Question

Price cuts have enabled FMCG companies like HLL and P & G to increase the sales volume. The sale of major detergent brands have increased by 15-17 percent. Analysts in fact expect Surf Excel to be a success story for HLL. The company expects more sale from the brand this year.

Launching sachets and positioning the brand in affordable category was necessitated by a number of highly competitive smaller brands in the market like Henko, Nirma and Ghari detergents. Friendly wash by many other smaller brands have challenged the giants by offering prices which attracted the value conscious Indian consumer. In fact unbranded players are offering packs which are twice the size of a branded product with similar or better quality at a cheaper price. Very clearly FMCG majors ham to either maintain the plethora of freebees to push the brand or just simply cut prices. 

The manufacturers attribute the price drops to internal cost efficiencies especially with the supply chain. Analysts say the FMCG companies will have to drop prices further to get the right value equation in the market. There is no other way to grow. The companies have tried innovations and relaunch. The fact is, there is a cut in the price and they cannot afford to overprice their product. The companies are just going to do what Nestle did sometime back to get the price equation right.

(a) How did sales volume of detergents increase? 

(b) In view of the fact that unbranded products have put up a challenge to branded items, do you think branding is useless? Give reasons. 

(c) In addition to price cuts what other measures should FMCG firms take to grow in future.

Answer 1

(a) Sales volume of detergent increase by the following ways: 

The various types of incentives used for this purpose are: 

percent off, special discount, free gifts, free extra quantity in the pack, three for two offer (take three, pay for two), coupons, contests etc. Making immediate sales clearing over-due stocks, attracting new buyers, launching a new product quickly, catching impulse buyers (who buy on the spur of moment without planning) and meeting competition successfully are the major merits of sales promotion. Many brands in the market like Henko, Nirma and Ghari detergents have launched sechets which also increase the sales volume of detergent Advertising of detergents also increases the sales volume. It creates a positive impact on the consumer towards the product. 

(b) No branding is not useless. Branding helps the consumers to identify and recognise the product. It simplifies, therefore purchase and sale and reduces the time and efforts of the consumers. 

Branding acts as a market identity: A brand helps position a company’s product offering in terms of price level, quality, service, prestige and other factors that are important to buyers in the firm’s target market. Consumers often use brand image as a proxy for quality and dependability, particularly if they find it difficult to evaluate the product because of its newness or complexity. Brand identity may itself increase margins and profits by enhancing the perception of quality. 

(c) To grow in future FMCG should take care of: 

1. The quality of the product. Products should be invariably packed which prevents adulteration and helps to preserve the quality of the product. 

2. Advertising of a particular product should be there which increases the sales volume. It creates a positive impact on the consumer towards that product. 

3. Technological Advancement should be there time to time. Companies should invest in research and development aimed at advances in technology and should make regular improvement at all stages of life cycle. 

4. Dynamic: One should follow the dynamic techniques in marketing which can be adopted according to the tastes and preferences of the consumers.