Businessworld

Brand booster

As the Indian economy embarks again on an expansion path, companies must actively seize the opportunity to increase household penetration of their brands by driving consideration.

著者：Joydeep Bhattacharya, Guy Brusselmans and Sachin Khandelwal

First published on 9月 16, 2014
min read


This article originally appeared in Businessworld. A rebound in GDP growth and more money in Indian consumers’ pockets—with tax concessions in the budget, moderating retail inflation and buoyant stock markets—should hopefully indicate acche din (better days) ahead, especially for consumer products companies after the 2013 annus horribilis. To capture disproportionate growth as the economy picks up, many consumer product companies will rely on the conventional marketing approach of focusing on select groups of consumers, getting them to try their brands and investing heavily to convert them into loyal users who buy larger and larger quantities over time. While this approach may appear attractive given its use over time, evidence shows that it increasingly just doesn’t work—in India or elsewhere. Consumer products companies throughout the world are waking up to a profound new finding: The best way brands can sustainably grow is to increase the number of buyers, i.e., to increase household penetration of brands (“penetration” is defined as the percentage of households in a market buying a particular brand in a given year), rather than through higher repurchase rates or share of wallet. This may sound obvious, but the reality is that it’s a big departure for most consumer products executives who tend to focus on driving loyalty/share of wallet with targeted segments of consumers. This finding on the overwhelming importance of household penetration emerged from recent Bain & Company analyses of buying habits of nearly one lakh shoppers across the globe, based on data collected by Kantar Worldpanel and our experience working on more than 600 brand growth projects.¹ Across dozens of categories, as well as developed (e.g., the UK) and developing markets (e.g., China and Indonesia), we have systematically arrived at the same insight: Brands that have achieved leadership position have done so by driving penetration; higher repurchase rates and share of wallet play relatively less important roles. From our experience, loyalty across categories doesn’t vary significantly over time, but household penetration does. Brands primarily stand out because more people buy them. That’s why in India, for instance, Godrej Consumer’s hair color brand Expert Rich Crème increased penetration rates ahead of competitors. But penetration is a leaky bucket, and even top brands can experience churn rates of nearly 50 per cent. That’s why winners continually invest to acquire more new consumers every year than they lose—through increasing household penetration. Also, despite the importance of penetration, too many brands err by limiting their imagined universe of users. Consider that Red Bull would have hit a wall if it viewed its brand as competing only in “premium energy drinks.” The brand realised there was a much broader competitive space. By acknowledging this, the brand managed to boost its US penetration to more than 14 per cent of adults. So, how can brands grow their penetration rates? They need to be in for the long run. Unfortunately, few companies lay out plans for more than one year, and many managers change everything from the types of SKUs to the advertising strategy, rather than staying the course. They risk losing out to rivals that stick with a plan for steadily increasing penetration. Meanwhile, boosting penetration is difficult in isolation from another critical performance indicators: brand consideration (defined as the percentage of consumers/shoppers who would consider your brand for a given purchase occasion). Building penetration depends on continually building consideration—which in turn helps increase penetration. The steady path for earning consideration and penetration requires investing in three key brand assets: memory structures, product portfolios and in-store assets. Memory structures: Building memory structures means anchoring a brand in consumers’ long-term memories, using the full range of touch points. Winning companies broadcast a brand’s messages widely enough to be heard by the largest possible swath of consumers. To get into consumers’ heads—and stay there—they articulate distinct and memorable messages. It takes persistence, repetition and consistency. Hair care brand Parachute has essentially been using similar visual cues for decades on hair nourishment, e.g., scalp massage or champi for its core product. Winning companies concentrate their resources on fewer brands that either have enough scale to self-fund the required investments or enough potential to break into a new consideration set. Last month, Procter & Gamble announced that it will focus on its key 70-80 brands—which account for around 90 per cent of sales and plans to sell, discontinue or eliminate around 100 brands in the next two years. Product portfolios: Too many brands and SKUs can result in ineffective levels of advertising, shopper confusion and other woes that erode penetration. Surprisingly, few innovations around product/SKU variants eventually result in increased penetration. SKUs fail at a high rate and distract marketing and commercial teams from supporting core SKUs. For their part, hero SKUs generate higher volumes that increase scale, leading to bigger margins that enable 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 highly successful Good Knight franchise, Xpress System, which, with its promise of relief from mosquitoes in just 9 minutes, offers a strongly differentiated proposition. In-store assets: It’s The Shopper, Not The Consumer! Finally, having targeted the most important SKUs, it’s critical to adequately invest to activate them at the point of sale and ensure they’re always available at the right place on the shelf. Why is that? Brand choice (from a set of considered brands) in repertoire categories is made at the store by the shopper, and in-store assets help activate memory structures and influence choice. For instance, Hindustan Unilever (HUL) understood that for several of its core categories, 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. Unilever reported that the implementation of a store design strategy programme has seen its “perfect stores” outperform other stores on average in markets like India and Argentina. Leading companies identify store assets critical to their category. They define a compelling picture of success to guide their sales force. These winners adopt a “store-back” view to reverse-engineer their core processes and make them compatible with their trade customers’ constraints. For example, they consider a retailer’s space constraints when defining their product portfolio, ensuring that the majority of products actually see the light of day. As the Indian economy embarks again on an expansion path, companies must actively seize the opportunity to increase household penetration of their brands by driving consideration. This is a particularly attractive prospect for brands in nascent categories to recruit millions of first-time consumers—in fact, it’s an imperative that they simply can’t afford to ignore. 1 The patterns we observed are consistent with the theories developed by Professor Andrew Ehrenberg and hold true in a broad variety of categories and markets. They are being further studied by the Ehrenberg-Bass Institute for Marketing Science. Joydeep Bhattacharya is a Bain & Company Partner who leads the firm’s Consumer Products and Retail practices in India. Guy Brusselmans is a Bain Partner based in Brussels and a member of the Consumer Products and Retail practices. Sachin Khandelwal is a principal based in Mumbai in the same practices.

This article originally appeared in Businessworld.

A rebound in GDP growth and more money in Indian consumers’ pockets—with tax concessions in the budget, moderating retail inflation and buoyant stock markets—should hopefully indicate acche din (better days) ahead, especially for consumer products companies after the 2013 annus horribilis.

To capture disproportionate growth as the economy picks up, many consumer product companies will rely on the conventional marketing approach of focusing on select groups of consumers, getting them to try their brands and investing heavily to convert them into loyal users who buy larger and larger quantities over time. While this approach may appear attractive given its use over time, evidence shows that it increasingly just doesn’t work—in India or elsewhere.

Consumer products companies throughout the world are waking up to a profound new finding: The best way brands can sustainably grow is to increase the number of buyers, i.e., to increase household penetration of brands (“penetration” is defined as the percentage of households in a market buying a particular brand in a given year), rather than through higher repurchase rates or share of wallet.

This may sound obvious, but the reality is that it’s a big departure for most consumer products executives who tend to focus on driving loyalty/share of wallet with targeted segments of consumers.

This finding on the overwhelming importance of household penetration emerged from recent Bain & Company analyses of buying habits of nearly one lakh shoppers across the globe, based on data collected by Kantar Worldpanel and our experience working on more than 600 brand growth projects.¹

Across dozens of categories, as well as developed (e.g., the UK) and developing markets (e.g., China and Indonesia), we have systematically arrived at the same insight: Brands that have achieved leadership position have done so by driving penetration; higher repurchase rates and share of wallet play relatively less important roles. From our experience, loyalty across categories doesn’t vary significantly over time, but household penetration does. Brands primarily stand out because more people buy them. That’s why in India, for instance, Godrej Consumer’s hair color brand Expert Rich Crème increased penetration rates ahead of competitors.

But penetration is a leaky bucket, and even top brands can experience churn rates of nearly 50 per cent. That’s why winners continually invest to acquire more new consumers every year than they lose—through increasing household penetration.

Also, despite the importance of penetration, too many brands err by limiting their imagined universe of users. Consider that Red Bull would have hit a wall if it viewed its brand as competing only in “premium energy drinks.” The brand realised there was a much broader competitive space. By acknowledging this, the brand managed to boost its US penetration to more than 14 per cent of adults.

So, how can brands grow their penetration rates?

They need to be in for the long run. Unfortunately, few companies lay out plans for more than one year, and many managers change everything from the types of SKUs to the advertising strategy, rather than staying the course. They risk losing out to rivals that stick with a plan for steadily increasing penetration.

Meanwhile, boosting penetration is difficult in isolation from another critical performance indicators: brand consideration (defined as the percentage of consumers/shoppers who would consider your brand for a given purchase occasion). Building penetration depends on continually building consideration—which in turn helps increase penetration. The steady path for earning consideration and penetration requires investing in three key brand assets: memory structures, product portfolios and in-store assets.

Memory structures: Building memory structures means anchoring a brand in consumers’ long-term memories, using the full range of touch points. Winning companies broadcast a brand’s messages widely enough to be heard by the largest possible swath of consumers. To get into consumers’ heads—and stay there—they articulate distinct and memorable messages. It takes persistence, repetition and consistency. Hair care brand Parachute has essentially been using similar visual cues for decades on hair nourishment, e.g., scalp massage or champi for its core product.

Winning companies concentrate their resources on fewer brands that either have enough scale to self-fund the required investments or enough potential to break into a new consideration set. Last month, Procter & Gamble announced that it will focus on its key 70-80 brands—which account for around 90 per cent of sales and plans to sell, discontinue or eliminate around 100 brands in the next two years.

Product portfolios: Too many brands and SKUs can result in ineffective levels of advertising, shopper confusion and other woes that erode penetration. Surprisingly, few innovations around product/SKU variants eventually result in increased penetration. SKUs fail at a high rate and distract marketing and commercial teams from supporting core SKUs.

For their part, hero SKUs generate higher volumes that increase scale, leading to bigger margins that enable 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 highly successful Good Knight franchise, Xpress System, which, with its promise of relief from mosquitoes in just 9 minutes, offers a strongly differentiated proposition.

In-store assets: It’s The Shopper, Not The Consumer! Finally, having targeted the most important SKUs, it’s critical to adequately invest to activate them at the point of sale and ensure they’re always available at the right place on the shelf. Why is that? Brand choice (from a set of considered brands) in repertoire categories is made at the store by the shopper, and in-store assets help activate memory structures and influence choice. For instance, Hindustan Unilever (HUL) understood that for several of its core categories, 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. Unilever reported that the implementation of a store design strategy programme has seen its “perfect stores” outperform other stores on average in markets like India and Argentina.

Leading companies identify store assets critical to their category. They define a compelling picture of success to guide their sales force. These winners adopt a “store-back” view to reverse-engineer their core processes and make them compatible with their trade customers’ constraints. For example, they consider a retailer’s space constraints when defining their product portfolio, ensuring that the majority of products actually see the light of day.

As the Indian economy embarks again on an expansion path, companies must actively seize the opportunity to increase household penetration of their brands by driving consideration. This is a particularly attractive prospect for brands in nascent categories to recruit millions of first-time consumers—in fact, it’s an imperative that they simply can’t afford to ignore.

1 The patterns we observed are consistent with the theories developed by Professor Andrew Ehrenberg and hold true in a broad variety of categories and markets. They are being further studied by the Ehrenberg-Bass Institute for Marketing Science.

Joydeep Bhattacharya is a Bain & Company Partner who leads the firm’s Consumer Products and Retail practices in India. Guy Brusselmans is a Bain Partner based in Brussels and a member of the Consumer Products and Retail practices. Sachin Khandelwal is a principal based in Mumbai in the same practices.