FMCG Brands Need to Stand Out In Order to be Outstanding
By Brian Moore, Global Retail Consultant and CEO of EMR-NAMNEWS

In a crowded, me-too market, being different is no longer about having a single unique selling point-of-difference, but is more about presenting a composite package that optimises relative appeal to a demanding target audience.

Nowadays a brand’s relative appeal has to fight for the attention of an increasingly savvy consumer already distracted more by a need to survive than spending valuable time evaluating competing offerings…

Meanwhile, the multiple retailers are already reaching saturation point in terms of food provision and now need the addition of non-foods and services in order to sustain growth.  In the process, the relative novelty of these new categories in a ‘grocery’ environment can make traditional FMCG brands less exciting to a buyer trying to make a name on a rapidly changing retail career-path…

Apart from competing with other brands in the category, a brand now has to stand comparison with private label alternatives that are striving for 50% share of categories, and can provide better functional performance, have more facings, are cross-subsidised by brands and sell at prices that may be equal to, or even lower than equivalent offerings in the category.

Meanwhile, the multiples’ insatiable appetite for trade funding can prevent adequate above-the-line investment in brand equity, with the additional complication that traditional broadcast media are being fragmented and crowded out by increasingly effective one-to-one social media.

In this challenging climate, effective differentiation is really about being realistically optimistic in identifying real consumer need-priorities in an unprecedented market environment, objectively comparing the brand’s ability to meet that need vs. alternative brands and private label equivalents within a retailer’s version of the category.  

Moreover, with buyer-churn jeopardising continuity and prioritising the short term, any attempts at implementing medium and longer term strategies can seem unrealistic to a buyer due to transfer to an unrelated category within months.

In making the brand more appealing to the retailer, a supplier has to relate consumer brand profile to shop-traffic profile, translate consumption into shopping behaviour, and optimise a mix of shopper and consumer insights.  This brand-appeal has to stand objective comparison with equivalent brand and private label offerings in the eyes of a buyer that uses brands to draw people to the store, to be confronted in the aisle by switch-sell private label equivalents.

In other words, to make a difference, a brand’s competitive appeal has to represent a demonstrable commercial advantage to all stakeholders.

This means understanding and being able to demonstrate the financial impact of the brand on the retailer’s profitability.  Apart from the obvious effect of return on retail sales, where any brand margin in excess of a retailer’s average 25% is making a positive contribution to retail profitability, the addition of trade funding up to 15% of a supplier’s sales, and deductions running at anything up to 7% of a retailer’s purchases, all combine in increasing the brand’s direct value to a retailer’s profitability.

If one then adds the brand’s role in stimulating switch sales of private label, together with the provision of unaudited category advice, it can be seen why compliance has to be an imperative for brand owners...

Finally, the advent of fair-share Joint Business Plans will crystalise this recognition of mutual value to each party.  As currently practiced, some suppliers can be excused from suspecting that JBPs show a distinct disconnect between genuine business building to the advantage of each partner, and their perceived use as excuses for additional demands by some buyers…

For retailers to achieve this level of committed partnership, it is crucial that a JBP be implemented as originally intended, namely the setting of “SMART” goals, clarity on the “what” (i.e. KPIs) but flexible on the “How”, Senior Management endorsement and visible support, with the consumer-shopper as King, incorporating an output-focused planning process well grounded in fair share partnership.

Only then will the advantages of outstanding brands benefit all the stakeholders….

For KamTips on 'Making a Brand Stand Out', see NamNews - March 2011

Date article published: March 2011