Product – the most important element of retail execution & the marketing mix

Product is, probably, the most crucial component of the 6Ps. It originates directly from your consumer through an unmet need that they have.

This can be a physical item, a service, a platform or software. It is produced at a cost and is made available to the target audience at a price to help fulfil the need. Whatever the nature of the product, it always follows a lifecycle. A company can increase its competitive edge by ensuring a thorough understanding of the potential lifecycle of the product for proactive launches of product extensions or timely re-launches. Re-launches help the brand/product to remain relevant in a changing market or at the end of its lifecycle.

Product lifecycle

The 4 commonly used stages are introduction, growth, maturity and decline.

We like the hubspot model as it breaks this down into 6 stages – development, introduction, growth, maturity, saturation and decline.

Development: The development stage of the product life cycle is the research phase before a product is commercially launched for wider consumption. In the FMCG context, this is when the innovation team develops/conceptualises the product and the branding in collaboration with the R & D team, with key consumer focus groups providing feedback.

Introduction: The introduction phase is when a product is commercially launched. In the FMCG context, this is when marketing teams begin building product awareness amongst consumers and sales teams reach out to potential customers. Typically, when a product is introduced, sales volumes are low and demand builds slowly. This phase is dominated by advertising and marketing campaigns educating both the consumer and the customer (supermarket/wholesaler/distributor etc).

Growth: During this stage, consumers have accepted the product in the market and customers are beginning to buy in. This is the stage when competition begins developing.

During this phase, marketing campaigns often shift from getting customers’ buy-in to establishing a brand presence so consumers choose them over developing competitors. Additionally, as companies grow, they’ll grow distribution at existing and new customers.

Maturity: Once the brand/product gains strong foothold in market, it enters the maturity phase, with gradual slowdown in sales. The brand/product is already the market leader and demand grows only at the replacement rate.

Saturation: This means that a majority of the brand’s/product’s target households will own or use the product. At this stage, sales grows more or less on par with population. Price competition becomes intense and the brand/product teams focus on retaining shelf space and even their listings at stores.

Decline: If the product/brand doesn’t become or retain its position as the preferred brand for consumers, it enters the last stage – decline. Usually, this happens to strong brands only in the case of industry transformation. Eg. Kodak. Sales will decrease during this time and the only way to win at this stage is to innovate and launch a new or transformative solution.

It goes without saying that functionally, the product must be able to perform its function as promised and it must be available when the consumer needs it.

At this moment in time, availability in store is proving to be a bigger challenge than others. This is driving consumers to look towards what they already have for solutions and in the cases of some products/brands, is speeding up the onset of the ‘decline’ phase before the products/brands even get to the ‘saturation’ phase.

Why is availability at risk?

2021 has been a challenging year for the grocery sector. While the HGV crisis was not specifically driven by the pandemic, it only made it worse. This has caused unprecedented levels of stock outs in supermarkets. And then there is the legacy of COVID on consumption behaviour.

Covid has had a lasting impact on our lives, from the increase in home based working (driving higher consumption of toilet paper and cleaning products at home vs the office) to cooking meals at home instead of eating out (increased demand for oil, salt, cooking ingredients at the supermarket vs at wholesalers/distributors to the on-trade). People have realised that cooking at home during the pandemic has helped significantly with savings. The same goes for consumption of beer, wine & spirits at home instead of at the on-trade. These are behaviours that are expected to last, especially as the impact of price inflation is felt at home.

The above changes, combined with just in time ordering and production followed by retailers and by suppliers in this sector is putting pressure on availability.

As 2020 demonstrated, at one point, availability trumps price and brand loyalty. And, at the risk of using an over tired idiom, out of sight, out of mind.

Promotions and retail sales

This is probably the most complex of the 4 (or 6) Ps.

Promotion includes all those activities that involve communicating the benefits and features of your brand/product.

Through it, you let potential customers and consumers know what you are selling. In order to convince them to buy your brand, you need to explain how it solves their problem/what it is, how to use it, and why they should buy your brand.

An effective promotional effort contains a clear message that is targeted to a certain audience and is done through appropriate channels.

The audience of your promotional activities include, but are not restricted to:

  • Consumers
  • Customers where consumers can buy your brand
  • Influencers
  • Collaborators

The key objectives of promotional activities are:

  • Building awareness
  • Creating interest
  • Providing information
  • Stimulating demand
  • Differentiating the brand/product
  • Reinforcing your brand

You may choose multiple channels to reach your target audience and achieve these objectives. There are 5 elements to the promotional mix and are as below:

Advertising

This mode of promotion is usually paid, with little or no personal message. Mass media such as television, radio or newspapers and magazines is most often the carrier of these messages. Apart from these, billboards, posters, web pages, brochures and direct mail also fall in the same category. While this method has traditionally been one sided, advertising on new channels such as the internet may allow for quick feedback from your target audience.

In order to pick the optimal advertising channel:

  1. Define objectives – What are you seeking to achieve and your end goals of the campaign?
  2. Decide on the budget – How much are you willing to spend on the campaign?
  3. Adoption of the message – What message are you trying to convey?
  4. Review past campaigns for effectiveness – If your company has done other campaigns in the past, go through post campaign evaluation notes for how effective they were.

PR and Sponsorship

Public relations (PR) is usually focused on building a favourable image of your business. PR or publicity tries to increase positive mention of the product or brand in influential media outlets.

You can do this by doing something good for the neighborhood and the community like holding an open house or being involved in community activities.You can engage the local media and hold press conferences as part of your promotional strategy.

Through these press conferences, you can engage with newspapers, magazines, talk shows and new media such as social networks and blogs. This could also mean allowing super users, or influencers to test the product and speak positively about it to their peers.

This may or may not be paid. For example, sponsoring a major event and increasing brand visibility is a paid action. Sending free samples to a blogger then depends on their discretion and opinion and is not usually swayed by payment.

Previously this has been the least used channel by brands, especially the large ones; but is becoming increasingly important in the current world we live in.

Events & Experiences

Through events, you can make your product known to both your customer and your consumer. These include industry events targeting trade (supermarkets, wholesalers, distributors, restaurants etc) or consumer facing ones. This even includes tasting experiences you may decide to hold and is commonly seen in the beer, wine and spirits industry.

Personal selling

Direct selling connects company representatives with the consumer. These interactions can be in person, over the phone and over email or chat. This personal contact aims to create a personal relationship between the client and the brand or product. Some personal sales strategies are incentive programs, sales representations, samples, sales meetings, and trade shows.

These days this is common in sales of high value consumer goods like consumer electronics (think Apple store), art galleries, high end wines and whisky etc.

Direct marketing

Direct marketing allows you to promote the product or service to an individual consumer.

This strategy allows greater adaptability of the product and the messaging to the needs or interests of the consumer.

The main direct marketing channels are:

  • e-mail
  • internet
  • telemarketing
  • mail
  • e-commerce

Sales promotions

These are usually short term strategic activities which aim to encourage a surge in sales. These could be ‘buy one get one free’ options, seasonal discounts, contests, free samples or even special coupons with expiration dates.

Promotions can vary by target demographic and need to be carefully evaluated for each store, consumers in the location and time of the year.

Key considerations when designing the promotional mix for your brand

Whenever a brand/company sets out to design its promotional mix, the brand team needs to consider the following points:

  1. Stage in the brand/product Lifecycle – Eg. At the launch stage there may be a need for more aggressive and informational advertising.
  2. Nature of the brand/product – If a brand/product is not new in its usage or function, there may be less need for information and more focus on brand equity creation.
  3. Budget – This is fairly self explanatory. For those with large marketing budgets, TV ads and large billboard campaigns may form part of the mix and those on a shoestring budget may rely on other elements of the mix to create awareness.
  4. Cultural Sensitivity – If a product is to be launched in a new international market or even a new region in a country, it is critical to take into consideration local sensitivities. These include both cultural and religious considerations.
  5. Target Market Composition – The people who make up the target market need to be considered before committing to a promotional mix. What media do they consume the most? How and where do they shop?
  6. Competitor Actions – The methods your closest competitor uses influences your mix as well.

If you’d like to learn more about how to derive the right mix for your brand, the different channels for promotion or how markets or regions can influence mix, email me on veena@salesbeat.co

Pricing strategy and pricing

Price is the only KPI of retail execution that creates revenue, while all of the others are costs.

FMCG companies need to be very clear about pricing objectives, methods and the factors that influence price setting. The pricing team needs to know if their brand is losing or gaining market share at the current price offered for the product. This requires data collection and its subsequent computation to gather actionable insights. 

If you need to price a brand or a SKU in a new market, it makes all the difference in the world if you can understand consumers’ willingness-to-pay. As price affects the value that consumers perceive they get from buying a brand, it can be an important element in their purchase decision.

Understanding willingness to pay is a key element of pricing in all sectors. However, a lack of widely available information in the FMCG sector makes this challenging.

One of the biggest challenges faced by FMCG companies is setting a price or prices (depending on channels) that unifies all internal objectives:

  1. one that simultaneously boosts top-line growth,
  2. is aligned with the brand positioning,
  3. and increases penetration & growth

This is further complicated if the route to consumer is not direct i.e. the brand is sold through a supermarket, grocery store, wholesaler or an e-commerce aggregator. In this case, the company needs to set their recommended price for consumers and set their customer’s prices based on the margin they are likely to take. Usually, at this point, there is an element of negotiation with the customer.

All brands selling through aggregators (supermarkets, convenience etc) need to negotiate optimal prices with buying directors

An FMCG company may implement all the best practices of a perfect store and still not succeed if their product pricing is not competitive, and if pricing is not communicated on shelf or (for some countries) on pack. Similar to availability, it doesn’t matter how much shelf space has been secured in store and how effective the point of sale material is, if the consumer encounters an absent price tag. The risk of lost sales is very high. Pre-covid, we’d have said that an absent price tag equals a lost sale, especially for a new brand.

An absent price tag impacts sales

However, 2020 taught us that availability trumps price.

If you’d like to learn more about pricing for FMCG brands in the retail environment or more about retail execution, email me on veena@salesbeat.co

Place/Placement – where do consumers find your brand?

As you can tell, this is a KPI most applicable to brick & mortar stores. Where the brand/SKU can be located in a store has an outsized impact on sales.

There are 3 components to this:

  • The aisle (where on the shop floor) where your brand can be found
  • The arrangement on shelf
  • Share of shelf

The aisle

When consumers walk into the store, they usually have a list of brands/SKUs they’d like to buy. Based on previous in-store experience or based on aisle labels, consumers can then locate the shelves on which these brands/SKUs are stacked. It is key that brands and SKUs are placed in the most intuitive aisle/shelves as it maybe hard for consumers to find it otherwise. If this happens, it is likely that the store/brand may lose the sale.

It is equally important to also place your brands/SKUs on shelves adjacent to complementary products, to encourage impulse sales. For example, the consumer who walks in to buy baking powder to bake a cake, may end up buying cocoa or icing sugar which is placed adjacent to the baking powder. Another example is the instance when a customer buys a dip that’s placed in the crisps(chips)/snacks aisle.

The arrangement on shelf

Important shelf arrangement KPIs are:

  • eye-level product placement,
  • sequence of products,
  • point of sale materials,
  • adjacencies (which we touched on in the previous section),
  • planogram compliance and
  • category separation

In a store, shelf space allotted to a brand is limited. Eye level shelf space is prime real estate in this context as this encourages trial and impulse buys.

Eye level is ‘buy’ level

Also, given the space constraints, sequence of placement becomes important as this can have a major influence on sales. Many brand owners prefer to place associated products near their ‘hero SKUs’. Eg: placing conditioner right next to their hero SKU, a shampoo. This encourages impulse buying and may encourage a consumer to switch brands eventually.

Point of sale (POS) materials are perhaps the most under-utilised levers. POS materials are usually present on or near shelves in the form of posters or shelf talkers. They may also be free standing display units like the ones seen at at the end of an aisle, close to the entrance of the store or near the tills, where people are likely to make an impulse purchase while waiting to pay. They often introduce a new launch, a promotion, or the value proposition of the hero SKU. Challenger brands usually are great at this.

A great example of point of sale material

A Planogram is a detailed schematic about how products will be placed on shelf. There are 3KPIs that relate to this:

  1. Availability
  2. Placement in the right area and with the right sides facing the consumer
  3. Sequence of placement (i.e. sequence in which the brands’ various SKUs will be placed on the shelf)
There are several apps available to monitor and ensure planogram compliance

Category separation becomes important when there is a key differentiating factor between other brands on the same shelf and yours and even between your own brands. Eg: you may want to place your biodegradable toothbrushes separate from your regular toothbrush SKU.

Colgate has placed its charcoal infused biodegradable toothbrush SKU in a shelf ready unit

Share of shelf

This refers to the space allotted to your brand/SKU on the shelf, by the store. While this is part of the planogram, it is important to address this separately. Enough shelf space needs to be bought or negotiated for your brand, so that your product is displayed practically and advantageously. 

Here, Warburtons Toastie has 10 facings across Medium, Toastie & Super Toastie

You may have heard others referring to facings as a key metric here. This is a key part of shelf space and refers to how many products in your SKU face the customer.

As with the ‘P’ from last week’s blog, Product, today’s ‘P’, Placement also assumes availability of the brand/SKUs in store. Here, we are not just referring to presence but also having enough stock in store to meet consumer demand.

If you’d like to get more information on any of these KPIs, discuss this in more detail or understand how availability can be solved for, especially within the context of today’s fast changing world, email me on veena@salesbeat.co

Product – availability & distribution

Today’s blog is about Product and all the factors associated with it.

The product (brand or SKU) placed in a store is extremely important. Even in the case of large retailers like Walmart or Tesco, not all stores are the same. Each store in a retail chain has a different mix of consumer demographics, dependent on location.

Size of store/store format is a factor that influences this ‘P’.  Another factor is packaging and artwork.

For example, a convenience occasion focussed brand/brand extension with high sustainability credentials aimed at the AB demographic would be far better off launching in stores in & around the city than anywhere else in London. 

Another example is stocking only single serve or sharing size SKUs in city convenience stores and stocking sharing, value added and multipacks in supermarket/hypermarket formats. This is dictated by space constraints in store and also at the homes of consumers.

A convenience store format is more focussed on stocking core products than in product extensions
Hypermarkets will be focussed on maximising sales top get the highest ROI and so will stock a large assortment of SKUs

Retailers typically divide their products into three categories:  

  • Core items that customers always expect you to have in stock and ready for them to buy;
  • Line extensions which are different options to the core product; 
  • Related products or services that make the initial purchase work better.

On-shelf availability is a key factor for this ‘P’. The consumer should be able to find the brand/SKU they want, whenever they want it. This relates directly to the ‘out of sight, out of mind’ principle. 

If a consumer does not find the brand/SKU they want, they will look for a different brand or even a substitute. This leads directly to not just a loss of sale, but also to a share loss. 

In the lead up to next week’s blog on the 2nd P, Place, we would be remiss in not mentioning new product launches. New brand launches or product extensions should be in stores where the target consumer is most likely to buy or sample it. These new SKUs or brands should be in high visibility areas in store and if relevant, with complementary products. Eg. new dip brands or flavours placed next to chips/crisps or in the snacking section. More on this next week!

If you’d like to learn more about the first P, Product and getting your KPIs to a healthy place, email us on veena@salesbeat.co.