FMCG - Business issues
FMCG shares many of the challenges facing the retail sector.
Principally, working out how to sell to consumers who are finding genuine difficulty in making ends meet.
As The Economist recently reported: “Basic consumer goods were long assumed to be more or less recession-proof. Shoppers may not be able to afford Dior dresses or Cartier watches, went the argument, but they still need loo paper and detergent. Yet people are finding ways to save money even on daily necessities. They are shopping less and with more purpose. Some people deliberately pick up a basket rather than collect a trolley in supermarkets, to prevent themselves from buying too much. Some buy smaller packets, which are cheaper, or huge ones, which are better value. Many make do without air fresheners, hair conditioner and other fripperies once deemed essential. Many scour the internet for special deals1.”
This threat to revenue and margins is exacerbated by volatile commodity and fuel costs.
In addition, consumers increasingly expect multi-channel access to FMCG brands, driving a need for companies to spend on technology and climb a steep learning curve to understand how new marketing methods build on customer engagement.
It is in this context that the growth of digital media in general and social networks in particular for the marketing of FMCG brands is both impressive and instructive.
The Internet Advertising Bureau (IABUK) reported in October 2011 that UK online ad spend had soared by 13.5% fuelled by a surge in FMCG advertising and a triple-digit increase in online video2.
These remarkable figures are given further context by a report in the FT which stated: “Display advertising was the best performer within the sector, with industry experts saying that buyers in the fast-moving consumer goods (FMCG) market had discovered that video advertising on the internet, particularly through social media websites, could be a cost-effective way of reaching consumers3.”
The shift to these media illustrates a new emphasis on customer engagement: by providing content that consumers choose to share, FMCG brands are earning the right to word of mouth advertising (always the most effective kind) amplified on a huge scale.
Just like telecommunications companies, owning the customer relationship has never been more critical for today’s FMCG organisations because their customers have never had so much choice or more reason for switching brands in search of savings.
Focussing on this strategic imperative can provide a prompt for FMCG companies to outsource business processing and IT services that add cost to the business and distract it from its core purpose.
