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‘Increase Focus On Household Penetration’
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A rebound in gross domestic product and more money in Indian consumers’ pockets indicates acche din ahead for consumer-product companies after the 2013 annus horribilis.
To capture growth as the economy picks up, many consumer-product companies will rely on the conventional marketing approach of focusing on select groups of consumers by investing heavily to convert them into loyal users who buy larger quantities over time.
But the best way brands can sustainably grow is by increasing the number of buyers through increased household penetration of brands (defined as the percentage of households in a market buying a particular brand in a given year), than through higher repurchase rates or share of wallet.
The finding came from Bain & Company, which analysed buying habits of nearly one lakh shoppers across the globe. From our experience, loyalty across categories doesn’t vary significantly over time, but household penetration does. Penetration is a leaky bucket, and even top brands can experience churn rates of nearly 50 per cent. That’s why winners continually invest in acquiring more new consumers every year than they lose — through increasing household penetration.
How can brands do this?
Building penetration depends on building brand consideration. The steady path for earning consideration and penetration requires investment in three key brand assets: memory structures, product portfolios and in-store assets.
Memory structures: This means anchoring a brand in consumers’ memories, using the full range of touchpoints. Winning companies broadcast a brand’s message wide enough to be heard by a large number of consumers. To get into consumers’ heads — and stay there — they articulate distinct and memorable messages. Hair care brand Parachute has been using similar visual cues for decades on hair nourishment, e.g., scalp massage or champi for its core product.
Too many brands and stock keeping units (SKU) can result in ineffective advertising, confusion among shoppers and other woes that erode penetration. Surprisingly, fewer innovations around products/ SKU variants can result in increased penetration. SKUs fail at a high rate and distract marketing and commercial teams from supporting core SKUs.
Hero SKUs generate higher volumes increasing scale and margins, thereby enabling investment to fuel growth. Winners constantly invest in their hero SKUs, with every new product meeting a high threshold for different consideration sets or consumption occasions, thus contributing to increased penetration. Consider Godrej’s latest addition to its successful Good Knight franchise, Xpress System, which, with its promise of relief from mosquitoes in just nine minutes, offers a strongly differentiated proposition.
Having targeted the key SKUs, it’s critical to adequately invest to activate them at the point-of-sale and ensure they are available at the right place on the shelf. For instance, Hindustan Unilever understood that a large percentage of purchase decisions are made in-store. Therefore, it focused on getting its in-store presence right through its Perfect Stores programme, which has expanded to at least a million stores nationwide.
(This story was published in BW | Businessworld Issue Dated 20-10-2014)