4.

Marketing strategy analysis:-

4.1 Marketing research: - Today, there is increasing competition in the markets. It has therefore
become necessary to understand the internal and external dynamics that consist of an inter-
product and inter-organization marketing-mix strategy in optimizing profit and the volume of
sales. Marketing research is concerned with the factors that are directly involved in marketing of goods
and services, and it includes the study of the effectiveness of the marketing-mix, advertising strategies,
competition and consumer behavior. It not only helps in formulating strategies suitable for market
intervention but also guides in perspective planning by analyzing formation for future projections.
In case of FMCG industry marketing research is carried out for the following
purpose:-
1. Identifying market characteristics
2. Product-mix research
3. Determining product sustainability
4. Innovative product range
5. Preferential and profitable positioning of products
6. Distribution analysis
7. Pricing strategies impact analysis
8. Product testing - pilot studies
9. Market share analysis
10. Short and long range forecasting for price and demand of the product
11. Sales trend analysis
12. Competition pattern
13. Consumer-behavior analysis in reference to price, product-mix and comparative advantages
Over other products
14. Assessment of impact advertising and
15. Analysis of gender preferences of products, etc.

Thus different players of this industry has carried out different research for various
objectives and carried out further strategy of product penetration and segmentation accordingly. Based on
their research they took the decision of different type of market for different products. Thus research
helped to HUL, ITC, DABUR, NESTLE etc to launch their product successful into the market.

This research has helped different units for diversification of their

business. Thus research is playing a key role in case of FMCG industry.

4.2 key issues and current trends:-

The Report identifies 9 key mega trends across consumers, markets and environment that will have a
significant impact in shaping how the industry will look like in year 2020. 

1.Increasing Premiumization: Continued income growth coupled with increased willingness to spend

will see consumers’ up-trading, creating demand for higher priced and increased functionality (real or
perceived) products. The size of this segment will be large 

2.Evolving Categories: Many consumers will move up the ladder and will shift from basic “need” to
“want” based products. In addition evolving behaviour and emphasis on beauty, health & wellness will
see increased requirements for customized and more relevant product offerings. 
3.Value at BoP: Significant majority of the population in the country, especially in the rural m arkets, will
become a consumption source by moving beyond the “survival” mode. This segment will require
tailored product at highly affordable prices which will come with the potential of very large
volumes 

4.Increasing Globalisation: While many leading MNCs have operated in the country for years
given the liberal policy environment, the next 10 years will see increased competition from Tier
2 and 3 global players. In addition, larger Indian companies will continue to seek opportunities
internationally and also have an access to more global brands, products and operating practices 

5.Decentralization: Despite the complexity of the Indian market (languages, cultures, distances)

the market has mainly operated in a homogenous set-up. Increased scale and spending power
will result in more fragmented and tailored business models (products, branding, operating
structures) 

6.Growing Modern Trade: Modern trade share will continue to increase and is estimated to
account for nearly 30% by year 2020. This channel will complete existing traditional trade (~8
million stores which will continue to grow) and offer both a distribution channel through its cash
& carry model as well as more avenues to interact with the consumer 

7.Focus on Sustainability: Global climatic changes, increasing scarcity of many natural

resources (e.g. water, oil) and consumer awareness (e.g. waste) are leading to increased concerns
for the environment. The pressure on companies to be environmentally responsible is gradually
increasing due to involvement of various stakeholders – from government (through policy) to
consumers (through brand choice) and NGOs (through awareness). 

8.Technology as a Game Changer: Increased and relevant functionality coupled with lower

costs will enable technology deployment to drive significant benefits and allow companies to
address the complex business environment. This will be seen both in terms of efficiencies in the
back-end processes (e.g. supply chain, sales) as well as the front-end (e.g. consumer marketing) 

9.Favourable Government Policy: Many government actions – in discussions as well as

planned – will help in creating a more suitable operating environment. This will be done both on
the demand side by increased income and education as well as on the supply side by removing
bottlenecks and encouraging investments in infrastructure. 
 4.3 SEGMENTATION AND POSITIONING PRODUCT:-

The main segments of the FMCG sector are:

 Personal Care: oral care; hair care; skin care; personal wash (soaps); cosmetics and toiletries;
deodorants; perfumes; paper products (tissues, diapers, sanitary); shoe care.

Major companies active in this segment include Hindustan Lever; Godrej Soaps, Colgate-
Palmolive, Marico, Dabur and Procter & Gamble.

 Household Care: fabric wash (laundry soaps and synthetic detergents); household cleaners
(dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellants,
metal polish and furniture polish).

Major companies active in this segment include Hindustan Lever, Nirma and Reckitt &
Colman.

 Branded and Packaged Food and Beverages: health beverages; soft drinks; staples/cereals; bakery
products (biscuits, bread, cakes); snack food; chocolates; ice cream; tea; coffee; processed fruits,
vegetables and meat; dairy products; bottled water; branded flour; branded rice; branded sugar; juices etc.

Major companies active in this segment include Hindustan Lever, Nestle, Cadbury and
Dabur.

 Spirits and Tobacc Major companies active in this segment include ITC, Godfrey Philips, UB and
Shaw Wallace.

FMCG companies can also be segregated according to the product categories in which they exist.
Various products have different demand drivers; hence, the growth of companies tends to be
different. For instance, paints makers witness growth during a housing boom. But the same may
not be the case with soapmanufacturers, which may witness some down-trading by consumers.
With the
market in a bearish phase, the FMCG sector has found flavour among investors.
The sector's defensiveness is demonstrated by the stability in returns
generated even during times of slow economic growth. While the Sensex isdown by 29% since
the beginning of this year, the ET FMCGindex comprisingthe top 20 stocks in the sector, has
fallen only by 12.5%.For investors eyeing the FMCG space, large domestic companies offer
attractive
growth prospects. These companies are outperforming their MNC peers and small Indian
companies in the sector. But the MNC pack — specifically GlaxoSmithKline Consumer
Healthcare, Nestle and HUL — has fared better in terms of profit margins. While the FMCG
sector's revenue growth has been positive since the past three quarters, profits are showing a
downward trend.
Nevertheless, the FMCG growth story is here to stay. Although double-digit revenue growth is
likely to continue, margins may come under pressure as the industry is finding it difficult to pass
on cost inflation without impacting consumer demand. Moreover, the scenario has become more
challenging for FMCG companies, given the emergence of modern retail and regional brands.
The growth in media industry has also led to innovative advertising, which has changed the rules
of the game.

PRODUCT POSITIONONG:-

commercials or print ads, including one for the new product, then they are given
money and brought into a store where they can make purchases. The company
notes how many people buy the new brand and competing brands as a test of the
ad’s relative effectiveness against competing ads in simulating trial. Consumers are
also asked why they bought or did not buy; nonbuyers receive a free sample of the
new product and are reinterviewed later to determine product attitudes, usage,
satisfaction, and repurchase intention.15
➤ Controlled test marketing. A research firm manages a panel of stores that will
carry new
products for a fee. The company with the new product specifies the number of
stores and geographic locations it wants to test. The research firm delivers the
product to the participating stores and controls shelf position; number of facings,
displays, and point-of-purchase promotions; and pricing. Sales results can be
measured through electronic scanners at the checkout. The company can also
evaluate the impact of local advertising and promotions during this test.
➤ Test markets. When full-blown, the company chooses a few representative
cities, the
sales force tries to sell the trade on carrying the product and giving it good
exposure, and the company unleashes a full advertising and promotion campaign in
these markets. Here, marketers must decide on the number and location of test
cities, length of the test, what to track, and what action to take. Today, many firms
are skipping extended test marketing and relying instead on faster and more
economical market-testing methods, such as smaller test areas and shorter test
periods.

4.4 QUALITY AND TECHNOLOGY:-

4.5 CUSTOMER SERVICE:-

4.6 PRICING:- All for-profit organizations and many nonprofit organizations set prices on their
goods or services. Whether the price is called rent (for an apartment), tuition (for
education), fare (for travel), or interest (for borrowed money), the concept is the same.
Throughout most of history, prices were set by negotiation between buyers and sellers.
Setting one price for all buyers arose with the development of large-scale retailing at
the end of the nineteenth century, when Woolworth’s and other stores followed a
“strictly one-price policy” because they carried so many items and had so many
employees. In the entire marketing mix, price is the one element that produces revenue; the
others produce costs. Price is also one of the most flexible elements: It can be changed
quickly, unlike product features and channel commitments. Although price competition
is a major problem facing companies, many do not handle pricing well. The most
common mistakes are these: Pricing is too cost-oriented; price is not revised often
enough to capitalize on market changes; price is set independent of the rest of the
marketing mix rather than as an intrinsic element of market-positioning strategy; and
price is not varied enough for different product items, market segments, and purchase
occasions.

DIFFERENT PRICING STRATERGY FOR DIFFERENT PRODUCTS

PRICE SELECTION METHOD IN FMCG INDUSTRY

Value Pricing IS MAINLY CARRIED OUT IN FMCG INDUSTRY

Value pricing is a method in which the company charges a fairly low price for a highquality
offering. Value pricing says that the price should represent a high-value offer to
consumers. This is a major trend in the computer industry, which has shifted from
charging top dollar for cutting-edge computers to offering basic computers at lower
prices. For instance, Monorail Computer started selling PCs in 1996 for as little as $999
to woo price-sensitive buyers. Compaq and others quickly followed suit. More recently,
eMachines began selling its PCs for less than $500 without a monitor, targeting the 55
percent of computerless households with annual incomes of $25,000 to $30,000.13
Value pricing is not a matter of simply setting lower prices on one’s products
compared to those of competitors. It is a matter of reengineering the company’s operations
to become a low-cost producer without sacrificing quality, and lowering prices
significantly to attract a large number of value-conscious customers. An important type
of value pricing is everyday low pricing (EDLP), which takes place at the retail level.
Retailers such as Wal-Mart and Amazon.com use EDLP pricing, posting a constant,
everyday low price with few or no temporary price discounts. These constant prices
eliminate week-to-week price uncertainty and can be contrasted to the “high-low” pricing
of promotion-oriented competitors. In high-low pricing, the retailer charges higher
prices on an everyday basis but then runs frequent promotions in which prices are
temporarily lowered below the EDLP level.14
Retailers adopt EDLP for a number of reasons, the most important of which is
that constant sales and promotions are costly and erode consumer confidence in the
credibility of everyday prices. Consumers also have less time and patience for such
time-honored traditions as watching for specials and clipping coupons. Yet promotions
are an excellent way to create excitement and draw shoppers. For this reason,
EDLP is not a guarantee of success. As supermarkets face heightened competition
from store rivals and alternative channels, many are drawing shoppers using a combination
of high-low and EDLP strategies, with increased advertising and promotions

PROMOTION: - Promotion strategies are concerned with the planning, implementation, and control of
persuasive communication with customers. Promotion includes advertising, personal selling, sales
promotion, and publicity of goods and services.
The sales promotion encompasses different techniques (for example, samples, trading
stamps, point-of-purchase motion, coupons, contests, gifts, allowances, and displays) that support and
complement advertising and personal selling. Publicity includes seeking favorable comments on product
or service and/or the firm itself through a write-up or presentation in mass for which the sponsor is not
charged. These strategies may be designed around advertising, personal selling, sales promotion, or any
combination of functions of these. One of the major strategic issues associated with the development of
effective promotion strategy is the availability of financial resources for a specific product/market. The
distribution of the notional budget among advertising, personal selling, and sales promotion is another
strategic matter. The formulation of strategies dealing with these determines the role that each type of
promotion plays in a particular situation. Promotion strategy consists of planning, implementing and
controlling communications from an organization to its customers and other target audiences. The
function of promotion in the marketing program is to achieve various communications objectives in the
market segment.

DISTRIBUTION CHANNELS:-
The fast moving consumer goods (FMCG) industry is posed to grow
dramatically. To leverage opportunities, FMCG manufacturers and retailers will have to develop and
implement deliberate strategies for gaining market access. This paper provides an in-depth look at the
strategic role of distribution channels in the FMCG industry. Specifically, it surveys the state of current
distribution channels in India and identifies four archetypes that FMCG firms can use as a starting point
to develop their distribution strategy. With a population in excess of 1 billion and current annual GDP
growth of 9% (Vietor and Thompson 2007), India is a major player in the world economy. Not
surprisingly, by 2050 the country is projected to become the third largest economy after China and the
United States (Hawksworth 2006). India's economic prowess is being driven by the purchasing power of
a burgeoning middle class as wealth steadily trickles down to the bottom of the economic pyramid.
Given this brisk growth, domestic industries are in a race against time to ramp up capacity, increase
production, and achieve market access via channels of distribution. One sector that is expected to bear
the brunt of this demand is the fast moving consumer goods (FMCG) industry with retail sales expected
to top $40 billion by 2015 (India Brand Equity Foundation 2008). FMCG's encompass a wide range of
products such as toiletries, soap, cosmetics, toothpaste, shaving cream, and detergents (Coulthart
2006). Multinationals with a significant FMCG presence in India are Unilever, Procter and Gamble,
Nestle, and Cadbury. Despite its potential, the FMCG industry faces several significant marketing
constraints. First, manufacturers and retailers have to grapple with fragmented markets and a plethora
of channel forms in a constant state of flux. In particular, numerous street-side vendors, hawkers, and
roughly 12 million unregulated neighborhood mom-and-pop or kirana stores create strong institutional
forces that cannot be ignored. Second, frequent regulatory changes affect channel structure and
exacerbate adaptation challenges. For example, in 2006 the government allowed direct foreign entry by
single brand retailers (Lakshman 2007). Consequently, firms scampered for upscale retail space in a
hypercompetitive real estate market while domestic manufacturers faced a multitude of challenges in
the areas of new product introduction, line stretching, and branding. Given the importance of
distribution channels to the Indian economy, one would expect a considerable body of relevant
academic research to be readily available. However, a careful appraisal of extant research belies this
expectation. While India has garnered much attention, the focus has primarily been on general topics
pertaining to the socio-economic, political, and business environments (Basu 2008; Khanna 2008; Vietor
and Thompson 2007). In recent years, the emphasis has shifted to include research on other topics like
entry modes (Johnson and Tellis 2008), and outsourcing (Marshall 2002). However, there remains a
paucity of systematic work on the impact of distribution on the Indian economy in general and the
FMCG industry in particular. This study attempts to bridge the gap in our understanding of FMCG
distribution channels in India.

A brief explanation of different channels of distribution is given below:

1. Manufacturer _ Customer:

This is also known as direct selling because no middlemen are involved. A producer may sell directly
through his own retail stores, for example, Bata. This is the simplest and the shortest channel. It is fast
and economical. Small producers and producers of perishable commodities also sell directly to the local
consumers. Big firms adopt direct selling in order to cut distribution cost and because 274 they have
sufficient facilities to sell directly to the consumers. The producer or the entrepreneur himself performs
all the marketing activities.
2. Manufacturer _ Retailer _ Customer:

This is one stage distribution channel having one middleman, i.e., retailer. In this channel, the
producer sells to big retailers like departmental stores and chain stores who in turn sell to customer.
This channel is very popular in the distribution of consumer durables such as refrigerators, T V sets,
washing machines, typewriters, etc. This channel of distribution is very popular these days because of
emergence of departmental stores, super markets and other big retail stores. The retailers purchase in
large quantities from the producer and perform certain marketing activities in order to sell the product
to the ultimate consumers.

3. Manufacturer _ Wholesaler _ Retailer _ Customer:

This is the traditional channel of distribution. There are two middlemen in this channel of
distribution, namely, wholesaler and retailer. This channel is most suitable for the products with widely
scattered market. It is used in the distribution of consumer products like groceries, drugs, cosmetics,
etc. It is quite suitable for small scale producers whose product line is narrow and who require the
expert services and promotional support of wholesalers.

CHANNEL MANAGEMENT DECISSIONS