it is well supported by the retailers and motivates retailer as well as the consumer in making the actual sales. If such schemes are not able to motivate the retailers to promote sales then such schemes are mere waste of resources. Every company tries its best to provide as much satisfaction to the retailers in lieu to their objectives to be achieved. Thus a scheme’s success primarily depends upon the level of understanding about the schemes on the part of the retailers. If the retailers are not well informed or the product displays are not eye catching, then such schemes may often fail to bring out the actual sales. Thus from the above analysis we can deduce that a complete market research is required to find the effectiveness of merchandising schemes on the sales of FMCG Sector. Thus we can deduce the hypothesis for our research as
Ho : Effective merchandising schemes helps in motivating retailers and consumers and thus making actual sales.
H1 : Effective merchandising schemes does not helps in motivating retailers and consumers and thus making actual sales.
Survey Plan
To understand importance of POP in general and displays in particular in consumer buying decision, a study was carried out amongst 25 retailers and 100 consumers in Noida. All the consumers were interviewed through a structured questionnaire just as they came out of selected shops after shopping.
In total 25 shops were selected on the basis that they satisfy two major criteria’s viz., firstly that they sell most of the successful FMCG brands and secondly, that they had at least more than two product displays of different products.
The research was carried out with the help of two different structured questionnaires for the retailers and the consumers respectively. Both retailers and the consumers were asked to rank on a scale of 1-5, the four pre-selected factors(for retailers) and six pre-selected factors (for consumers) respectively. 1 Point was scored for the most important factor and 5 for the least important. These factors were decided on the basis of their effect on the merchandising stunts as channeled by the company to influence consumer’s buying behavior and also on
the KSA consumer outlook survey (2000) in India. The specimen questionnaire is available on the next two pages. KSA consumer outlook survey
The KSA consumer outlook study (2000) in India established that 75% of consumers look out for attractive display in a store. The other important attributes wereSatisfaction with stores Attributes Polite & courteous sales 86.1 people Quality of products Non-intrusive sales people Value for money Attractive displays Range of products Schemes & promotions Exchange/ return policy A trial room Acceptance of credit cards An entertainment center for children 85.9 76.2 75.1 75.0 65.8 48.8 44.1 32.0 25.1 10.0 % Of respondents looking out for this attribute in a retail outlet.
SPECIMEN QUESTIONNAIRE
(Retailers) ? Serial No. : ? Name of the Retail Outlet : ? Address : ? Do you receive special schemes by the FMCG company’s for pushing more of their product? (please tick for the appropriate answer) YES NO
? Do such schemes motivate you to sell more Brands of a particular company? YES NO
? Which attributes motivate you to sell more of a particular product? (Rank on a scale of 1-5, one for most important and five for least important) (Rank 1-5) • Incentives • Good relationship with salesman • Brand
• Product Quality
SPECIMEN QUESTIONNAIRE
(Consumers) ? Serial No. : ? Name of the Customer : ? Does a Product display have any influence on your buying pattern? YES NO
? Do you remember any of the product displays from your last shopping experience? YES NO
? Which attribute influences you most to buy a particular product? (Rank on a scale of 1-5, one for most important and five for least important) (Rank 1-5) • Price • Product Display • Brand Name • Retailer Suggestions • Advertising
• Schemes
RETAILERS SURVEY ANALYSIS
Survey Analysis
Retailers Survey Findings Sample Space : 25 retailers Factors 1 Rankings 2
(Tally Points)
3
4
5
Incentives Good relationship with salesman Brand Product Quality
7 5 4 1
13 6 6 7
4 5 9 12
1 3 5 4
6 1 1
Computation Of aggregate Tally points Aggregate Tally points were computed by sum total of number of tally points multiplied by respective ranking given by consumer for each factor. For ex,
Aggregate Tally Points for the factor ‘Incentives’ was calculated as : (7×1) + (13×2) + (4×3) + (1×4) + (0×5) = 49 Similarly aggregate tally points for all the other factors were also calculated. Factor Incentives Good relationship with salesman Brand Product Quality Tally Points 49 75 66 72
Findings
? 28 % of the retailers believed that the incentive is the factor which motivates them most to sell a particular brand.
? 24 % of the retailers believed that the Brand image is the second best motivating factor.
? 48 % of the retailers believed that the product quality is the third best motivating factor.
? 12 % of the retailer believed that the personal relationship with the salesman is the least motivating factor among the four which motivates them to sell a particular brand.
Aggregate Tally Points
80 70 60 50 40 30 49 20 10 0 75 66
72
Tally Points
Incentives
Brand
The above chart displays the aggregate tally points as computed on the basis of rank given by the retailers for different factors representing the level of motivation for each given factor. Thus Incentives with minimum tally points represent maximum motivation and the factor ‘Good relationship with the salesman represent the minimum motivation level.
Motivation Level
60 50 40 30 51 20 10 0 25 34 Motivation
28
Incentives
Good relation w ith the salesman
Brand
Product quality
The above chart displays the motivation level as computed on the basis of rank given by the retailers for different factors. Motivation level is computed by subtracting aggregate tally points of each factor from a sum of 100 representing full motivation level. Thus Incentives with minimum tally points represent maximum motivation and the factor ‘Good relationship with the salesman represent the minimum motivation level.
Ranking for 'Incentives'
14 12 10 8 6 4 2 0 13 No. of the Retailers
7 4 1
Rank I
Rank II Rank III Rank IV Rank V
0
? The above chart displays the ranking for the factor ‘Incentive’ as given by the retailers. ? 52 % of the retailers gave ‘Incentive’ a II nd rank. ? 80 % of the retailers believed that it is the most important factor in motivating them for selling a particular product.
Ranking for 'Good Relation with the Salesman'
6
5
4 No. of the Retailers
3 5 2
6 5
6
3 1
0
Rank I
Rank II
Rank III Rank IV Rank V
? The above chart displays the ranking for the factor ‘Good relation with the salesman’ as given by the retailers. ? 20 % of the retailers gave ‘Good relation with the salesman’ a I st rank. ? 24 % of the retailers believed that it is the second most important factor in motivating them for selling a particular product.
Ranking for 'Brand'
9 8 7 6 5 9 4 3 2 1 1 0
Rank I Rank II Rank III Rank IV Rank V
No. of the Retailers
6 5 4
? The above chart displays the ranking for the factor ‘Brand’ as given by the retailers. ? 36 % of the retailers gave ‘Brand’ a III rd rank. ? Only 16 % of the retailers believed that it is the most important factor in motivating them for selling a particular product.
Ranking for 'Product Quality'
12
10
8 No. of the Retailers
6
12
4
7 4 1
Rank I
2
0
1
Rank II Rank III Rank IV Rank V
? The above chart displays the ranking for the factor ‘Product Quality’ as given by the retailers. ? 48 % of the retailers gave ‘Product Quality’ a III rd rank. ? Only 4 % of the retailers believed that it is the most important factor in motivating them for selling a particular product.
ANALYSIS FOR RETAILER SURVEY
? Indian Retailers are hard bargainers and hence are easily motivated by sound incentives/commissions policy by any brand.
? Retailers also like consumers give much weightage to Brand Image in selling a product as it reduces their burden of push sales.
? Retailers also look for the quality product on the basis of feedback received by them from the consumers as they are always willing to maintain long lasting relationship with their regular customers.
? Retailers don’t give much wieghtage to their relationship with the salesman for a particular brand.
CONSUMERS SURVEY ANALYSIS
Survey Analysis
Consumer Survey Findings Sample Space : 100 retailers
Factors 1 Price 06 Product Display 18 Brand Image 12 Retailer’s suggestion Advertising Schemes 21 32 18 24 17 23 28 28 32
Rankings 2 3
(Tally Points)
4 12 22 15 19 17 11
5
36 24 26 18 18 20
14 18 23
23 16 09
Computation Of aggregate Tally points Aggregate Tally points were computed by sum total of number of tally points multiplied by respective ranking given by consumer for each factor. For ex, Aggregate Tally Points for the factor ‘Price’ was calculated as : (32×1) + (36×2) + (14×3) + (12×4) + (6×5) = 224
Similarly aggregate tally points for all the other factors were also calculated. Factors Price Product Display Brand Image Retailer’s suggestion Advertising Schemes Tally Points 224 298 265 308 279 241
Findings
? 32 % of the Consumers believed that the price is the factor which motivates them most to buy a particular brand.
? 32 % of the consumer believed that the ‘Schemes’ is the second best motivating factor.
? 23 % of the consumers believed that the ‘Brand Name’ is the third best motivating factor.
? 17 % of the consumers believed that the ‘Advertising’ is the fourth best motivating factor.
? 22 % of the consumers believed that the ‘Product Display’ is the Fifth best motivating factor.
? 23 % of the consumer believed that the ‘Retailer’s suggestion’ is the least motivating factor of all the above factors.
Tally Points
Aggregate Tally Points
350 300 250 200 150 100 50 0 224 298 308 265 279 241
Price
Product Display
Brand Im age
Retailer Advertising Suggestion
Schem es
The above chart displays the aggregate tally points as computed on the basis of rank given by the consumers for different factors representing the level of motivation for each given factor. Thus ‘Price’ with minimum tally points represent maximum motivation and the factor ‘Retailer’s Suggestion’ represent the minimum motivation level.
Motivation 300 250 200 150 100 50 0
Motivation Level
276 235 202 192 221
259
Price
Product Display
Brand
Retailer's Advertising Suggestion
Schemes
The above chart displays the motivation level as computed on the basis of rank given by the retailers for different factors. Motivation level is computed by subtracting aggregate tally points of each factor from a sum of 500 representing full motivation level. Thus ‘Price’ with minimum tally points represent maximum motivation and the factor ‘Retailer’s Suggestion’ represent the minimum motivation level.
No. Of Retailers
Ranking for Price
40 35 30 25 20 15 10 5 0 14 12 6
Rank I Rank II Rank III Rank IV Rank V
32
36
? The above chart displays the ranking for the factor ‘Price’ as given by the Consumers. ? 36 % of the consumers gave ‘Price’ a II nd rank. ? 68 % of the consumers believed that it is the most important factor in motivating them for buying a particular brand.
No. Of Retailers
Ranking for Product Display
25
20
15 24 10 18 18 22 18
5
0
Rank I
Rank II
Rank III
Rank IV
Rank V
? The above chart displays the ranking for the factor ‘Product Display’ as given by the Consumers. ? 22 % of the consumers gave ‘Price’ a V th rank. ? 40 % of the consumers believed that it is not an important factor in motivating them for buying a particular brand.
No. Of Retailers
Ranking for Brand Image
30 25 20
15 24 10 15 5 0 12 26 23
Rank I
Rank II
Rank III
Rank IV
Rank V
? The above chart displays the ranking for the factor ‘Brand Image’ as given by the Consumers. ? 23 % of the consumers gave ‘Brand Image’ a III rd rank. ? 73 % of the consumers believed that it is one of the most important factor in motivating them for buying a particular brand.
No. Of Retailers
Ranking for Retailer's Suggestion
25
20
15 23 10 17 5 18 19 23
0
Rank I
Rank II
Rank III
Rank IV
Rank V
? The above chart displays the ranking for the factor ‘Retailer’s Suggestion’ as given by the Consumers. ? 17 % of the consumers gave ‘Retailer’s Suggestion’ a I st rank. ? 23 % of the consumers believed that it is the least important factor in motivating them for buying a particular brand.
No. Of Retailers
Ranking for Advertising
30 25 20
15 10 5 0 21
28 18
17
16
Rank I
Rank II
Rank III
Rank IV
Rank V
? The above chart displays the ranking for the factor ‘Advertising’ as given by the Consumers. ? 17 % of the consumers gave ‘Advertising’ a IV th rank. ? 21 % of the consumers believed that it is the most important factor in motivating them for buying a particular brand.
No. Of Retailers
Ranking for Schemes
35 30 25 20 15 10 5 0 32 28 20 11 9
Rank I
Rank II
Rank III
Rank IV
Rank V
? The above chart displays the ranking for the factor ‘Schemes’ as given by the Consumers. ? 32 % of the consumers gave ‘Advertising’ a II nd rank. ? 60 % of the consumers believed that it is the most important factor in motivating them for buying a particular brand.
ANALYSIS FOR CONSUMER SURVEY
? Indian consumers are very price sensitive and hence providing best quality product at competitive price to the Indian consumers is the key for success.
? Indian household consumers can also be allured by providing them better schemes such as free gifts/coupons, discounts etc.
? Consumers in India especially in the Urban sector always prefers branded products if available at affordable price rather than unbranded products.
? Indians are very sentimental and emotional people and hence they can be motivated to buy a particular product by effective advertising.
? Consumers in India don’t value retailer’s suggestion and hence are very difficult to handle at POP (Point of Purchase)
? Consumers in India also don’t give much weightage to merchandising or product display at POP.
CONCLUSION
Thus from the above analysis and few charts we can easily deduce that Effective merchandising schemes does help in motivating both retailers and consumers and helps in making actual sales. Retailers have accepted the fact that ‘Incentive’ is the key factor leading to motivation for selling a particular product.
Consumers also agreed to the fact that ‘Schemes’ as provided by the firms also attract them for a particular brand but felt that product display at POP (Point of Purchase) have little influence over their buying pattern.
Thus, we can accept our Null Hypothesis (Ho) that “Effective merchandising schemes helps in motivating retailers and consumers and thus making actual sales”, and reject our alternative hypothesis (H1) on the basis of above analysis and discussion.
.
Suggestions and Recommendations
? Good product quality is the prerequisite for successful business operation.
? Retailers must be motivated by providing them good incentives.
? Brand Image is also important for making actual sales both from retailer and consumer point of view.
? Indian consumers are still very price sensitive.
? Advertising and good merchandising are important factor for generating increased sales.
? Proper execution of the merchandising schemes must be ensured.
? Information must be provided to the retailers in detail and in time.
? Supply should be made regular even in the areas of low sale.
? Suggestions and complains of the retailers must be heard with great care.
doc_418161495.doc
Dissertation or thesis , rare thesis or doctoral writing , also officially inaugural dissertation , commencement, or dissertation introduction is a scholarly work for obtaining a doctoral degree at a university or any other university with doctoral degrees. For promotion in addition to the publication of the dissertation usually an oral examination is necessary.
DESSERTATION PROJECT REPORTS
Effect of Merchandising on Consumer Buying Behavior
TABLE OF CONTENTS
• Executive Summary • FMCG Sector in India • Consumer Expectation and Indian FMCG Sector • Budget 2007-08 : FMCG • Merchandising as a component of Marketing Communication • Consumer Buying Behaviour
• Defining Research Problem • Survey Plan • Specimen Questionnaire (Retailers) Specimen Questionnaire (Consumer) • Retailer Survey Analysis
Survey Analysis Findings Analysis • Consumer Survey Analysis Survey Analysis Findings Analysis • Conclusion • Suggestions and Recommendations
EXECUTIVE SUMMARY
The FMCG sector has been the cornerstone of the Indian economy. Though, the sector has been in existence for quite a long time, it began to take shape only during the last fifty-odd years. To date, the Indian FMCG industry continues to suffer from a definitional dilemma. In fact, the industry is yet to crystallize in terms of definition and market size, among others. Generally, FMCG refers to consumer non-durable goods required for daily or frequent use. The sector touches every aspect of human life, from looks to hygiene to palate. Perhaps, defining an industry whose scope is so vast is not easy. Post-reforms, the industry's growth has been hinging around a burgeoning rural population which has witnessed significant rise in disposable incomes. Consequently, the rural markets have been witnessing intense competition in almost all the consumer product classes. Another reason which has led to rise in this trend is the saturation in urban markets in most of the consumer non-durable goods categories. This has led to the industry players scrambling for greater rural penetration as a future growth vehicle, the area which accounts for 70% of the total Indian households.
The FMCG sector consists mainly of subsegments viz. personal care, oral care and household products. This can be further sub-divided into oral care, soaps and detergents, Health and Hygiene products, beauty cosmetics, hair care products, food and dairy-based products, cigarettes, and tea and beverages. Of late, there seems to be a liberal approach towards branding of the companies/products as FMCG; companies in businesses like liquors (United Breweries), paints (Asian Paints), adhesives (Fevicol) too are being labeled as FMCG stocks in the stock market parlance. Quite interestingly media stock Zee Telefilms was labelled as FMCG stock by a mutual fund, which had Zee as its top holdings in its FMCG sector scheme at one point of time!
So far, it has been a chequered graph for the MNCs operating in the Indian FMCG industry. Domestic companies are only beginning to make their presence felt in the industry. It has taken tremendous consumer insight and market savviness for the FMCG players to reach where they are today. But, the journey seems to have just now begun for the players as the majority of the rural populace are yet to get access to the items of daily usage like toothpastes, soaps and shampoos.
Things however began to change post-reforms during the nineties. The floodgates were opened. And MNCs with saturating homemarkets who were hungrily looking for markets elsewhere rushed in. Categories within categories were created in products such as hair-oil and skincare, and many new product categories were also created. Untouched facets of the Indian consumer were explored. The FMCG players had in front of them not only a vast untapped market but also a market that was fast growing. Income-levels were rising. A new class of upwardly mobile was emerging. Television and, satellite and cable television were helping the market to grow further in rural areas by changing aspirations and lifestyles.
The canvas did widen for the FMCG players, but so did the challenges. Rules of the game changed. Strategies, in their true sense, came to the fore. Quite unlike in the past, companies began looking for ways to expand their product-portfolios and distribution reach. Acquisition of brands became the order of the day as it gave the players easy options of attaining growth in the FMCG sector. That is true of the MNCs who are known for their deep pockets .
With domestic consumption close to Rs 80,000 crore, the FMCG sector today is one of the largest in the country. In terms of size and importance, it is only going to grow. Notwithstanding experts' pronouncements that there would be enough room for everybody to co-exist, the name of the game is going to be competition and more competition. One of the biggest challenges facing the Indian FMCG industry is this: get to the next level of innovation. "You need strong local product ranges," says McKinsey's Fernandes.
So, the key to success in the Indian FMCG industry lies in: cutting costs, investing in brand building in the form of marketing, advertisements and promos, providing good price points and aggressive pricing, offering products such as packaged atta and milk that add value and convenience and protecting their human talents from poachers.
Alongside, FMCG players need to go in for new initiatives. Consider HLL for instance. The company has made it clear that Internet is going be its key delivery vehicle which would expedite its distribution and sales efforts. Sure, Internet is going to change the way FMCG companies strategise and do business. With reasons. Internet
presents vast opportunities to FMCG companies in the areas of logistics, interface with consumers and value chain.
Consider Internet's role in logistics. FMCG players can leverage Internet to extend their logistics network beyond the traditional expensive EDI-based solutions. Says Fernandes: "It is a huge valuedriver for an industry with such a wide reach and a huge SKU complexity." This would start from connections between the factory and C&F and then move on to more complex networks reaching out to key urban distributors and wholesalers. And over time, even to rural wholesalers and retailers.
As far as interface with consumers is concerned, Internet can work wonders here. Over time, successful e-marketeers can leverage the Internet to develop user-communities, which are invaluable in creating loyalty and in testing products. What more, FMCG companies can come together to form e-purchasing portals and increase their purchasing power and ability to find smaller suppliers.
Fine. All these call for a productive partnership between the FMCG industry and the government. Experts see this as an emerging
opportunity. A partnership between the government, which wants to drive Internet penetration into smaller towns, and FMCG companies who want to ride off a shared infrastructural network to enable superior logistics and drive product communications. Such a partnership can jointly drive the Internet network deeper into the Indian heartland.
It seems the excitement is just beginning in the Indian FMCG industry.
FMCG Sector in India
The fast moving consumer goods (FMCG) sector, which was beginning to be derisively referred to as the SMCG industry (slow moving consumer goods) as it didn't exceed a flaccid 1 to 1.5 per cent growth rate in the past four years, began to witness a slow revival in 2004. The revival was not without its share of pain though as companies in the sector resorted to price cuts, small packs, and offering freebies to push products.
Detergents and shampoos saw the maximum action as Procter & Gamble (P&G) and Hindustan Lever (HLL) went to war with each
other with discounts to cut each other's market share. P&G began by slashing prices of detergent brands Ariel and Tide by 50 per cent in March 2004 and was able to improve its market share in the detergents market to 10 per cent by October 2004 against 6 per cent in October '03 (source: AC Nielsen). HLL, while asserting that price cuts were unsustainable, followed suit and cut prices of its bestselling detergent Surf Excel. The slashed prices stay to this day while detergent volumes have grown by 11 per cent.
Next HLL initiated a price war in shampoos with its 'buy-one-get-onefree offer,' that effectively offered a discount of 25 per cent. However, P&G and other players refused to follow suit and instead P&G began focusing more heavily on its' Rejoice shampoo and even launched a new variant of Pantene with a promise to stop falling hair.
Analysts say the Rs1,000-crore shampoo industry grew between 1015 per cent in volumes in 2004 largely due to price cuts and small packs. Despite price cuts, freebies and promotional offers by Hindustan Lever (HLL), the company's brands together lost market share in
terms of volume as well as value in 2004. The major gainer in terms of market share was, which improved market share to 20 per cent in October '04 against 16 per cent in October '03 in shampoos. Subsequently HLL tried increased its advertising budget by more than 25 per cent and introduced a half-dozen new creams, soaps, and detergents. These moves helped stop market share erosion, but hit earnings.
Industry experts said while the market for shampoos grew by 10 per cent over the whole year, the last three months saw a growth of 11.5 per cent. Indian FMCG companies like Dabur and Cavinkare for the first time found themselves under severe pressure as MNCs went on price slashing spree. In previous years the price value-equation was in favour of Indian brands but this trend was reversed in 2004. Some companies responded with their own price cuts, but these came late in the year and could not match those of the multinationals. Market research agency ORG data revealed that brands like Vatika, Dabur Anmol, Ayur, Chik and Nyle together lost 2.3 percentage
points in volume terms whereas the value gain was merely 0.1 percentage points during January-October. Future shampoo price cuts may be in the offing since many companies including HLL, P&G, Dabur and CavinKare have set up facilities in excise-free zones.
Such aggressive price cuts also saw companies investing heavily in brand building and aggressive product promotions through advertising to attain higher sales.
The small packs strategy
Apart from price cuts, small packs priced at Rs5 - in recent times even Rs3 - have been changing the rules of the FMCG market. For companies, small packs in the long run do not make sense, as they prove unprofitable. Yet, at present nearly all consumer goods are available in small packs right from facial creams to shampoos, detergents, tea, coffee and chocolates. For consumers small packs make a great deal of sense as they cost a lot less than their large counter-packs across all FMCG categories and offer consumers a chance to try out the
products before graduating to larger packs. Some buyers purchase premium products such as expensive creams or shampoos for occasional use. Without sachets such buyers might not have bought the product. Research reveals that on an average the unit price of large packs is twice that of sachets and it almost seems as if large packs subsidies sachets. HLL for instance charges a premium of nearly 90 per cent on 500gm of Surf Excel family pack, on the same comparable size in sachets while P&G sells a 500gm pack of Tide at a premium of 80 per cent to sachets on a comparable basis. This can be rationalized as plastic / glass bottles cost more than sachet packaging; companies follow a penetration pricing strategy for sachets but have higher margins on the bottles. Sachets account for nearly 70 per cent of shampoo sales. Shampoo were the first products to be offered in sachets, though at the time large bottles worked out to be more economical. Today the reverse is true. For instance Vatika shampoo's 8ml sachet costs Rs2, while its 50 ml bottle comes for Rs25. With this kind of difference available more and consumers are making the shift to sachets.
Despite this, a larger number of consumer goods categories, are being offered in sachets simply to drive consumption and prevent downgrading that has been the bane of FMCG companies in India for the past four to five years.
Industry insiders say companies find the Rs5 price point viable because of consumer buying behaviour. Many consumers are not concerned so much about size as about price. The Rs5 affordability strategy of cola makers Coca-Cola and Pepsi led to a 10 per cent increase in the size of the beverage market. However the year 2004 was not a particularly good one for cola majors. The pesticides controversy continued to persist in hurting sales of both Coca-Cola and Pepsi well into 2004, and the companies abandoned the 'affordability' strategy due to a severe margin squeeze and raised prices in the second half of the year. However, the Rs5 strategy managed to expand the consumer-base for soft drinks from 160 million in 2002 to 240 million in 2004, a two-year period during which the Rs5-price point remained in force.
This squeeze, brought about by a two per cent cess and higher input costs, forced cola companies to hike prices by a rupee each on 200 ml and 300 ml pack sizes. The year also saw the companies increasing focus on non-CSD business, Coca-Cola extending Georgia Gold hot beverage brand to more towns and cities while PepsiCo has been experimenting with a host of new flavours in the snack division besides launching different packs and varieties of packaged fruit juices under brand name Tropicana.
However, the packaged water business of both the cola companies witnessed slower-than-expected growth.
As per figures by market research agency AdEx (division of TAM Media), Coca-Cola India reduced its advertising spend on packaged water brand Kinley between January and August 2004 by 20 per cent as compared with the same period in the previous year while Pepsi's spends were also down by about 8 per cent till July. Pepsi's adspend recovered after that month and its total advertising budget increased by over 12 per cent between January and August 2004.
In terms of new launches, Coke launched Coke Vanilla, whereas Pepsi launched its global sports drink Gatorade. According to industry observers, the Rs5 price point also helps branded FMCG categories battling fakes from the unorganised sector. The FMCG industry in particular HLL, continued to suffer from fake product makers. HLL claimed to be losing close to Rs1,600 crore every year in revenue to counterfeit product makers while the Indian FMCG industry is said to be suffering a loss of around Rs2,500 crore of revenue annually. The negatives for the industry during the year were the spiraling costs of sugar, wheat, edible oil and packaging material as these shot up by as much as 15 per cent. Companies found a way to beat this by reducing the gram size of packs without reducing prices. The FMCG sector also received a boost by government led initiatives in the 2003 budget such as the setting up of excise free zones in various parts of the country that witnessed firms moving away from outsourcing to manufacturing by investing in the zones.
ASSOCHAM has indicated that the FMCG industry will achieve a growth of 3-4 per cent in 2005-06. However, FMCG companies will face the challenges of sharp swings in commodity prices, expected to impact profits like never before.
Consumers’ Expectations and Indian FMCG Sector
The ever-increasing pressure on marketers on enhancing product offerings in order to differentiate has continued to, in turn, increase expectations from market support services such as packaging. Consumers' expectations continue to grow on every facet of the product or service being sought, be it in terms of intrinsic or physical characteristics of the product such as greater effectiveness, longer life, more quantity, greater variants, etc. or in terms of the external values being reinforced by packaging or for that matter, advertising and sales promotion. Further, the advent of the e-age has added an altogether new dimension to the facet of marketing for most "erelevant”‘ prod ucts and services.
As in the case of many other sectors, the market for consumer goods in the Indian FMCG (Fast Moving Consumer Goods) industry also faces the "multi-technology coexistence syndrome". This refers to the
coexistence of the hand-pulled rickshaw along with the aircraft, or that of the manual -washing machine selling along side the state-ofthe-art fuzzy logic-driven fully automatic washing machine. In the case of the FMCG industry, it finds itself initiating the concept of branding in some categories alongside developing niche brands or variants, and differential strategies in the case of others more mature branded categories. Ipso facto, this translates into a varied crosssection of challenges for the support services such as Packaging. On the one hand, it relates to initiation of designing packs for hitherto commodity categories and on the other, also expects packaging to meet needs of innovation and differentiation in a multitude of competing mediums to reach the consumer.
The tea market lends itself to benchmarking the complexity of the FMCG set of products. The product necessitates packing of a type, which ensures the freshness of the tea (flavour and fragrance) as well as secure packaging to prevent loss. Also given its mass acceptance across various spectrums of society, there is a spectrum of pack types as well as sizes required to meet the varied segments.
Total domestic tea market amounts to 870 thousand tonnes. The packaged segment accounts for an estimated 237 thousand tonnes. The value of the packaged tea market comes to around Rs. 33 billion. The Compounded Annual Growth Rate (CAGR) for this category over the last five years is 14%. The urban-rural split has c hanged from 48:52 from 1995 to 51:49 in 2000. The tea market can be divided into various segments on the basis of the pack sizes. Available pack sizes range from 50 grams to 2 Kgs. The contribution of 200/250 grams pack is 38% followed by 50 grams pack with 31 % contribution
Rural India shows preference for small pack sizes, which can be seen from the absence of I kg and 2 kg packs from the rural market. The smaller packs of 50 grams and less exhibit an increasing trend with their respective contributions increasing from 32% to 45% from 1995 to 2000 respectively. Whereas in urban India the preference is for 200/250 grams, which contributes 48% to the total market
The pack types prevailing in the industry today are jars, bottles, boxes, sachets, pouches, strips, envelopes and tins. Poly p ouches introduced in 1985, has captured 12% of the tea market from the
loose tea segment as they were not only cost-effective, but were also effective in retaining freshness.
The number of players in the organised sector is 40 having 80 brands in all. There is an increase of 3 brands in the year 2000. The number of packs has increased from 897 in 1999 to 1025 in2000. There are 17 packtypesand21 pack sizes prevailing in the category. In the year 2000, the count of unique brand-wise pack sizes have gone up from 333 to 349 whereas number of unique brand-wise pack types increased from 234 to 248 in the same period.
COFFEE MARKET: This category specifically packaged coffee is relatively premium requiring a premium nature 6f packaging material. Also the product necessitates packaging to be secure and airtight.
1 .Total market for packaged coffee is estimated at 19600 tonnes and amounts to Rs. 4 Billion. The CAGR (Compound Annual Growth Rate) for the last five years is 11% in terms of value and 1.5% in terms of weight. The urban-ruralsplitis61: 39m2000asagainst59: 41 in 1995.
2. The Indian hot beverage market is a tea dominant market and coffee is consumed infrequently (expect for south zone). It is also a very price sensitive category. Hence the preference for the small pack sizes. The most preferred pack size is 50 grams and below accounting for 60% of the category sales. Unlike tea, the dominance of the small pack is evident in both the urban and the rural market.
3. Foil pouches, jars, boxes, poly pouches and bottles are the pack types prevailing currently in the market. Given the nature of the product, the foil pouch is the most popular pack type having 32% value contribution. In terms of volume the contribution of foil pouch is around 59%. The Preference is same both in rural and the urban market.
4. The organised coffee market is not as fragmented as the tea market. The number of players present in the category are just II with an average of 2 brands each. The number of SKU's are near 165 with 9 SKU's having been launched in 2000. The number of pack types and sizes available are 12 and 20 respectively. In the case of unique brand-wise pack types there is an addition of 7 such unique
combinations in the year 2000 which took the number to 53 while in the case of pack sizes the count increased by 4 taking the count to 89 in 2000.
MINERAL WATER: This category is one of the new emerging stars in the FMCG basket. It has recorded the best growth in its volume class and shows little evidence of slowing down. The hygiene aspect as well as the fear of pilferage makes it unique case for the packaging industry. In addition, are the number of players in the segment. The total market for mineral water is 65 million. crates valued at Rs. 2.3 billion. On an average the monthly consumption is an estimated 4.9 million. Crates, which increases to 5.2 million. during peak season. The penetration is restricted to rural India. There are close to 400 companies, 550 brands and SKU's in this market. These SKU's span near 18 pack sizes and 4 pack types at an overall level for the category. The pack type prevailing in the category is CRB (Carbo), PET bottles and pouches. (It ought to be mentioned that Carbo packs are the 20 liters packs, which are also sold through direct marketing channels to the end of consumers, the inclusion of which would increase its contribution.) PET bottles dominate the market with 45% of the
contribution. The rest of the market is di vided between CRB and pouches. The seasonal nature of the product (CRB gains largely due to shortages) is depicted from the pack type shift across seasons.
SOFT DRINKS: The dominance of the two world majors in this category and the resultant noise generated by this category necessitates the study of this category. Further the aspects of preserving carbonation (in the respective segment) as well as the f ragile nature of the conventional packaging are contributors to the complexity of packaging in this segment.
1. The total soft drink market is estimated 284 million. Crates a year, which is valued at Rupees. 47 billion. The seasonal nature of the category is evident from the variation observed in the consumption from 25 million crates per month during peak season dipping to a low of 15 million. Crates per month during off-season. The soft drink market is predominantly urban with just 25% contribution from rural.
2. There are close to 370 companies, 650 brands and 2000 SKU's in this market. These SKU's span near 26 pack sizes and 8 pack types at an overall level for t he category.
3. The glass bottle segment contribution the highest with around 82% followed by PET with 12%. The tetra pack segment has a small contribution of 2%. Cans are yet to make significant inroads. The similar pattern is observed in both urban and rural markets.
4. It is observed that in peak season the contribution of all the nonconventional pack types does show an increase resulting in the drop of contribution in glass bottles.
TheChallengesAhead The FMCG industry as a whole continues to grapple with low growths. The heady days of double-digit growth witnessed in the early 90's are well and truly behind us. All around, there are pressures of better efficiencies in an effort to boost bottom lines as top lines continue to struggle. More efficiency will be called for from the packaging industry in order to bring down Per unit packaging costs.
Globalisation will have its role to play too. The impending lowering of tariff barriers as per the WTO agreement will undoubtedly bring in fresh opportunities as well as challenges. We are already witnessing numerous FMCG products being imported and sold in the Indian market. The packaging industry will have to pr oactively team up with the local Indian manufacturer in order to bring in state-of-the-art technology as well as provide innovative solutions to combat the new entrants. The retail sector is also attempting in bits and pieces to organise themselves. Noteworthy is the interest and inclination shown by large corporates to enter organised retail with some of them making
impressive debuts in the south. The supermarket and its resultant pressures of "look & attract" will have its role to play in increasing demands from the packaging sector.
The Internet and the advent of e-commerce is another dimension, which the packaging industry has to contend with. It presents an immense opportunity as packaging assumes a much higher weightage in the marketing mix of marketers pursuing the ecommerce option. Packaging assumes criticality in this medium, in light of it connoting the value proposition in the absence of the "feel" option for the browser customer. Further, e-commerce also opens up a new opportunity for packaging in terms of consignment packaging (to ensure the promised delivery) of the e-commerce transaction. The packaging industry thus can look forward to, as well as prepare for, its rightful place in cyberspace.
Budget 2007-08: FMCG
The government focus so far has been to provide protection to the domestic companies by managing the import duty structures to the domestic advantage. In the last budget (2007-08), the government laid stress on agriculture reforms, in a bid to integrate the countrywide food market. The government also took its first tentative steps towards a VAT regime, addressing the long time demand from the industry. But the tax regime is marred by ambiguity and government's inability to get the message across to the small producers. The government's focus on road, rail and power development will indirectly benefit the FMCG industry in the long run.
Budget Measures
• Surcharge of Re 1 on per kg of tea abolished • Massive 'replantation and rejuvenation' for domestic tea plantations • Excise duty on refined edible oils (Re 1 per kg) and vanaspati (Rs 1.25 per kg) scrapped • Implementation of VAT from April 1, 2006 • Import duty on cloves cut to 35%
• Import duty on refrigeration van halved to 10% • Area specific excise duty exemption to continue • To form 'National Fund for Agri Research' with initial outlay of Rs 500 m • National Horticulture Mission to be commissioned in April 1 • Focus on development of agriculture, manufacturing and infrastructure • Corporate tax cut to 30% from 35%
Budget Impact • The removal of surcharge on tea and duty on vanaspati and refined edible oils will have a marginally positive impact on companies like Tata Tea, HLL and Marico. • The focus on replantation and rejuvenation of tea plantations will benefit the sector over the long term, but there is nothing material in it for companies immediately. • Implementation of VAT is a positive move over the long term. This is likely to pave the way for a singular tax going forward, which will help companies cut costs ands become more competitive in the long run. • Reduction in duty on refrigerated vans will give a boost to the processed food industry. A positive for players like Amul, Nestle, HLL and Britannia. • Area specific excise exemptions for North East, J&K, Himachal Pradesh will continue to encourage FMCG companies to relocate to these areas. • The corporate tax rate change is unlikely to benefit the FMCG companies much, as most pay an effective tax rate of less than 30% anyway. • The push to agriculture and rural India is likely to aid rural India's development in the long run. It has the potential to
induce increased usage of FMCG products going forward. Individual tax benefits too are a positive for the sector.
Sector Outlook
• The implementation of VAT at the state level is a positive for the FMCG sector in the long run for reasons mentioned above. Although there might be some initial hiccups, products and brands will become more affordable and this is a step in the right direction.
• Focus on improving sanitation, literacy levels, assured water supply, irrigation facilities, rural electrification and telephone networking are all measures to up India's human development index. All these are likely to positively impact productivity and employment generation in rural India and drive awareness of FMCG products. Again, this is a big positive in the long run. Tax relief to individuals too, may perk up per capita usage. All in all, the industry has much to look forward too in the long run.
Industry Wish List • Complete de-reservation of consumer products sector. If it happens, it will enable Indian companies to undertake manufacturing on a mass scale resulting in operational and quality efficiencies. • Quality check on imported FMCG products and effective enforcement of copyright laws. This would go a long way in filtering out import of sub-quality and discarded products, benefiting both the manufacturers and the consumers. Also, there should be a comprehensive policy to hit out at contraband imports. • More focus towards networking the food supply chain, which will enable free flow of food related products across the country, to the benefit of both manufacturers and consumers. For the government, it will mean effective utilisation of food stocks.
• As per CII, excise duty difference between 'branded' and 'unbranded' food products existing at present should be removed to encourage consumers to move from unhygienic unbranded foods to hygienically packaged processed foods.
Budget over the years Budget 2004-05 • Increased focus on agricultural reforms with an aim to integrate the countrywide food market • Deregulation of the milk processing capacity • Excise duty structure largely untouched. Only for tea, the duty was reduced from Rs 2 per Kg to Re 1 • Customs duty on tea and coffee doubled to 100% • Duty on imported pulses upped to 80% • Import duty on wine and liquor slashed from 210% to 180%
Budget 2005-06
• Excise on biscuits reduced to 8% from 16%. Excise on soft drinks and sugar boiled confectionery also reduced • All states to switch to VAT in FY04 (deadline now has been extended till end FY06) • Loans to agriculture and to small-scale sector will now be available at maximum 2% above prime lending rate (PLR) • Development plans for roads, ports, railways and airports • Customs duty on alcoholic beverages reduced
Budget 2006-07
• Increase in custom duty of refined palm oil to 75% • Concessional rate of 5% custom duty on tea and coffee plantation machinery • Excise duty on dairy machinery reduced from 16% to 0 • Excise duty on preparations of meat, poultry and fish halved to 8%
• Excise duty on food grade hexane (used in the edible oil industry) halved to 16% • Area specific excise duty exemptions to continue • 20% dividend distribution tax for corporates who invest in debt funds
Key Positives
Rural penetration levels are still low. Also, according to estimates, only about 8-10% of the total food production is consumed in processed form (US$ 90 bn). This speaks for itself, highlighting the scope for growth. The planned development of roads, ports, railways and airports, will increase FMCG penetration in the long term. As growth has shown signs of slackening companies are increasingly focusing on key products and brands, cost efficiencies and rural markets. This is a sign of market sophistication, both from the manufacturer's point of view as well as the consumer's point of view
Owing to India's cost advantage, many MNC companies have started using their Indian operations as their manufacturing base. Alternatively, some Indian companies have tested foreign shores like Bangladesh, Sri Lanka and the Middle East among others.
The proposed introduction of VAT at the start of FY06 is a long term positive for the FMCG sector. This had been a long pending demand
of the FMCG sector. Post this, the tax ambiguity will get reduced, benefiting the sector.
Key Negatives Weakness in the economy has led to a slowdown in demand for FMCG products. The topline growth of many FMCG majors has thus, declined. Resurgent economic numbers in FY04 did nothing to change the scenario. New entrants in the sector have heightened competition in key segments like soaps and detergents, putting pressure on profitability.
The infrastructure for free transport of goods is not adequate in the country. Also, the fall in agricultural output continues to cast on FMCG sector's prospects in the short term.
A large part of the branded market continues to be threatened by spurious goods and illegal foreign imports. In times of weakened consumer demand such menaces continue to give nightmares to large companies.
Merchandising as a component of Marketing Communication
Merchandising activity can be rightly described as a ‘clincher’ in the marketing process. After all, the word ‘merchandise’ means ‘ good for sale’, and the term ‘merchandising’ embraces all activities undertaken at a retail shop to promote sales. In particular, it includes two elements – imaginative use of dealer service material, and alluring display of products in the retail outlet. As such, it is but apt that merchandising is well recognized for its sales promotional role. In some cases, merchandising is particularly effective in inducing brand switching. A consumer normally goes to a retail outlet to purchase his usual brand. At the retail outlet, a good display of competing brand can command his attention and he may ultimately buy the competing brand. In other words, merchandising can lead to impulse buying and through that process to brand switching. The Encarta World English dictionary defines merchandising as “the Promotion Of a Product by developing strategies for packaging and displaying it". Effective merchandising can help generate more
customer traffic, amplify repeat business, increase no of customers who make purchases and increase the size of the purchases that take place- all leading to increase sales. In-store merchandising is no longer a commodities-driven method of organizing a product at retail, but rather the last three feet of any comprehensive and integrated marketing plan. Merchandising plays a crucial role in leveraging brands, since it talks to the consumer when money, product and willingness to buy converge at the retail outlet. Good merchandising at the store level often prompts the buyer in different ways: to buy ‘now’ rather than later, buy more than originally intended quantity or buy a particular pack size in preference to another. All these are essentially sales promotion objectives. While advertising can only make a consumer aware of the product or generate in him a desire for it, merchandising in many cases, instantly motivates a customer to buy a product. In other words, merchandising is a most effective tool in the hands of the marketer to amend the customer’s buying pattern at the Point Of Purchase (POP).
Organizing Sales Promotion Campaigns
Though almost all companies resort to sales promotion techniques, only some of them go about the job in a planned way. Others mostly view sales promotion as a weapon that can be taken just like that and used in an emergent situation. Sales promotion yields the intended results only when it meets certain basic requirements that are discussed below.
Identifying The Basic Requirements
The first is to identifying the specific requirement of the firm in resorting to sales promotion. The firm finds out its need: Is it to enhance the dealer’s off-take of the product? Is it to bring in substantial extra sales immediately? Is it to offload accumulated stocks? Is it to regain loosing consumer interest in the product? Etc.
Identifying The Right Promotional Programme
The next step is to identify the appropriate programme. The firm has to select the programme suitable to the current need and the current situation. Should it go in for product demonstration? Or free samples of the product? Or should it go in for a large scale consumer contest? The choice of the programme will be primarily decided by the resources available to the firm. A big consumer contest cannot be organized and implemented unless the firm can command substantial resources and organizing capacity.
Enlisting The Support And Involvement of Salesmen
Often, sales promotion programme are conceived and planned at the head office of the firm and implemented in a hurry without enlisting the cooperation and involvement of the field sales people. For campaigns to succeed, it is essential that salesmen are : (i) briefed on the context and content of the programme, (ii) informed of their roles in the conduct of the programme, and (iii) given detailed
information / working guides, explaining what they are expected to do at different stages of the campaign.
Enlisting the Support of Dealers It is also essential to enlist the support of dealers in any large scale sales promotion venture. This is because a major part of the activity has to take place around the dealer shop, and if the dealer is not motivated to support the campaign, the campaign may flop.
Enlisting the Agency’s Support
Carrying out a sales promotion campaign is as challenging as conducting an advertising campaign. In fact for an add campaign, quite often the results do not lend to immediate measurement. In a sales promotion campaign, the results are readily available to be measured. So campaign while committing heavy funds for sales promotion make it a point to ensure that they derive maximum benefit from the experience and expertise of their add agency.
Launching and Follow Up of Campaigns
Sometimes the sales promotion campaigns are launched with great publicity and fanfare. But subsequently the tempo of the programme is also allowed to die out. It is essential that the initial tempo built around the programme is maintained during the entire period of the campaign, through advertising and POP’s. The campaign tempo can also be kept up by suitably instilling a spirit of competition into salesmen and dealers.
Timing of the Campaign
Timing of the campaign is another factor that decides its success. The sales needs of the company is of course the prime factor that decide the timing. But the firm also has to consider factors like seasonality of purchase of the product, climate conditions, festival season etc., in timing the campaign.
Co-ordination with other Elements of Promotion Sales promotion programmes yield the best results when they are well coordinated with other elements of promotion – Advertising,
Personal selling and Publicity. Sales promotion programmes cannot run independent of these major promotion variables. When used in combination with promotion variables, sales promotion programmes stand a better chance of meeting their aims.
Consumer Buying Behaviour
What influences consumers to purchase products or services? The consumer buying process is a complex matter as many internal and external factors have an impact on the buying decisions of the consumer.
When purchasing a product there several processes, which consumers go through. These are discussed below.
1. Problem/Need Recognition
How do you decide you want to buy a particular product or service? It could be that your DVD player stops working and you now have to look for a new one, all those DVD films you purchased you can no longer play! So you have a problem or a new need. For high value items like a DVD player or a car or other low frequency purchased products this is the process we would take. However, for impulse low frequency purchases e.g. confectionery the process is different.
2. Information search So we have a problem, our DVD player no longer works and we need to buy a new one. What’s the solution? Yes go out and purchase a new one, but which brand? Shall we buy the same brand as the one that blew up? Or stay clear of that? Consumer often go on some form of information search to help them through their purchase decision. Sources of information could be family, friends, neighbours who may have the product you have in mind, alternatively you may ask the sales people, or dealers, or read specialist magazines like What DVD? to help with their purchase decision. You may even actually examine the product before you decide to purchase it. 3. Evaluation of different purchase options. So what DVD player do we purchase? Shall it be Sony, Toshiba or Bush? Consumers allocate attribute factors to certain products, almost like a point scoring system which they work out in their mind over which brand to purchase. This means that consumers know what features from the rivals will benefit them and they attach different degrees of importance to each attribute. For example sound maybe better on the Sony product and picture on the Toshiba , but picture clarity is more important to you then sound. Consumers
usually have some sort of brand preference with companies as they may have had a good history with a particular brand or their friends may have had a reliable history with one, but if the decision falls between the Sony DVD or Toshiba then which one shall it be? It could be that the a review the consumer reads on the particular Toshiba product may have tipped the balance and that they will purchase that brand.
4. Purchase decision
Through the evaluation process discussed above consumers will reach their final purchase decision and they reach the final process of going through the purchase action e.g. The process of going to the shop to buy the product, which for some consumers can be as just as rewarding as actually purchasing the product. Purchase of the product can either be through the store, the web, or over the phone.
Post Purchase Behaviour
Ever have doubts about the product after you purchased it? This simply is post purchase behaviour and research shows that it is a
common trait amongst purchasers of products. Manufacturers of products clearly want recent consumers to feel proud of their purchase, it is therefore just as important for manufacturers to advertise for the sake of their recent purchaser so consumers feel comfortable that they own a product from a strong and reputable organisation. This limits post purchase behaviour. i.e. You feel reassured that you own the latest advertised product.
Factors influencing the behaviour of buyers.
Consumer behaviour is affected by many uncontrollable factors. Just think, what influences you before you buy a product or service? Your friends, your upbringing, your culture, the media, a role model or influences from certain groups?
Culture is one factor that influences behaviour. Simply culture is defined as our attitudes and beliefs. But how are these attitudes and beliefs developed? As an individual growing up, a child is influenced by their parents, brothers, sister and other family member who may teach them what is wrong or right. They learn about their religion and culture, which helps them develop these opinions, attitudes and
beliefs (AIO) . These factors will influence their purchase behaviour however other factors like groups of friends, or people they look up to may influence their choices of purchasing a particular product or service. Reference groups are particular groups of people some people may look up towards to that have an impact on consumer behaviour. So they can be simply a band like the Spice Girls or your immediate family members. Opinion leaders are those people that you look up to because your respect their views and judgements and these views may influence consumer decisions. So it maybe a friend who works with the IT trade who may influence your decision on what computer to buy. The economical environment also has an impact on consumer behaviour; do consumers have a secure job and a regular income to spend on goods? Marketing and advertising obviously influence consumers in trying to evoke them to purchase a particular product or service.
Peoples social status will also impact their behaviour. What is their role within society? Are they Actors? Doctors? Office worker? and mothers and fathers also? Clearly being parents affects your buying habits depending on the age of the children, the type of job may mean you need to purchase formal clothes, the income which is
earned has an impact. The lifestyle of someone who earns £250000 would clearly be different from someone who earns £25000. Also characters have an influence on buying decision. Whether the person is extrovert (out going and spends on entertainment) or introvert (keeps to themselves and purchases via online or mail order) again has an impact on the types of purchases made.
Maslow’s Hierarchy of Needs
Abraham Maslow hierarchy of needs theory sets out to explain what motivated individuals in life to achieve. He set out his answer in a form of a hierarchy. He suggests individuals aim to meet basic psychological needs of hunger and thirst. When this has been met they then move up to the next stage of the hierarchy, safety needs, where the priority lay with job security and the knowing that an income will be available to them regularly. Social needs come in the next level of the hierarchy, the need to belong or be loved is a natural human desire and people do strive for this belonging. Esteem need is the need for status and recognition within society, status sometimes drives people, the need to have a good job title and be recognised or the need to wear branded clothes as a symbol of status.
Self-actualisation the realisation that an individual has reached their potential in life. The point of self-actualisation is down to the individual, when do you know you have reached your point of selffulfilment? But how does this concept help an organisation trying to market a product or service?
Well as we have established earlier within this website, marketing is about meeting needs and providing benefits, Maslows concept suggests that needs change as we go along our path of striving for self-actualisation. Supermarket firms develop value brands to meet the psychological needs of hunger and thirst. Harrods products and services for those who want have met their esteem needs. So Maslows concept is useful for marketers as it can help them understand and develop consumer needs and wants.
Types of buying behaviour. There are four typical types of buying behaviour based on the type of products that intends to be purchased. Complex buying behaviour is where the individual purchases a high value brand and seeks a lot of
information before the purchase is made. Habitual buying behaviour is where the individual buys a product out of habit e.g. a daily newspaper, sugar or salt. Variety seeking buying behaviour is where the individual likes to shop around and experiment with different products. So an individual may shop around for different breakfast cereals because he/she wants variety in the mornings!
To summarise: • There are five stages of consumer purchase behaviour • Problem/Need Recognition • Information search. • Evaluation of purchases. • Purchase decision. • Post purchase behaviour. • Culture has an impact on the company. • Marketers should take into account Maslows hierarchy of needs
International rating agency Fitch has predicted that penetration of organised retail in India will increase to about 10 per cent over the next five years from the present three per cent.
"The penetration of organised retail in India is on track to increase to about eight to 10 per cent over the next five years from an estimated three per cent in 2004 which is about Rs 28,000 crore, Fitch managing director Amit Tandon said in a special report on India's retail sector.
"The rapid growth in the Indian retail sector has been driven by the country's economic fundamentals including a more favourable income distribution and increased consumption expenditure," it said.
The agency said key players have customised the concepts of their outlets to better service their target market and it expects a strong topline growth across the industry including hypermarkets, department stores and supermarkets.
The study, however, warned that the supermarket segment is likely to witness margin pressures and it needed to rapidly scale up its operations and promote instore brands to increase its profitability.
"Retailers are expected to benefit from the increased availability of retail focussed real estates as the rapid development of malls in major cities is expected to continue in the medium term," it added.
Fitch said the industry is gaining acceptance from the investor community and new modes of financing are opening up for the retail sector.
Defining Research Problem
It’s a established fact that 75% of consumers look out for attractive display at the Point of Purchase. Thus the importance of effective merchandising comes into the picture as any marketer or a company may affect its total sales by imaginative use of dealer service material, and alluring display of products in the retail outlet. Mostly merchandising schemes of almost all company’s includes following points: ? Alluring product display at the retail shop ? Effective Price range. ? Eye catching Packaging of the product. ? Schemes for Consumer ? Schemes for Retailer ? Retailer incentives.
Our discussion under ‘FMCG sector in India’ provides us the base to understand in depth about the merchandising and sales promotion campaigns as channelised by the companies, especially in the FMCG sector. But the question arises that shouldn’t we test the effect Merchandising schemes on the Retailers and the Consumer at a large?
Any merchandising scheme can be successful only if it is well supported by the retailers and motivates retailer as well as the consumer in making the actual sales. If such schemes are not able to motivate the retailers to promote sales then such schemes are mere waste of resources. Every company tries its best to provide as much satisfaction to the retailers in lieu to their objectives to be achieved. Thus a scheme’s success primarily depends upon the level of understanding about the schemes on the part of the retailers. If the retailers are not well informed or the product displays are not eye catching, then such schemes may often fail to bring out the actual sales. Thus from the above analysis we can deduce that a complete market research is required to find the effectiveness of merchandising schemes on the sales of FMCG Sector. Thus we can deduce the hypothesis for our research as
Ho : Effective merchandising schemes helps in motivating retailers and consumers and thus making actual sales.
H1 : Effective merchandising schemes does not helps in motivating retailers and consumers and thus making actual sales.
Survey Plan
To understand importance of POP in general and displays in particular in consumer buying decision, a study was carried out amongst 25 retailers and 100 consumers in Noida. All the consumers were interviewed through a structured questionnaire just as they came out of selected shops after shopping.
In total 25 shops were selected on the basis that they satisfy two major criteria’s viz., firstly that they sell most of the successful FMCG brands and secondly, that they had at least more than two product displays of different products.
The research was carried out with the help of two different structured questionnaires for the retailers and the consumers respectively. Both retailers and the consumers were asked to rank on a scale of 1-5, the four pre-selected factors(for retailers) and six pre-selected factors (for consumers) respectively. 1 Point was scored for the most important factor and 5 for the least important. These factors were decided on the basis of their effect on the merchandising stunts as channeled by the company to influence consumer’s buying behavior and also on
the KSA consumer outlook survey (2000) in India. The specimen questionnaire is available on the next two pages. KSA consumer outlook survey
The KSA consumer outlook study (2000) in India established that 75% of consumers look out for attractive display in a store. The other important attributes wereSatisfaction with stores Attributes Polite & courteous sales 86.1 people Quality of products Non-intrusive sales people Value for money Attractive displays Range of products Schemes & promotions Exchange/ return policy A trial room Acceptance of credit cards An entertainment center for children 85.9 76.2 75.1 75.0 65.8 48.8 44.1 32.0 25.1 10.0 % Of respondents looking out for this attribute in a retail outlet.
SPECIMEN QUESTIONNAIRE
(Retailers) ? Serial No. : ? Name of the Retail Outlet : ? Address : ? Do you receive special schemes by the FMCG company’s for pushing more of their product? (please tick for the appropriate answer) YES NO
? Do such schemes motivate you to sell more Brands of a particular company? YES NO
? Which attributes motivate you to sell more of a particular product? (Rank on a scale of 1-5, one for most important and five for least important) (Rank 1-5) • Incentives • Good relationship with salesman • Brand
• Product Quality
SPECIMEN QUESTIONNAIRE
(Consumers) ? Serial No. : ? Name of the Customer : ? Does a Product display have any influence on your buying pattern? YES NO
? Do you remember any of the product displays from your last shopping experience? YES NO
? Which attribute influences you most to buy a particular product? (Rank on a scale of 1-5, one for most important and five for least important) (Rank 1-5) • Price • Product Display • Brand Name • Retailer Suggestions • Advertising
• Schemes
RETAILERS SURVEY ANALYSIS
Survey Analysis
Retailers Survey Findings Sample Space : 25 retailers Factors 1 Rankings 2
(Tally Points)
3
4
5
Incentives Good relationship with salesman Brand Product Quality
7 5 4 1
13 6 6 7
4 5 9 12
1 3 5 4
6 1 1
Computation Of aggregate Tally points Aggregate Tally points were computed by sum total of number of tally points multiplied by respective ranking given by consumer for each factor. For ex,
Aggregate Tally Points for the factor ‘Incentives’ was calculated as : (7×1) + (13×2) + (4×3) + (1×4) + (0×5) = 49 Similarly aggregate tally points for all the other factors were also calculated. Factor Incentives Good relationship with salesman Brand Product Quality Tally Points 49 75 66 72
Findings
? 28 % of the retailers believed that the incentive is the factor which motivates them most to sell a particular brand.
? 24 % of the retailers believed that the Brand image is the second best motivating factor.
? 48 % of the retailers believed that the product quality is the third best motivating factor.
? 12 % of the retailer believed that the personal relationship with the salesman is the least motivating factor among the four which motivates them to sell a particular brand.
Aggregate Tally Points
80 70 60 50 40 30 49 20 10 0 75 66
72
Tally Points
Incentives
Brand
The above chart displays the aggregate tally points as computed on the basis of rank given by the retailers for different factors representing the level of motivation for each given factor. Thus Incentives with minimum tally points represent maximum motivation and the factor ‘Good relationship with the salesman represent the minimum motivation level.
Motivation Level
60 50 40 30 51 20 10 0 25 34 Motivation
28
Incentives
Good relation w ith the salesman
Brand
Product quality
The above chart displays the motivation level as computed on the basis of rank given by the retailers for different factors. Motivation level is computed by subtracting aggregate tally points of each factor from a sum of 100 representing full motivation level. Thus Incentives with minimum tally points represent maximum motivation and the factor ‘Good relationship with the salesman represent the minimum motivation level.
Ranking for 'Incentives'
14 12 10 8 6 4 2 0 13 No. of the Retailers
7 4 1
Rank I
Rank II Rank III Rank IV Rank V
0
? The above chart displays the ranking for the factor ‘Incentive’ as given by the retailers. ? 52 % of the retailers gave ‘Incentive’ a II nd rank. ? 80 % of the retailers believed that it is the most important factor in motivating them for selling a particular product.
Ranking for 'Good Relation with the Salesman'
6
5
4 No. of the Retailers
3 5 2
6 5
6
3 1
0
Rank I
Rank II
Rank III Rank IV Rank V
? The above chart displays the ranking for the factor ‘Good relation with the salesman’ as given by the retailers. ? 20 % of the retailers gave ‘Good relation with the salesman’ a I st rank. ? 24 % of the retailers believed that it is the second most important factor in motivating them for selling a particular product.
Ranking for 'Brand'
9 8 7 6 5 9 4 3 2 1 1 0
Rank I Rank II Rank III Rank IV Rank V
No. of the Retailers
6 5 4
? The above chart displays the ranking for the factor ‘Brand’ as given by the retailers. ? 36 % of the retailers gave ‘Brand’ a III rd rank. ? Only 16 % of the retailers believed that it is the most important factor in motivating them for selling a particular product.
Ranking for 'Product Quality'
12
10
8 No. of the Retailers
6
12
4
7 4 1
Rank I
2
0
1
Rank II Rank III Rank IV Rank V
? The above chart displays the ranking for the factor ‘Product Quality’ as given by the retailers. ? 48 % of the retailers gave ‘Product Quality’ a III rd rank. ? Only 4 % of the retailers believed that it is the most important factor in motivating them for selling a particular product.
ANALYSIS FOR RETAILER SURVEY
? Indian Retailers are hard bargainers and hence are easily motivated by sound incentives/commissions policy by any brand.
? Retailers also like consumers give much weightage to Brand Image in selling a product as it reduces their burden of push sales.
? Retailers also look for the quality product on the basis of feedback received by them from the consumers as they are always willing to maintain long lasting relationship with their regular customers.
? Retailers don’t give much wieghtage to their relationship with the salesman for a particular brand.
CONSUMERS SURVEY ANALYSIS
Survey Analysis
Consumer Survey Findings Sample Space : 100 retailers
Factors 1 Price 06 Product Display 18 Brand Image 12 Retailer’s suggestion Advertising Schemes 21 32 18 24 17 23 28 28 32
Rankings 2 3
(Tally Points)
4 12 22 15 19 17 11
5
36 24 26 18 18 20
14 18 23
23 16 09
Computation Of aggregate Tally points Aggregate Tally points were computed by sum total of number of tally points multiplied by respective ranking given by consumer for each factor. For ex, Aggregate Tally Points for the factor ‘Price’ was calculated as : (32×1) + (36×2) + (14×3) + (12×4) + (6×5) = 224
Similarly aggregate tally points for all the other factors were also calculated. Factors Price Product Display Brand Image Retailer’s suggestion Advertising Schemes Tally Points 224 298 265 308 279 241
Findings
? 32 % of the Consumers believed that the price is the factor which motivates them most to buy a particular brand.
? 32 % of the consumer believed that the ‘Schemes’ is the second best motivating factor.
? 23 % of the consumers believed that the ‘Brand Name’ is the third best motivating factor.
? 17 % of the consumers believed that the ‘Advertising’ is the fourth best motivating factor.
? 22 % of the consumers believed that the ‘Product Display’ is the Fifth best motivating factor.
? 23 % of the consumer believed that the ‘Retailer’s suggestion’ is the least motivating factor of all the above factors.
Tally Points
Aggregate Tally Points
350 300 250 200 150 100 50 0 224 298 308 265 279 241
Price
Product Display
Brand Im age
Retailer Advertising Suggestion
Schem es
The above chart displays the aggregate tally points as computed on the basis of rank given by the consumers for different factors representing the level of motivation for each given factor. Thus ‘Price’ with minimum tally points represent maximum motivation and the factor ‘Retailer’s Suggestion’ represent the minimum motivation level.
Motivation 300 250 200 150 100 50 0
Motivation Level
276 235 202 192 221
259
Price
Product Display
Brand
Retailer's Advertising Suggestion
Schemes
The above chart displays the motivation level as computed on the basis of rank given by the retailers for different factors. Motivation level is computed by subtracting aggregate tally points of each factor from a sum of 500 representing full motivation level. Thus ‘Price’ with minimum tally points represent maximum motivation and the factor ‘Retailer’s Suggestion’ represent the minimum motivation level.
No. Of Retailers
Ranking for Price
40 35 30 25 20 15 10 5 0 14 12 6
Rank I Rank II Rank III Rank IV Rank V
32
36
? The above chart displays the ranking for the factor ‘Price’ as given by the Consumers. ? 36 % of the consumers gave ‘Price’ a II nd rank. ? 68 % of the consumers believed that it is the most important factor in motivating them for buying a particular brand.
No. Of Retailers
Ranking for Product Display
25
20
15 24 10 18 18 22 18
5
0
Rank I
Rank II
Rank III
Rank IV
Rank V
? The above chart displays the ranking for the factor ‘Product Display’ as given by the Consumers. ? 22 % of the consumers gave ‘Price’ a V th rank. ? 40 % of the consumers believed that it is not an important factor in motivating them for buying a particular brand.
No. Of Retailers
Ranking for Brand Image
30 25 20
15 24 10 15 5 0 12 26 23
Rank I
Rank II
Rank III
Rank IV
Rank V
? The above chart displays the ranking for the factor ‘Brand Image’ as given by the Consumers. ? 23 % of the consumers gave ‘Brand Image’ a III rd rank. ? 73 % of the consumers believed that it is one of the most important factor in motivating them for buying a particular brand.
No. Of Retailers
Ranking for Retailer's Suggestion
25
20
15 23 10 17 5 18 19 23
0
Rank I
Rank II
Rank III
Rank IV
Rank V
? The above chart displays the ranking for the factor ‘Retailer’s Suggestion’ as given by the Consumers. ? 17 % of the consumers gave ‘Retailer’s Suggestion’ a I st rank. ? 23 % of the consumers believed that it is the least important factor in motivating them for buying a particular brand.
No. Of Retailers
Ranking for Advertising
30 25 20
15 10 5 0 21
28 18
17
16
Rank I
Rank II
Rank III
Rank IV
Rank V
? The above chart displays the ranking for the factor ‘Advertising’ as given by the Consumers. ? 17 % of the consumers gave ‘Advertising’ a IV th rank. ? 21 % of the consumers believed that it is the most important factor in motivating them for buying a particular brand.
No. Of Retailers
Ranking for Schemes
35 30 25 20 15 10 5 0 32 28 20 11 9
Rank I
Rank II
Rank III
Rank IV
Rank V
? The above chart displays the ranking for the factor ‘Schemes’ as given by the Consumers. ? 32 % of the consumers gave ‘Advertising’ a II nd rank. ? 60 % of the consumers believed that it is the most important factor in motivating them for buying a particular brand.
ANALYSIS FOR CONSUMER SURVEY
? Indian consumers are very price sensitive and hence providing best quality product at competitive price to the Indian consumers is the key for success.
? Indian household consumers can also be allured by providing them better schemes such as free gifts/coupons, discounts etc.
? Consumers in India especially in the Urban sector always prefers branded products if available at affordable price rather than unbranded products.
? Indians are very sentimental and emotional people and hence they can be motivated to buy a particular product by effective advertising.
? Consumers in India don’t value retailer’s suggestion and hence are very difficult to handle at POP (Point of Purchase)
? Consumers in India also don’t give much weightage to merchandising or product display at POP.
CONCLUSION
Thus from the above analysis and few charts we can easily deduce that Effective merchandising schemes does help in motivating both retailers and consumers and helps in making actual sales. Retailers have accepted the fact that ‘Incentive’ is the key factor leading to motivation for selling a particular product.
Consumers also agreed to the fact that ‘Schemes’ as provided by the firms also attract them for a particular brand but felt that product display at POP (Point of Purchase) have little influence over their buying pattern.
Thus, we can accept our Null Hypothesis (Ho) that “Effective merchandising schemes helps in motivating retailers and consumers and thus making actual sales”, and reject our alternative hypothesis (H1) on the basis of above analysis and discussion.
.
Suggestions and Recommendations
? Good product quality is the prerequisite for successful business operation.
? Retailers must be motivated by providing them good incentives.
? Brand Image is also important for making actual sales both from retailer and consumer point of view.
? Indian consumers are still very price sensitive.
? Advertising and good merchandising are important factor for generating increased sales.
? Proper execution of the merchandising schemes must be ensured.
? Information must be provided to the retailers in detail and in time.
? Supply should be made regular even in the areas of low sale.
? Suggestions and complains of the retailers must be heard with great care.
doc_418161495.doc