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Price cuts score over freebies for FMCGs

Price cuts score over freebies for FMCGs

Author | Source: The Economic Times | Saturday, Oct 07,2006 9:56 AM

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Price cuts score over freebies for FMCGs

Freebies, bonus packs and nonprice promotions do not lure the customers the way price-off offers do. To put it simply, the customer prefers a price cut type of sales promotion on a national brand with an immediate incentive and awareness created at the point of purchase, says a study by an IIM-A professor.

When organised retailing is leading to increased competition among the companies in the FMCG category, the study states that the marketers need to be creative to attract more customers.

“Price-off offers find more takers than any other special offers. Moreover, all the players offer similar schemes and promote larger pack sizes. So the managers need to be more creative to create an impact, else the consumers tend to be more deal-prone and drift from one promoted brand to another,” says Preeta Vyas, a professor of marketing at the Indian Institute of Management-Ahmedabad (IIM-A).

Vahid Ravji of Adani Retail agrees. “A well-planned promotion technique that offers utility manages to pull the customers. But they are no more brand loyal while buying products in FMCG category and also prefer local brands from a strong regional player.”

As against the normal practice of offering a bonus pack in food categories, the study found that the bonus pack was offered more in the non-food category products.

“Contrary to expectations, in the food category, free gift offers were found to be more frequently used than bonus packs. Normally, bonus packs are offered more in food category as it is believed that the consumers tend to finish the additional stock by consuming more,” Ms Vyas said.

The study finds that in the health drink category, free gifts that appeal to children, like tattoos, compass box, lunch box, toys and others, were given as they were the end users. In the case of toothpaste, 200 gm pack size had the highest frequency, indicating that the family pack size was promoted the most to encourage its use by the entire family.

In the case of toilet soap, 75 gm pack size was promoted the most to encourage trial and brand switching as well as to attract deal-prone consumers.

“The promotional offers do not create much of an impact when it comes to products in the personal care category. For instance, skin care products such as soap and creams. Customers tend to give more priority to the brand value than the offers,” says Anand Adukia, regional manager (operations), Pantaloon Retail India.

The study adds that medium to large pack size is promoted more often in all other categories except the toilet soap category, indicating a tendency to load the consumer and thereby ward off competition temporarily.

Even high market share brands seem to offer a high level of incentives like their counterparts both in the food and the non-food category, trying hard to reward loyal users and encourage them to stockpile whereas low market share brands may be encouraging switching by offering sizeable incentives.

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