Proposition – A ‘P’ added by Unilever’s framework

A proposition emphasises the USP of any product. Crafting a simple, focused and clear winning proposition can be complex and time taking.

A framework to derive your brand’s USP

Consequently, marketers and sales teams strive to extract learnings from the past, and drive bigger and better innovations for the future. A successfully crafted proposition creates an imprint in the target consumers’ minds to the point that they think of the brand synonymously with the product. Example: The brand, Vaseline and the product, petrolatum, Sharpies and permanent markers, Band-Aid and adhesive bandages…

Chapstick and lip balm

The USP may be product purity, awards associated with the product, value for money, a cause that it stands for etc.

For some brands, it involves creating a narrative around the product. Its aim could be to educate the shopper, to awaken an emotional response or a call to support a mission driven cause. Eg: Tony’s Chocolonely, whose mission is a 100% slave free chocolate.

Most companies focus such propositions on their star brands and SKUs. This way, the benefits of customer loyalty and sales could even extend to different, newer versions of the same product resulting in a sales boost of the overall product category.

How do you communicate your value proposition?

These days, the proposition is most commonly communicated on e-commerce sites, whether that is the retailer’s site or one that is direct to consumer.

In store, proposition is often communication through shelf barkers/talkers. Gondola end displays are used as well. 

Stocking hero SKUs near or at check-out counters is another way to augment brand visibility and communicate proposition.

Crafting succesful propositions

So what are the elements of great value propositions? We have 5 for you to consider.

  1. The rule of 3: Propositions that sell more than three benefits often fail as consumers and shoppers fail to see the key benefit. Also, consumers/shoppers start questioning the assertions of the proposition and consequently trust the brand less.
  2. Emotional or mission driven appeal vs functional benefits: Focussing on a brand’s functional benefits commoditises the product and makes it easier for consumers to switch brands. To maintain share and to encourage more consumers to buy your brand, focus on the emotional or mission driven aspects of the proposition. Mission driven brands have been shown to retain market share even in the most challenging of circumstances.
  3. Include consumer and shopper benefits: Often times, the shopper is different from the consumer. For example, when parents go shopping for breakfast cereal for their children or when a woman buys shaving products for her male partner or when a man buys feminine care products for his female partner. It is key for the proposition to appeal as much to the shopper as the consumer.
  4. Sustainable differentiation: Ensure that your proposition remains relevant for the long term as well as the short. If your point of differentiation focusses on the problems of today and is not expected to be relevant beyond a certain period, your brand is likely to lose appeal beyond that period.
  5. The value proposition for your customers (for those brands that are not just D2C): The above 4 elements are often well thought through as a part of the organisation’s marketing and innovation process. However the value proposition for the customer is less thought through and often purely financial in nature. An effective customer value proposition combines both financial and emotional considerations and is often laid out when the customer is evaluating a brand or a SKU for listing at stores.

If you’d like to learn more about crafting successful value propositions for your brands, email me on veena@salesbeat.co

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.

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.

A timely example of VUCA

A ~1min video on how to sell more effectively in these times

This week started off hot for those of us in the UK, for March that is. Monday temperatures reached 22degrees and Tuesday was the warmest day in March that UK has seen in 53 years (Sky News) at 24 degrees.

Would you have expected this for March in the UK?

As weather influences beverage sales quite significantly, I decided to check out a few supermarkets on Monday to see how they were doing. Monday was also the day lockdowns eased.

I saw more people at the beer & wine section in the supermarket than I have seen in a while now! When asked about whether they were buying for Easter or for immediate consumption, all of them said that they were buying for immediate consumption. Some of them were going to the park, so they had some fruit and snacks as well and a few were buying for dinner on their patio at home.

Rosés and White wines are already going out of stock/out of stock in the chilled section

As you can see, brands and products were already starting to go out of stock and some already were. Tuesday was also a warm day and we expect that availability of brands would have decreased even more by end of day Tuesday. The manager of a wine store that I walked into, said that she sold more White wines, Rose wines & Sparkling wine/Champagne on a Monday than ever before.

We expect quite a few brands and products would have gone out of stock by end of day Tuesday and there was quite a bit of revenue ‘left on the table’.

This is a classic example of VUCA, when demand for Beer, Wines, Water, non-alcoholic beverages & ready to drink beverages increased significantly when compared to March in previous years.

Applying the framework we described in our previous blog, sales teams for FMCG companies should be monitoring weather forecasts and playing close attention to variances from ‘normal’ weather for the month so they can adjust sales volumes accordingly.

In the absence of a sales prediction model, optimal volume levels will be a matter of trial and error. But paying attention to these fluctuations would go a long way toward preventing the significant loss of sales we see now.

If you’d like to discuss how a sales prediction model can help or understand what factors influence each FMCG category, feel free to email me on veena@salesbeat.co

So what does the future look like?

So what is the future of retail as it pertains to groceries?

We believe that brick & mortar stores, whether they are supermarkets, convenience stores or even open air markets, are here to stay. Online grocery stores will take more share from brick & mortar stores. However, they will co-exist. 

Total grocery revenues will be almost evenly split between online and brick & mortar stores. Customers will use grocery stores to explore and discover new brands, and buy fresh groceries and meat. 

Companies will use brick and mortar presence to signal brand credibility to customers and to encourage trial. Just like D2C brands are now building their brand identity selling directly to consumers, there will come a time, when brand identity is built at brick & mortar retailers and consumers will look to establish brand credibility at stores.

Deliveries are becoming less of a pain point as an increasing number of stores offer delivery service to customers once they buy their groceries at stores. There will be fewer brick and mortar grocery stores in the future as their revenues will not justify the rent on the space. 

Additionally, there will be fewer stores in prime locations, further lowering the rent paid annually by these retailers. The reason they currently have stores in prime locations is for convenience (of their customers). But online shopping is likely to be the more convenient choice of the future, whether it gets delivered or whether it is picked up from a convenient location. This would leave a higher margin for retailers than they currently have.

The winners in this space will be:

  • the ones who can get delivery of fresh produce right. The greatest concern/barrier for customers buying online is fresh produce. Online grocery stores and brick & mortar stores that have an online presence should build a reputation for delivering high quality produce consistently to encourage repeat purchases and new customer sign ups
  • the stores that can offer a ‘pick-up at store’ option for those who shopped online or the online stores (like Amazon fresh) that offer deliveries within an hour
  • the brick & mortar stores that can offer busy households a painless shopping experience without queues, like Amazon Go. This combines the convenience of buying online with the experience of buying at stores
  • the ones who have an online presence combined with brick & mortar stores

Watch out for this space next week to understand what led us to these conclusions!

The Future of Retail as we see it at Salesbeat

A month or so ago, I sent out a survey to understand the future of grocery retail across the globe. We got more than 300 responses from 25 countries and across ages ranging from 20 until 70+. Super appreciate everyone who replied. Thank you!

Everyone talks about how online buying is on the rise and that one day, everyone will be buying their groceries online. We wanted to get a better understanding of why everyone saw online grocery buying as the future and whether all countries around the globe felt the same way, so we could set our users up for success.

We intended to leave the survey open for just a week initially, but seeing some of the initial responses, which were very contrary to expectations, we decided to leave it open for response for a couple more weeks, which turned into a month.

So what did we see? We’ll be posting 3 blogs about the results:

  • The first will be on what is happening now
  • The second on what we see as the future from the results we got
  • The third will go into why we came to that conclusion

71% of our respondents buy their groceries from Supermarkets. Just 2.9% of our respondents buy their groceries online. The remainder 26% said they shopped both online and in stores regularly. 

Of the 2.9% who responded that they only shopped for groceries online, the bulk of respondents were in the 50-70 age range. We were expecting these respondents to be much younger – Gen Z respondents to be specific. Or even late millennial respondents.

But when we dug into why we saw these results they made sense. 

It turns out that most of Gen Z enjoy the grocery shopping experience. They prefer going into stores to get what they want. As the current working culture turns more to remote working and flexible working, it does indeed make time for the Gen Z respondent to go into stores to shop on a weekly basis. Also, they feel they need to touch, feel and see the actual product on shelf. 

Most millennials have a preference for shopping at stores and topping up online. 

The previous generations, in contrast, had far less time because of their commute into work and due to the squeeze on time, you see more respondents who shop both online and at stores. Online for convenience and stores when they had time. 

Also, we found that respondents in the 50-70 age range found it far more convenient to buy mostly online due to mobility issues. 

More to come on this next week!

Top reasons why Food & beverage start-ups and NPDs fail (continued)

So last week we spoke about what could go wrong with new product launches and we are continuing that theme this week. You’d be surprised how many things can trip you up close to launch date, after launch or even well after launch.

  1. Bad customer experiences: Your customer has been very specific about the configuration of the cases and pallets of your brand. But unfortunately, your manufacturer has not heeded instructions and delivered your first order the way they have always done things, which is quite at odds with your customer requirements. They do this a second time. They get this sorted out the third time, but by then your customer has made a note of this. The next time something goes wrong, they delist you. 
  1. Bad consumer experiences: Your first two weeks of launch have gone great. Your brand has been flying off the shelves. You know the third week may not be great, as your first two weeks have gone splendidly. Your fourth week should go well. But it doesn’t. Your sales drops. Your fifth week sees almost no sales and in the sixth week, the category manager tells you that unless your sales rebound, they are considering delisting your brand in favour of a competitors. So what went wrong? Your brand obviously fills a gap, but consumers just did not come back to buy more. It became difficult to drive trial too. Did you look at whether you were getting bad word of mouth? Did you get feedback from any of your consumers from the first two week? Anything can go viral these days and all you need is one or two people who dislike the product to start a social media campaign. Maybe someone got a bad batch or just did not like the taste.
  1. Weather and seasonality: ‘The weather, really?’ you are thinking. Yes, the weather and the season play a very important role in the success of seasonal or weather dependent foods. For example, the best time to launch an ice-cream or frozen dessert brand is during the summer, when your consumers will be open to trying new brands and products. During winter, if a consumer is buying ice cream, he/she already has a favourite and she/he’ll go for that brand/flavour. The same goes for beer in winter and mulled wine, mince pies and winter soups in wummer. Any of you who launched your ice cream brand during unseasonably cold summers will know what I am talking about!

Top reasons why Food & beverage start-ups and NPDs fail

So the stars have aligned and you are ready to launch that new food brand that you’ve been developing for the last 6 months. You have the funding, you have found the right manufacturer with the right licenses and you have a national listing. What could possibly go wrong?

Congratulations, you have a national listing!
  1. Consumers don’t want it: Now you are thinking about the sampling sessions you/your agency held when everyone loved your product and brand. Well, it turns out that unless the product is that bad, your sample group will tell you what you want to hear. After all, you are paying them to be part of the group and they feel obligated to give you the answers you want to hear. Consider speaking to random people at your corner grocers outside of their stores to get honest feedback about your product. Or speak to your kids, they’ll be honest!
  1. Cultural nuances: Brand names, packaging and the right ingredients are so critical to the success of your food product. They can make or break your brand if not done right. Did you get enough feedback from your target consumers in the target market? Did you check whether the ingredients raise any red flags for your consumer group? What about the brand name? Does your brand name mean anything different to your target consumers than to you? More on this subject in a later post.
  1. Pricing is all wrong for the customer segment: Your brand/product is targeting a very specific segment of consumers. It could either be too expensive for the consumer to buy or too cheap for the target segment. Keep in mind that for certain products, price also acts as a signal for quality. So when you work up the pricing, take into account what your consumers should be paying for it. Do your homework and look into what competition is doing and what similar products or even complementary products are priced at for those consumer segments. Then work back the numbers to your selling price to the customer, taking into account retailer/customer margin, warehousing costs, logistics costs and any additional costs the retailer/customer needs to bear. 

Stay tuned for more next week!