In the consumer goods sector, only one out of five brands wins
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In an increasingly competitive consumer packaged goods market, where consumers experiment with several brands in any given category, the failure rate for brands is high, with only one in five brands winning.
In India, of the top 412 brands across 37 categories like soap, shampoo, detergents, oral care, hair oil, beverages, biscuits and deodorants, 330 brands have lost share and only 82 have gained share or won in the three years between 2012 and 2015, said a new study by consulting firm Bain and Co.
As such, leading companies like Britannia Industries Ltd and ITC Ltd have only one brand each on the list, whereas Hindustan Unilever Ltd’s deodorant brand Axe among others was missing, and even category leaders like Colgate have lost market share due to competition from Patanjali Ayurved Ltd in the recent past.
The study avoids conventional methods of prioritizing customer loyalty over household penetration, as consumers are found to have little or no loyalty. It also sees no merit in segmenting and targeting of consumers and instead favours pursuing a strategy that focuses on broad and constant recruitment of consumers. Penetration is defined as a household that has bought your brand at least once in the last 12 months.
“It’s no longer about segmenting, loyalty, targeting and differentiation. Brand marketers should instead drive penetration and constant recruitment,” said Joydeep Bhattacharya, partner, Bain and Co. India Pvt. Ltd, in Delhi in an interaction with Mint, while explaining that there is no real predictable understanding of why consumers actually buy and hence brands would do better if they focused on becoming a part of the consumers’ consideration set, as market share gains are linked to how brands have performed on penetration and not on loyalty.
Across categories, the primary difference between brands that are able to grow and not grow is the ability to drive penetration rather than repeat purchase. This is true for even the most-penetrated brands like Lifebuoy and Clinic in highly penetrated categories of soap and shampoo. “Besides three brands, we have seen that penetration is at the 30-40% level for most large brands,” said Shyam Unnikrishnan, manager and member of Bain India Strategy and Consumer Products and Retail practices in Delhi while explaining that there is enough headroom for brands to grow their penetration.
Brand winners drive penetration by investing behind visibility—being present in more outlets and channels of sale and creating and building distinctive assets which help consumer recall and remember the brand at the point of sale. For instance, the blue Nivea tin.
The study is based on evidence-based marketing that is gaining popularity over the last 5-10 years and comes from the Australian Ehrenberg-Bass Institute for Marketing Science, summarized by Professor Byron Sharp, director of the Institute, in his book How Brands Grow. This is the first time the company has analysed consumer behaviour in India. A similar study has been carried out in markets like China, Indonesia, Europe and the US annually for the last four years. “The result has been similar across all these countries,” said Bhattacharya.
The study looks at data of 400 brands which are the top 10-15 brands across 37 consumer packaged goods categories and is based in part on data reported by Kantar, a market research company, through its Indian Household Panel for the last three years. It covers close to 80,000 households, of which 15,000 are rural households.