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The ART Of FMCG part two Ahmed Alaa Executive MBA at Alexandria University [email protected]

The Art Of FMCG ( part Two )

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Page 1: The Art Of FMCG ( part Two )

The ART Of

FMCG part two

Ahmed Alaa

Executive MBA at Alexandria University

[email protected]

Page 2: The Art Of FMCG ( part Two )

To all my dear friends ,, brothers ,,

colleagues ,, managers ,, team who

support me , motivate me ,, gave me the

true beloved advice ... Who learn me to

be an ambitious and curious to learn ,,

search for the goals and hungry to know

a lot about all the fields in my life ....

Through more than 8 years of working

in FMCG i learned that the success and

progress didn't come by luck but by the

hard work and challenge your self and

ur obstacles ...... The more u work and

learn ..... The more u can achieve your

targets .....Thank u .... I appreciate all of

ur efforts

First You must see this video

https://www.youtube.com/watch?v=mA

7ms-6wTeq

Page 3: The Art Of FMCG ( part Two )

Neuromarketing !

What is Neuromarketing? Neuromarketing aims to better understand the impact of marketing stimuli, by

observing and interpreting human emotions. The rationale behind

neuromarketing is that human decision making is not so much a conscious

process and the idea of the “homo economicus”, basis for the majority of

economic models around, is out dated. Instead, there is more and more prove

that the willingness to buy products and services is an emotional process

where the brain uses a lot of short cuts to accelerate the decision making

process.

Neuromarketing studies which emotions are relevant in human decision

making and uses this knowledge to make marketing more effective. The

knowledge is applied in product design, enhancing promotions and

advertising, pricing, store design and the improving the consumer experience

in a whole.

The field lies on the intersection of neuro economics, neuroscience, consumer

neuroscience and cognitive psychology.

Neuromarketing in different areas of marketing Neuromarketing in Market Research

Page 4: The Art Of FMCG ( part Two )

The vast majority of companies under the umbrella of neuromarketing are

active in the market research domain. These companies are experts in

evaluating commercials, ads, new products, or even measure audience

responses to media like broadcasting or movies. Neuromarketing in Product Design and Packaging

How a product looks, feels and functions is affecting the consumer experience in a

whole. Applying neuromarketing principles and neuromarketing testing can provide

insights on the emotional effects of design choices.

Neuromarketing in Pricing

Marketers know for a very long time, that price is an important variable in the success

of product and service. Knowledge on how price information is perceived and

processed is the added value of neuromarketing in this part of the marketing process.

Neuromarketing in Store Design

If every in-store decision was taken rationally, your weekly groceries would take up

to eight hours. The success of retailers depends on how consumers experience their

stores and services, how easy they can navigate and how products, price and

promotions are presented (and perceived). Shopper marketing can be enriched by real

time measurements of participants’ emotions in a lab or in-store situation. Retailers

can also apply the scientific principles of neuromarketing in their retail environments.

Neuromarketing in (Professional) Services

The (professional) service industry depends largely on human interactions. How

(B2B) consumer experience the quality of these services is basically an emotional

process. This explains why the best offer for the best price does not always win the

quote. Neuromarketing brings in some heuristics on how to act for a better quality. Or

for a better perceived quality, because most of the time the decision is taken before

the service is delivered.

Neuromarketing in Advertising

Neuromarketing applied to advertising uses neuromarketing principles to develop ads

and campaigns. While advertising is mainly a creative process, neuromarketing can

add value by a better understanding the effects of ads on human beings.

Neuromarketing is well developed in ad-testing on effectiveness. Predicting how well

it is related to likability and sales.

Neuromarketing is currently looking for ways to apply the knowledge around to apply

knowledge on ad effectiveness in an earlier stage of the creative process.

Neuromarketing in Consultancy Neuromarketing consultants use their knowledge

from consumer neuroscience and apply it in consultancy jobs in the different areas of

marketing. Neuromarketing in 'Business to Business' it is rather unusual to state that

purchase decisions in B2B environments are (at least partly) emotional. But these

Page 5: The Art Of FMCG ( part Two )

purchase decisions are made by the same brains as consumer decision making and it is

unlikely that the principles for consumer decision making suddenly disappear once

entering the office. Although there is currently not so much research around on this

topic, it is expected that neuromarketing in B2B will grow in this

Look in Video

https://www.youtube.com/watch?v=Ajg0ypDD7i0

Page 6: The Art Of FMCG ( part Two )

Trade marketing

Trade marketing is a discipline of marketing that relates to increasing the

demand at wholesaler, retailer, or distributor level rather than at the consumer

level. However, there is a need to continue with Brand Management strategies

to sustain the need at the consumer end. A shopper, who may be the consumer

him/herself, is the one who identifies and purchases a product from a retailer.

To ensure that a retailer promotes a company's product against competitors',

that company must market its product to the retailers as well. Trade marketing

might also include offering various tangible/intangible benefits to retailers. The

alignment of sales and marketing discipline to profitability can be another

explanation for trade marketing.

Introduction

76 percent of shopping decisions are now made at the trade or what marketing

practitioners refer to as "point-of-purchase" This new trend leads to the greater

importance of merchandising and shopper promotions than consumer directed

programs.

Page 7: The Art Of FMCG ( part Two )

Targets of trade marketing Distributor/Dealer

Distributor/Dealers are channel trade partners who act as a medium to ensure

stock delivery/availability for the consumer across the geographies. The role of

these entities is absolutely critical as they help in ensuring that the product is

widely distributed and available for the end consumer. The key benefit of these

entities is in ensuring that the distribution costs are lower for the manufacturer

and simultaneously the products are available for the end consumer. The

distributor and dealers operate on a base trade margin (factored in the cost of

the product by the manufacturer). Along with the base margin the trade

partners also get additional schemes/incentives which keep on varying from

time to time and product to product. The dealer could be a Retailer (selling to

end consumer directly), wholesaler (selling to other retailers primarily) or a

modern retailer (i.e. self-service stores like the carfour . panada etc. which are

into both the consumer retailing and wholesaling).

sales outlet

Sales outlet means a retailer. A retailer is also one of the customers in trade

marketing targets. Plans of trade marketing is targeting customers and

shoppers. Therefore, trade marketing should provide sales outlets with

customer & shopper-based value creation plans. Sales outlets (customers) are a

place that manufacturer can meet shoppers and consumers.

Methods of trade marketing

Basic method of trade marketing is focusing on sales fundamentals, such as

Distribution, Display, Promotion and Price. With data and knowledge of sales

fundamentals, trade marketing develops market strategy aligned with brand

strategy. In order to deliver sales volume and value, trade marketing support

sales forces with well-designed fundamental enhancement plans.

Current trends in trade marketing

Shopkeepers and retailers are becoming more and more profit margin

oriented.They try to extract maximum margin from a particular Company by

quoting higher margins being given a competitor company. Retailers demands

Page 8: The Art Of FMCG ( part Two )

higher display rent as well for the front section and appears to be a mess of the

same.

Shopper marketing

Shopper marketing may be included in trade marketing, therefore the shopper

being another target for trade marketing managers, while it can also be

considered as a separate discipline. Some of the activities to increase demand at

shopper level include setting the right planogram, price announcements such as

inserts, use of point of purchase materials, alternatively called promotional

material.

KPI Trade marketing

active customer base - distribution, sales outlets which buy

products of company

middle order from a sales outlet

share trade shelf

fullness on trade shelf

regular presence of must stock

right representation planograms

accommodation POS

additional space for products of company

lack of OOS

low level of commodity rests

knowledge about product in sales outlets

Page 9: The Art Of FMCG ( part Two )

Market share

Market share is the percentage of a market (defined in terms of either units or

revenue) accounted for by a specific entity. In a survey of nearly 200 senior marketing

managers, 67% responded that they found the "dollar market share" metric very

useful, while 61% found "unit market share" very useful

"Marketers need to be able to translate and incorporate sales targets into market share

because this will demonstrate whether forecasts are to be attained by growing with the

market or by capturing share from competitors. The latter will almost always be more

difficult to achieve. Market share is closely monitored for signs of change in the

competitive landscape, and it frequently drives strategic or tactical action

Increasing market share is one of the most important objectives of business. The main

advantage of using market share as a measure of business performance is that it is less

dependent upon macroenvironmental variables such as the state of the economy or

changes in tax policy. However, increasing market share may be dangerous for

makers of fungible hazardous products, particularly products sold into the United

Page 10: The Art Of FMCG ( part Two )

States market, where they may be subject to market share liability

Purpose

Market share is said to be a key indicator of market competitiveness—that is, how

well a firm is doing against its competitors. "This metric, supplemented by changes in

sales revenue, helps managers evaluate both primary and selective demand in their

market. That is, it enables them to judge not only total market growth or decline but

also trends in customers’ selections among competitors. Generally, sales growth

resulting from primary demand (total market growth) is less costly and more

profitable than that achieved by capturing share from competitors. Conversely, losses

in market share can signal serious long-term

problems that require strategic adjustments. Firms with market shares below a certain

level may not be viable. Similarly, within a firm’s product line, market share trends

for individual products are considered early indicators of future opportunities or

problems.

Research has also shown that market share is a desired asset among competing firms.

Experts, however, discourage making market share an objective and criterion upon

which to base economic policies. The aforementioned usage of market share as a basis

for gauging the performance of competing firms has fostered a system in which firms

make decisions with regard to their operation with careful consideration of the impact

of each decision on the market share of their competitors.

It is generally necessary to commission market research (generally desk/secondary

research) to determine. Sometimes, though, one can use primary research to estimate

the total market size and a company's market share.

Construction

Page 11: The Art Of FMCG ( part Two )

"Market share: The percentage of a market accounted for by a specific entity."]

"Unit market share: The units sold by a particular company as a percentage of total

market sales, measured in the same units]

Unit market share (%) = 100 * Unit sales (#) / Total Market Unit Sales (#)

"This formula, of course, can be rearranged to derive either unit sales or total market

unit sales from the other two variables, as illustrated in the following]

Unit sales (#) = Unit market share (%) * Total Market Unit Sales (#) / 100

Total Market Unit Sales (#) = 100 * Unit sales (#) / Unit market share (%)

"Revenue market share: Revenue market share differs from unit market share in that it

reflects the prices at which goods are sold. In fact, a relatively simple way to calculate

relative price is to divide revenue market share by unit market share]

Revenue market share (%) = 100 * Sales Revenue ($) / Total Market Sales

Revenue($)

"As with the unit market share, this equation for revenue market share can be

rearranged to calculate either sales revenue or total market sales revenue from the

other two variables

Market share can be decomposed into three components, namely: penetration share,

share of customer, and usage index. These three underlying metrics can then be used

to help the brand identify market share growth opportunities

Methodologies

"Although market share is likely the single most important marketing metric, there is

no generally acknowledged best method for calculating it. This is unfortunate, as

different methods may yield not only different computations of market share at a

given moment, but also widely divergent trends over time. The reasons for these

disparities include variations in the lenses through which share is viewed (units versus

dollars), where in the channel the measurements are taken (shipments from

manufacturers versus consumer purchases), market definition (scope of the

competitive universe), and measurement error

Page 12: The Art Of FMCG ( part Two )

SKU ?!

SKU (stockkeeping unit, sometimes spelled "Sku") is an identification, usually

alphanumeric, of a particular product that allows it to be tracked for inventory

purposes. Typically, an SKU (pronounced with the individual letters or as SKYEW) is

associated with any purchasable item in a store or catalog. For example, a woman's

blouse of a particular style and size might have an SKU of "3726-8," meaning "Style

3726, size 8." The SKU identification for a product may or may not be made visible

to a customer. SKU numbers can sometimes be seen in online e-commerce sites.

Short for stock keeping unit, SKU is a unique numerical identifying number that

refers to a specific stock item in a retailer's inventory or product catalog. The SKU is

often used to identify the product, product size or type, and the manufacturer. In the

retail industry, the SKU is a part of the backend inventory control system and enables

a retailer to track a product in their inventory that may be in warehouses or in retail

outlets

in the field of inventory management , a stock keeping unit or SKU is a

distinct type of item for sale such as a product or service, and all attributes associated

with the item type that distinguish it from other item types. For a product, these

Page 13: The Art Of FMCG ( part Two )

attributes could include, but are not limited to, manufacturer, description, material,

size, color, packaging, and warranty terms. When a business takes an inventory, it

counts the quantity it has of each SKU.

Page 14: The Art Of FMCG ( part Two )

(POS display) ?!

A point-of-sale display (POS display) is a specialized form of sales promotion that is

found near, on, or next to a checkout counter (the "point of sale"). They are intended

to draw the customers' attraction to products, which may be new products, or on

special offer, and are also used to promote special events, e.g. seasonal or holiday-

time sales. POS displays can include shelf edging, dummy packs, display packs,

display stands, mobiles, posters, and banners. POS can also refer to systems used to

record transactions between the customer and the commerce

Examples

Usually, in smaller retail outlets, POS displays are supplied by the manufacturer of

the products, and also sited, restocked and maintained by one of their regular

salespersons. However, this is less common in large supermarkets as they can control

the activities of their suppliers due to their large purchasing power, and prefer to use

their own material designed to be consistent with their corporate theming and store

layout.

Common items that may appear in POS displays year-round are batteries, soft drinks,

candy, chewing gum, magazines, comics, tobacco, and writable CDs and DVDs.

These displays are also useful in outlets with limited floor space, as there tends to be

much wasted space around counters.

The displays are normally covered with branding for the product they are trying to

sell, and are made out of cardboard or foamboard, and/or a covering over a plastic or

Perspex/Plexiglass stand, all intended to be easily replaceable and disposable. This

Page 15: The Art Of FMCG ( part Two )

allows designers to make full use of color and printing to make the display visually

appealing. Some displays are fixed or non-disposable; these may include lighting to

make the display more visible and may also contain a cooler, e.g. for drinks or ice

cream. Some are no more than a metal basket, with no design on the outside, simply

showing a price; these types of display are easier to refill

Lightboxes

In the field of POS displays, a "lightbox" is a display fixture (or a modular component

of a larger POS display structure) that contains a translucent graphic film with lamps

that transmit light through the graphic, thus "backlighting" the graphic message for

increased visibility, brightness and contrast relative to its surroundings. By definition,

the artwork or backlit graphic film (aka "duratrans") in a POS lightbox is replaceable

without discarding the lightbox or any of its other components.

Lightboxes have historically been lighted with fluorescent lamps due to their (a)

cooler operating temperature than incandescent; (b) relatively efficient power

consumption; and (c) inherent diffusive property. However, as in most commercial

lighting applications, there has been a significant industry-wide shift in the late 20th

and early 21st century toward LED lamps in POS lightboxes, for not just the

universally-acknowledged benefit of economy but also of practicality, as LED lamps

are more durable and impact-resistant in shipping, handling and public applications

such as Point-of-Sale.

Note: the definition of "lightbox" as it relates to POS displays is similar to but distinct

from that of a lightbox in the Photography and Graphic Arts industries. The similarity

is that they both contain lamps whose light is diffused to uniformly backlight a

translucent image; the distinction is that a POS lightbox is a permanent or semi-

permanent fixture used to display an advertising message in a retail space, while a

photography lightbox is usually a portable or table-mounted appliance used for image

quality analysis and/or tracing in a photography studio, graphic design studio,

graphic/print production shop or similar environment

Page 16: The Art Of FMCG ( part Two )

ROMI ?!

Return on marketing investment

Return on marketing investment (ROMI) is the contribution to profit

attributable to marketing (net of marketing spending), divided by the marketing

'invested' or risked. ROMI is not like the other 'return-on-investment' (ROI)

metrics because marketing is not the same kind of investment. Instead of

money that is 'tied' up in plants and inventories (often considered capital

expenditure or CAPEX), marketing funds are typically 'risked.' Marketing

spending is typically expensed in the current period (operational expenditure or

OPEX). The idea of measuring the market’s response in terms of sales and

profits is not new, but terms such as marketing ROI and ROMI are used more

frequently now than in past periods. Usually, marketing spending will be

deemed as justified if the ROMI is positive. In a survey of nearly 200 senior

marketing managers, nearly half responded that they found the ROMI metric

very useful

History

The relatively young ROMI concept first came to prominence in the 1990s.

The phrase "return on marketing investment" became more widespread in the

next decade following the publication of two books Return on Marketing

Investment by Guy Powell (2002) and Marketing ROI by James Lenskold

(2003 )In the book "What Sticks: Why Advertising Fails And How To

Guarantee Yours Succeeds," Rex Briggs suggested the term "ROMO" for

Return-On-Marketing-Objective, to reflect the idea that marketing campaigns

may have a range of objectives, where the return is not immediate sales or

profits. For example, a marketing campaign may aim to change the perception

Page 17: The Art Of FMCG ( part Two )

of a brand

Purpose

The purpose of ROMI is to measure the degree to which spending on

marketing contributes to profits.[1] Marketers are under more and more

pressure to “show a return” on their activities.

Construction

Return on Marketing Investment (ROMI) =

[Incremental Revenue Attributable to Marketing ($) * Contribution Margin (%)

- Marketing Spending ($)] /

Marketing Spending ($)

A necessary step in calculating ROMI is the estimation of the incremental sales

attributable to marketing. These incremental sales can be 'total' sales

attributable to marketing or 'marginal.

Methodologies

There are two forms of the Return on Marketing Investment (ROMI) metric.

Short term

The first, short-term ROMI, is also used as a simple index measuring the

dollars of revenue (or market share, contribution margin or other desired

outputs) for every dollar of marketing spend.

For example, if a company spends $100,000 on a direct mail piece and it

delivers $500,000 in incremental revenue, then the ROMI factor is 5.0. If the

incremental contribution margin for that $500,000 in revenue is 60%, then the

margin ROMI (the incremental margin for $100,000 of marketing spent is

$300,000 (= $500,000 x 60%). Of which, the $100,000 spent on direct mail

advertising will be subtracted and the difference will be divided by the same

$100,000 . Every dollar expended in direct mail advertising translates an

additional $2 on the company's bottomline.

The value of the first ROMI is in its simplicity. In most cases a simple

determination of revenue per dollar spent for each marketing activity can be

sufficient enough to help make important decisions to improve the entire

marketing mix.

The most common Short Term approach to measuring ROMI is by applying

Marketing Mix Modeling techniques to separate out the incremental sales

effects of marketing investment.

Long term

In a similar way the second ROMI concept, long-term ROMI can be used to

determine other less tangible aspects of marketing effectiveness. For example,

Page 18: The Art Of FMCG ( part Two )

ROMI could be used to determine the incremental value of marketing as it

pertains to increased brand awareness, consideration or purchase intent. In this

way both the longer-term value of marketing activities (incremental brand

awareness, etc.) and the shorter-term revenue and profit can be determined.

This is a sophisticated metric that balances marketing and business analytics

and is used increasingly by many of the world's leading organizations (Hewlett-

Packard and Procter & Gamble to name two) to measure the economic (that is,

cash-flow derived) benefits created by marketing investments. For many other

organizations, this method offers a way to prioritize investments and allocate

marketing and other resources on a formalized basis.

Long term ROMI models will often draw on Customer lifetime value models to

demonstrate the long term value of incremental customer acquisition or

reduced churn rate. Some more sophisticated Marketing Mix Modeling

approaches include multi-year long term ROMI by including CLV type

analysis.

Long term ROMI models have sometimes used Brand valuation techniques to

measure how building a brand with marketing spend can create balance sheet

value for brands (or at least for brands that have been transacted, and therefore

under accounting rules can have a balance sheet value). The ISO 10668

standard sets out the appropriate process of valuing brands and sets out six key

requirements, transparency, validity, reliability, sufficiency, objectivity and

financial, behavioural and legal parameters. Brand valuation is distinguished

from brand equity by placing a money value on a brand, and in this way a

ROMI can be calculated.

Note: No return on marketing investment methodologies have been

independently audited by the Marketing Accountability Standards Board

(MASB) according to MMAP (Marketing Metric Audit Protocol) .

Cautions

Direct measures of the short-term variant of ROMI are often criticized as only

including the direct impact of marketing activities without including the long-

term brand building value of any communication inserted into the market.

Short-term ROMI is best employed as a tool to determine marketing

effectiveness to help steer investments from less productive activities to those

that are more productive. It is a simple tool to gauge the success of measurable

marketing activities against various marketing objectives (e.g., incremental

revenue, brand awareness or brand equity). With this knowledge, marketing

investments can be redirected away from under-performing activities to better

performing marketing media.

Long-term ROMI is often criticized as a "silo-in-the-making"—it is intensively

data driven and creates a challenge for firms that are not used to working

Page 19: The Art Of FMCG ( part Two )

business analytics into the marketing analytics that typically determine

resource allocation decisions. Long-term ROMI, however, is a sophisticated

measure used by a number of firms interested in getting to the bottom of value

for money challenges often posed by competing brand managers.

However, it is often unclear exactly what it means to 'show a return' on

marketing investment. "Certainly, marketing spending is not an 'investment' in

the usual sense of the word. There is usually no tangible asset and often not

even a predictable (quantifiable) result to show for the spending, but marketers

still want to emphasize that their activities contribute to financial health. Some

might argue that marketing should be considered an expense and the focus

should be on whether it is a necessary expense. Marketers believe that many of

their activities generate lasting results and therefore should be considered

'investments' in the future of the business."]

ROMI across mediums

The difficulty of measuring ROMI varies across mediums. Results of a recent

North American survey show the ROI associated with one-way, traditional

media (e.g. television and radio) is more difficult to measure than interactive,

web-based digital media such as permission-based email marketing or social

media marketing.[6] In 2013, Black Ink introduced Eye On, the first SaaS

designed to measure enterprise ROMI across all mediums.]

With the rise in Digital Marketing, the opportunity is available for marketers,

or even business owners to run rough calculations of what their approximate

ROI may be for their campaigns, before they even start investing.

Based from statistical research, and all things being equal, the business owner

can calculate their current Digital Marketing ROI via their website and web

analytics software to understand their :

Current Traffic

Conversion Rate and

Average Sale.

Add in readily available information on potential traffic from the Google

Keyword Tool, and surveyed costs to acquire that traffic, the business owner or

marketer can estimate the potential ROI if that traffic is acquired, and even

measure it against other marketing methods

Page 20: The Art Of FMCG ( part Two )

Whats CLV ?

In marketing, customer lifetime value(CLV) (or often CLTV), lifetime customer value

(LCV), or life-time value (LTV) is a prediction of the net profit attributed to the entire

future relationship with a customer. The prediction model can have varying levels of

sophistication and accuracy, ranging from a crude heuristic to the use of complex

predictive analytics techniques.

Customer lifetime value can also be defined as the dollar value of a customer

relationship, based on the present value of the projected future cash flows from the

customer relationship. Customer lifetime value is an important concept in that it

encourages firms to shift their focus from quarterly profits to the long-term health of

their customer relationships. Customer lifetime value is an important number because

it represents an upper limit on spending to acquire new customers. For this reason it is

an important element in calculating payback of advertising spent in marketing mix

modeling.