FMCG SECTOR
Compiled by Allaam Ousman
EVOLVING CONSUMER MINDSET
Chathurika Fonseka notes that brand equity is sacrosanct during a downturn
Q: How can the market drive brand equity during a recession, in your opinion?
A: Brand equity reflects the strength of brands in the minds of the consumer.
High brand equity can enable a brand to succeed in many ways during challenging market conditions.
One of the first indicators of a recession is the changes that take place in the consumer purchase basket.
With disposable income crunching, organisations will be forced to make painful decisions on what to include and what to opt out of in regular purchase decisions. Consistent investments made over time to connect with the hearts and minds of consumers will prove beneficial in times such as these.
While consumer decisions will primarily be based on the savings achieved by swapping to cheaper alternatives, the loyal consumer segment will remain with the brand.
What marketers need to keep in mind is the importance of addressing the dynamic market conditions that are part and parcel of a downturn.
In the short term, agile marketing inputs that are more tactical in nature will have to be introduced to maintain consumer interest. This combined with long-term equity building activities will be the best course of action to navigate these challenging times.
Q: In your assessment – and given the emergence of e-commerce opportunities for consumers – how has online marketing impacted the FMCG sector?
A: E-commerce and social commerce have taken over traditional distribution and store management processes across many sectors globally. It’s changed how products are promoted, stocked, presented, sold and delivered to end consumers.
Due to its efficacy, convenience and choices, online marketing is slowly but steadily gaining importance across all spheres of product marketing. However, I feel that in Sri Lanka, we’re very much at a nascent stage specifically with reference to FMCG products.
This could boil down to the fact that being a small island nation with many mom-and-pop stores around the corner, and the continuous growth and expansion of modern trade with competitive pricing and value additions, consumers still prefer to shop at bricks and mortar stores as opposed to shopping online.
However, it’s important for brands to be e-commerce ready. Technology is the future and even though it’s unfolding at a slower pace, there’s space for e-commerce in the marketplace.
Globally, most brands now focus on ensuring that their products are e-commerce ready from inception – and that this should be a key factor when planning a new product or product modification.
Q: In your view, which segments of the FMCG landscape hold the most promise?
A: By observing consumer behaviours in different economic landscapes, it’s evident that circumstances play a part in this. As humans, we aspire to elevate our standard of living and move beyond meeting our basic physiological needs.
Therefore, in developing markets where we witness movements from low to middle income earners, categories such as home and personal care will show promise as consumers look to elevate their standard of living through greater attention to personal wellbeing and a superior lifestyle.
However, the reality is that in markets such as Sri Lanka that are experiencing an economic downturn, consumers are reevaluating their purchase decisions with the category priorities changing drastically. And essentials such as food take precedence over non-essentials when disposal incomes shrink.
It follows that such predictions are more accurate in stable economies where consumer behaviour, lifestyles and aspirations are easier to gauge.
Q: How would you describe competition in market given the economic times we live in? And in your opinion, how does shelf space and visibility play a part in this?
A: There are a few key factors to consider when identifying and understanding competition.
Specifically, during a market situation such as what we’re facing today, we will encounter a new set of competitors or even the same competitors but where different marketing tactics are implemented.
Understanding the consumer psyche during tough economic times, those with the capabilities to manage their profitability through scale, modification and alterations to production to reduce costs – or even by introducing low-quality, low-cost alternatives – will primarily focus on seeking an advantage through price competition.
Accordingly, traditional brands that demand a premium based on equity and high quality will need to be wary of how to tackle a market influx of players that may seem more attractive in the eyes of financially challenged consumers.
Marketing communication too will change to focus less on driving equity, and more on tactical messaging on value offerings and price benefits.
In addition to the short-term adjustments within one’s categories, there’s always the challenge posed by supermarket owned label brands – from low pricing to better shelf visibility that can make an impact on consumers who visit such stores.
Regardless of the economic landscape, these brands will impact your brand’s share of shelf space in the stores.
