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[F95]Fast Moving Consumer Goods

by Laurus Nobilis, Lau

During my career I had the opportunity to work for non-profit as well as for profit-oriented company. I must say that the difference is huge. Non-profit organization does not have to earn the budget. Their goal is to spend it. Of course, there are some rules and guidelines that should be respected. In such organization reporting and expenditure justification to donors is crucial part, in order to make an organization eligible for future funding.

On the other side, working in a profit oriented is something completely different. Still you have the funding. But in this case your stakeholder is also a shareholder, who expect profitable operation, with certain return on investment. Further more, goal of every successful company is to have continuous growth in all directions; expanding the portfolio, market share, increasing of sales, revenue and profit, while driving the business at the optimal cost.

But how long the growth can be continuous? Are there any limitations for market need? Of course that there are limitations, but they are imaginary, since the market demand is not something that is firm. It changes, as it evolves through time. But also it is changed by the influence of supplier, i.e. Company is creating a new demand of their potential consumer, by offering them a new and better offer of products and services. This offer is done through development of a new products and services, as well of suitable above the line campaign.

On the other hand below the line campaign is something that is also very important for sustainable growth. Below the line marketing is very important, especially the companies that deal primarily with Fast Moving Consumer Goods ( FMCG ). While capital expenditures as real estates or vehicles are on the one side of demand scale, FMCG commodities like food, soft drinks, alcohol drinks, cosmetics, etc are on the other side.

FMCG products are subject of planned purchase, but are very often subject of impulse purchase.
Impulse for purchase can be triggered by clever positioning and merchandising of product within the shopping area. There are several basic rules for successful positioning that will initiate the shopping need of consumers, even when they didn't even thought about buying some item.

* Corporate Block is the section on shelf or separate rack that is dedicated for product of one manufacturer or brands owner. Corporate block gives strength from brands synergy, it creates visual impact and increase brands value. Shopper is more likely to be attracted by impressive, well arranged section dedicated to one producer, than by the bunch of products scattered around on different shelves.

* Positioning Before Competition is very important. Who is the winner on 100 m race? That is the one who first gets to the finish, even if the second one is only 0,01 sec behind. This is why is important to have position before competition.

* Eye Level Rule say that whatever is in the eye level and slightly below is at the reach of the hand. What ever is at the reach of the hand is likely to be grabbed. People like easy and effortless shopping, without stretching up or leaning down. This is why you should avoid too low or to high positioning.

* Multiple Shopping Points; more selling points means more shopping opportunities. For small size outlets applies triangle rule, while for the large outlets quadrant rule is more applicable

* Triangle Rule says that the best positioning in the small outlet is capturing the golden triangle - hot spots: entrance, the most frequent area and the cashier. This is obvious, since, whoever comes to the outlets is coming through all mentioned spots, and therefore purchasing possibility is the highest from perspective of horizontal positioning.

* Quadrant Rule says that product positioning is recommended in all zones, but their strength from entrance to the cashier is in decreasing trend. Simply, at the entrance the shopper's basket is empty while wallet is full, shopper is eager to shop. While moving to the exit the basket becomes full, money already allocated and the shopper is less enthusiastic, since he is starting to think about the rest of a day, rather than about shopping. Therefore early positioning is important for impulse purchase based products.

* Merchandising is the process of effective arranging of product at the selling point. It covers activities like stocking up, arranging according the corporate merchandising standards, placing the price tags, cleaning and rotating products according the expiry date ( FEFO ).

* X-Merchandising is positioning the product next to the other product that is complementary to your products. Examples: soft drinks next to snacks, or spices next to the meat.

These are basics of successful positioning in the shopping zone. This should be accompanied with an optimal inventory stock, changes in portfolio, smart price policy and fresh advertising material. If the outlet is worthwhile investing, then special promotions, presence of sales animators, surprises for shoppers and other add-ons can be used.

Impulse purchase is the moment that must be used in the FMCG industry. Just to be available is not enough. It is necessary to be active and visible at same time. There are many similar products that can easily substitute your. Sometimes only the small difference in position can make the judgment of shopper about which product to buy. For shopper that may not present a big difference. But what about your product?

Put the average company into a high-growth situation (for its industry) for the first time, and you'll soon see overoptimism sprouting everywhere. In the aftermath of the Arab oil embargo and the subsequent rise in the cost of energy, Americans began using all sorts of new ways to reduce their energy use and costs.

One idea for heating your home was to cut your own wood to burn in wood stoves and fireplaces. Soon, every wooded neighborhood was abuzz with the sound of busy chain saws.

Prior to the oil shortage, chain saws had been avoided like the plague by suburbanites who didn't want to be confused with the woodcutters and gardeners they hired. Now, you couldn't stand tall unless you could buzz through trees and limbs with the best of them.

McCulloch was the leading chain saw manufacturer at the time. Black & Decker, the home power-tool giant, quickly purchased McCulloch at a hefty price to be able to benefit from the seemingly limitless potential of chain saws.

Soon, Black & Decker was optimistically describing itself as a company about to be transformed by its chain saw business. Capacity could not be expanded fast enough. And business did, indeed, take off . . . for a while.

Within a few years, though, everyone who thought they wanted or needed a chain saw had one. Many people who took to the backyard woods found that cutting down trees and making smaller pieces out of the logs with a small chain saw was hard, dangerous work repaying little for the time and effort. The person using the chain saw also had to cope with a tremendous racket, obnoxious fumes from a gas engine, and an irritating need to keep sharpening the small chain-saw blade.

Many of these nouveau woodspeople didn't know that wood has to be dried and aged before it will burn properly. So they often experienced smoky, smoldering fires that left the whole house smelling terrible and provided little heat.

Wood is a poor way to heat most houses. The fireplace sucks the heat from the house up through the chimney, leaving the rest of the house colder.

A wood stove is great if you are at exactly the right distance from it, but too hot or too cold otherwise. And it's a real drag to have to constantly haul wood to feed the fires and clean out the ashes.

Pretty soon, suburbanites found that they liked warm clothes better than wood fires as a way to save money. Used chain saws began to be sold at garage sales for a few dollars. Moreover, even those who loved cutting with their chain saws usually had no use for more than one.

Black & Decker basked in the glow of its then remarkable record of growing earnings from quarter to quarter at 15 percent per year. That past success led them to see chain saws as being the same as their bread-and-butter power tools.

They missed some important differences. Power tools are inexpensive, and if you add a new feature, many householders will buy a new one to get the benefit of the feature. Chain saws are much more expensive, and few people were willing to replace them. That's where the irresistible forces took hold.

Entranced by the rising sales numbers, chain saw competitors proliferated and the market was jammed with products. Then chain saw sales dived.

Black & Decker reversed course, and dumped its chain saw business. A lot of money went up in smoke in the process. Overoptimism was costly in this case because the irresistible forces driving chain saw sales were not understood by Black & Decker before it entered the business.

Article Source : Importance Of Strategic Planning

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Both Laurus Nobilis & Donald Mitchell are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Laurus Nobilis has sinced written about articles on various topics from Finances, Careers and Job Hunting and Strategic Planning. Laurus Nobilis has 11 years of experience in FMCG business. In 2007 he has started the web site dedicated to. Laurus Nobilis's top article generates over 12100 views. to your Favourites.

Donald Mitchell has sinced written about articles on various topics from . Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantag. Donald Mitchell's top article . to your Favourites.