This document provides an overview of the FMCG sector in India including a SWOT analysis. It begins with definitions of FMCG and describes key segments. India has a large FMCG market, expected to reach $33.4 billion by 2015. The top strengths are low costs, established distribution networks, and strong brands. Weaknesses include lower technology investment and counterfeiting. Opportunities include the large untapped rural market and rising incomes. Threats include increased competition and high taxes. The document proposes strategies like expansion, improved distribution, innovation, and addressing issues in tax policy.
2. Agenda
What is FMCG ?
FMCG @ world
FMCG @ India
SWOT analysis
Proposed strategies
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3. What is FMCG
− FMCG is Fast Moving Consumer Goods.
− It also called the consumer packaged goods sector.
Definition: Fast Moving Consumer Goods (FMCG) as
“products that have a quick shelf turnover, at relatively low
cost and don‟t require a lot of thought, time and financial
investment to purchase. Fast Moving Consumer Goods is a
classification that refers to a wide range of frequently
purchased consumer products…”
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4. Key Segments Of FMCG Sector
Household Care
Personal Care
Food & Beverages
•Fabric wash
(laundry soaps and
synthetic detergents)
•Household cleaners
(dish/utensil cleaners,
floor cleaners, toilet
cleaners, air
fresheners, insecticides
and mosquito
repellents, metal
polish and furniture
polish)
•Oral care
• Hair care
• Skin care
• Personal wash (soaps)
•Cosmetics
• Toiletries
•Perfumes
• Deodorants
•Feminine hygiene
•Health beverages
•Soft drinks
•Staples/cereals
•Bakery products (biscuits,
bread, cakes)
•Snack food
•Chocolates
•Ice cream
•Tea & Coffee
•Processed fruits & vegetables
•Dairy products
•Bottled water
•Branded flour
•Branded rice
•Branded sugar
•Juices
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5. Main characteristics of FMCGs
From the consumers' perspective:
– Frequent purchase
– Low involvement (little or no effort to choose the item)
– Low price
From the marketers' angle:
– High volumes
– Low contribution margins
– Extensive distribution networks
– High stock turnover
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6. Top 10 FMCG companies in
world
Ranking
Company Name
1
Procter & Gamble
2
Pfizer
3
Unilever
4
L'Oréal
5
Kimberly-Clark Corp.
6
Reckitt Benckiser
7
Johnson & Johnson
8
Avon Products, Inc.
9
Henkel
10 Alcon Laboratories, Inc.
2011 sales
$82.6 B
$67.4B
$64.7 B
$25.8 B
$20.8 B
$15 B
$14.9 B
$11.3 B
$10 B
$9.9 B
Source: Hunt Executive Search, 2012
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7. FMCG growth in Emerging
and developed Markets
− Roughly 70 percent of
the world‟s population in
emerging-market
account for only 35
percent of the world‟s
GDP.
− By 2020 the collective
GDP of the emerging
markets will overtake
that of the developed
economies
Source: Global Growth Compass, Mckinesy analysis
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8. FMCG in India
− Fourth largest sector in the
economy.
− Market size US$ 13.1 billion as
of the year 2012.
− Expected market USD 33.4
billion by the year 2015
− Market growth rate :
Rural ---40%, urban ---25%
Source:
1. The Confederation of Indian Industry (CII)
2. Industry Practices | Altavis
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9. Top 10 FMCG companies in
India:
Rank Company Name
2012 sales
(Rs.Cr)
Rank Company Name
2012 sales
(Rs.Cr)
6
PROCTER & GAMBLE INDIA
12,838
7
COLGATE-PALMOLIVE
12,764
9,842
1
India Tobacco
Company (ITC)
151,078
2
HINDUSTAN UNILEVER
67,858
3
NESTLE INDIA
39,819
8
GLAXOSMITHKLINE
CONSUMER HEALTHCARE
(GSK)
4
DABUR INDIA
18,632
9
MARICO
9,078
5
GODREJ CONSUMER
PRODUCTS
13,335
10
EMAMI
6,836
Source: AC Nielsen Report 2012
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10. Other FMCG companies in
India
• Britannia Industries Ltd.
• Parle Agro
• Nirma
• Johnson & Johnson
• Himalaya Herbal Healthcare
• Amul India
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11. SWOT analysis
Strengths
Weaknesses
1. Low operational costs
2. Presence of established distribution
networks in both urban and rural areas
3. Presence of well-known brands in FMCG
sector
4. Deep roots in local culture & great
understanding of consumer needs
1. Lower scope of investing in technology
and achieving economies of scale,
especially in small sectors
2. Low exports levels
3. Counterfeit Products. These products
narrow the scope of FMCG products in
rural and semi-urban market.
Opportunities
Threats
1. Untapped rural market
2. Rising income levels, i.e. increase in
purchasing power of consumers
3. Large domestic market- a population of
over one billion.
4. Export potential
5. High consumer goods spending
1. Removal of import restrictions resulting
in replacing of domestic brands
2. Slowdown in rural demand
3.Tax and regulatory structure
Source: The Confederation of Indian Industry (CII)
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12. Strengths
1. Low operational costs
2. Presence of established distribution networks in both
urban and rural areas
3. Presence of well-known brands in FMCG sector
4. Deep roots in local culture & great understanding of
consumer needs
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13. WEAKNESSES
"Me-too" products: which illegally mimic the labels of the
established brands, narrow the scope of FMCG products in
rural and semi-urban market.
Detention of counterfeit and pirated goods at EU borders in
2010
Source: Europa Press releases
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15. OPPORTUNITIES
1. High consumer goods spending
15
40
10
11
8
16
Savings
Others
Clothings
Entertainment
Personal Care
Grocery
Source: Consumer Survey 2010 by KSA-Technopak
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17. OPPORTUNITIES…
3.Large domestic market- a population of over one billion.
4. Large untapped market available, especially the rural areas.
5. Export potential- expansion of horizons towards more and
more countries.
6. Opportunity in food sector.
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18. THREATS
− Intense and increasing competition from local as well as
MNC players
− The standardization of packaging norms that is likely to be
implemented by the Government by Jan 2013 is expected to
increase
cost
of
beverages,
cereals,
edible
oil, detergent, flour, salt, aerated drinks and mineral water.
− Steadily rising fuel costs, leading to increased distribution
costs.
− The declining value of rupee against other currencies may
reduce margins of many companies, as Marico, Godrej
Consumer Products, Colgate, Dabur, etc. who import raw
materials.
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19. Issues in Tax Policy in India
Major Threat: Tax and regulatory structure
1) Extremely high incidence of tax on certain product
categories
Some FMCG products such as shampoos, processed
food, soft drinks and toiletries containing alcohol attract high
rates of excise duty and sales tax. The total tax incidence in
some cases is more than 60 per cent of the cost or more than
30 per cent of MRP. Such high tax incidence hampers growth
of these product categories besides encouraging manufacture
of spurious products and smuggling.
Source:
1. India Policy Forum
2. "IMF lowers India's growth forecast to 6.1% for 2012". The
Hindustan Times. 16 July 2012
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20. Issues in Tax Policy
2) Cascading effect of Special Excise Duty
− In production process, raw material passes through
various processes stages till a final product emerges.
Thus, output of the first manufacturer becomes input for
second manufacturer and so on.
− In other words, the tax burden goes on increasing as raw
material and final product passes from one stage to other
because, each subsequent purchaser has to pay tax
again and again on the material which has already
suffered tax. This is called cascading effect or double
taxation.
Source: Business portal of India
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21. Issues in Tax Policy in India
3) Inverted Duty structure for selected inputs
Duty on certain raw materials is higher or the same as
compared to finished products in which these materials are
used. Such raw materials include oils and chemicals like Soda
ash, caustic soda etc. In addition to customs duty, raw
materials are also subject to sales tax and therefore total tax
incidence and cost of local manufacture goes up.
4) High taxes on processed foods
The
existing
tax
structure
and
its
high
overall
incidence, hampering the growth of the processed industry. The
increase in excise duty in last year‟s budget from 8% to 16%
has adversely affected the growth of processed foods industry.
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22. Issues in Tax Policy in India
5) Irrational domestic tax structure encouraging imports
− Significant reduction in custom duty rates of consumer
goods has made imported product cheaper as compared to
local manufactured products.
− For instance, goods manufactured in India suffer from
cascading effects of taxes on inputs as additional cost
compared to imports.
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23. Proposed strategies
The main objective is to generate a competitive
advantage, increase the loyalty of customers and to beat
competitors.
1. Expansion Strategies
2. Distribution Strategies
3. Innovation Strategies
4. Promotional Strategies
5. Pricing Strategies
6. Digital Strategies
7. Sustainable Growth Strategies
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24. 1. Expansion strategies
1.1 Expansion through Concentration
1.2 Expansion through integration
1.3 Expansion through diversification
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25. CONCENTRATION
STRATEGIES
• When an organisation focuses on intensifying its core
businesses with a view on expanding through either
acquiring a new customer base or diversifying its product
portfolio, it is having a concentration strategy
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26. TYPES OF CONCENTRATION
STRATEGIES
MARKET PENETRATION – Selling more products in the
same market
MARKET DEVELOPMENT – Selling same products to new
markets
PRODUCT DEVELOPMENT – Selling new products to the
same market
Example:
Bajaj Auto has undertaken all the above mentioned
strategies
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27. INTEGRATION STRATEGIES
• Integration means combining activities related to the
present activity of a company
• Integration is part of the diversification strategy
• It widens the scope for a company as far is the market
penetration is concerned.
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29. HORIZONTAL INTEGRATION
Horizontal Integration: When an organization takes up the
same types of products at the same level of production
or marketing process, it is said to follow a strategy of
Horizontal Integration (Also known as
Merger/Acquisition)
Example: Takeover of Satyam by Mahindra
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30. VERTICAL INTEGRATION
Vertical Integration: Expansion to serve its own needs.
Vertical Integration is of two types, namely Backward
and Forward Integration
- Backward Integration means going back
to
the source of raw materials
(Example: A Thermal power company may do coal-mining)
- Forward Integration implies moving
closer to
the finished product (example: A car spare parts
manufacturer would start manufacturing passenger cars)
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31. 2. Distribution Strategies
• A plan created by the management of
a manufacturing business that specifies how the firm intends
to transfer its products to intermediaries, retailers and
end consumers.
• Larger companies involved in making products will usually
also put together a detailed production distribution strategy to
guide its entry into its intended market.
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33. Distribution Strategies
Exclusive Distribution
•
Limiting the distribution to only one intermediary in
the territory
Intensive distribution
•
Distribute from as many outlets as possible to provide
location convenience
Selective distribution
•
Appoint several but not all retailers
33
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34. Exclusive Distribution
• It is a situation where suppliers and distributors enter into
an exclusive agreement that only allows the named distributor
to sell a specific product
• Means that the producer selects only very few intermediaries.
• Exclusive distribution is often characterised by exclusive dealing
where the reseller carries only that producer's products to the
exclusion of all others
34
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35. Exclusive Distribution:
Advantages
•
Maximize control over service level/output
•
Enhance product‟s image & allow higher markups
•
Promotes dealers loyalty, better forecasting, better
inventory and merchandising control
•
Restricts resellers from carrying competing brands
35
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37. Intensive Distribution
• The producer's products are stocked in the
majority of outlets.
• It is a strategy under which a company sells its
product through as many outlets as possible so
that the customers encounter the product
virtually everywhere they go.
37
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38. Intensive Distribution
Advantages:
Increased
sales,
wider
customer
recognition, and impulse buying
Disadvantages:
Characteristically low price and low-margin
products that require a fast turnover
Difficult to control large number of retailers
38
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40. Selective Distribution
• Selective Distribution is a type of distribution
that lies between intensive and exclusive
distribution.
•
This
basically
involves
using
more
than
one, but lesser than all the intermediaries who
carry the company‟s products
40
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42. Selective Distribution (cont’d)
Disadvantages:
– May not cover the market adequately
– Difficult to select dealers (retailers) that can
match your requirement and goals
42
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43. Multiple-Channel Strategy
Using two or more different channels to distribute
goods and services
Why?
Permits optimal access to each market segment
Increase market coverage, lower channel cost and provide more customized
selling
What to look out for?
More channels usually means more conflict and control problems
43
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44. Complementary Channels
Each channel handles a product or segment that is
different or non-competing e.g.
•
Toyota Lexus
•
MPH online portals
•
Magazine distributions
44
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45. Competitive Channels
The same product is sold through two different and
competing channels e.g.
•
Non-prescriptive drugs
•
Electronic goods
• Why? To increase sales
• What to look out for?
•
Over extending yourself
•
Dealers‟ resentment
•
Control problems
45
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46. Modifying Distribution
Strategies
Modify when the following changes occur:
•
Consumer markets and buying habits
•
Customer needs
•
Competitor‟s perspectives
•
Relative importance of outlet types
•
Manufacturer‟s financial strength
•
Sales volume level of existing products, and
•
The marketing mix
46
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47. E-Commerce: Online
Distribution
•
One of the importance of any website or business
is to bring the products or services to the right
people and to reach the target audience.
•
There are a number of different distribution
channels available on the Internet which could be
utilised efficiently to the benefits of any company
47
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48. Selecting Channels of
Distribution
In either the presence or the absence of a
traditional channel, a primary constraint is that of
the availability of various types of middlemen
Selecting a channel of distribution can hinge on
one of these factors
Distribution coverage required
Degree of control desired
Total distribution cost
Channel flexibility
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49. Selecting Channels of
Distribution
Distribution coverage – Channel selection may
depend upon the nature of market coverage
desired
Intensive distribution – Using as many
wholesalers and retailers as possible
Selective distribution – Using only the best
available per geographic area
Exclusive distribution – Selected intermediaries
are given exclusive rights within a particular territory
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50. Selecting Channels of
Distribution
Degree of control desired – Achieved by the seller is proportionate
to the directness of channel
Total distribution cost – Channel should be viewed as a total
system composed of interdependent subsystems
Objective should be to optimize total system performance
Generally assumed that the total system should be designed to
minimize costs, other things being equal
Channel flexibility – Ability of the manufacturer to adapt to
changing conditions
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51. 3. INNOVATION STRATEGIES
Innovation is introducing something new in the
economy, that can be new means of sources of raw
materials, new methods of production, etc..
Advantages:
• Use open innovation to reduce R&D costs
• Use process innovation to reduce operating costs
• Use innovation to match supply and demand
• Solve your customers‟ pain
• Use innovation to improve your suppliers‟ business
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52. Types Of Innovative Strategies
1. INVENTIVE (First to market)
2. ADAPTIVE (Second but “best”)
3. ECONOMIC (Low cost producer)
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53. Ways Of Innovation Strategies
Radical
Open source
• (Explore new technology)
• A problem shared is problem
solved
Sustainable
• Sustaining innovation for a longer
time
Incremental
• Exploring the Existing Technology
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54. 4. Promotional Strategy steps
1. Identify and analyze the target market
2. Define advertising objectives
A. Specific, obtainable, measurable
B. Communication and sales
3. Create the advertising platform
4. Determine the advertising appropriation
5. Develop the media plan
A. Type of media
B. Specific vehicles
C. Reach and frequency
D. Message content
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55. 4. Promotional Strategy steps
6. Create the advertising message
A. Consider type of media and platform
B. Copy and artwork
7. Execute the advertising campaign
8. Evaluate the effectiveness of the advertising
A. Extent of reaching objectives
B. Testing procedures
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56. 5. Pricing Strategies
Market-penetration pricing
- setting the price as low as possible to win a large
market share, then cut price further as falling costs are
experienced (Ex: IKEA Home Furnishings)
May be adopted under the following conditions:
a. the market is highly price sensitive and a low price
stimulates market growth;
b. production and distribution costs fall with accumulated
production experience;
c. a low price discourages actual and potential
competition.
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57. 5. Pricing Strategies
Mark-up pricing
- the most elementary pricing method which adds a
standard mark-up to the product‟s cost
- the most popular pricing strategy
Advantages of mark-up pricing:
a. sellers can determine costs much more easily than they
can estimate demand
b. where all firms in the industry use this pricing
method, prices tend to be similar and price competition is
minimized
c. many people feel that cost-plus pricing is fairer to both
buyers and sellers
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58. 5. Pricing Strategies
Target-return pricing
- determining the price that would yield its target
return on investment (ROI) (Ex. General Motors
priced its automobiles 15%-20% ROI)
- tends to ignore price elasticity and competitors‟
prices
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59. Pricing Strategies
Perceived-value pricing
- made up of several elements, such as the
buyers‟ image of the product performance, the
warranty quality, customer support, and softer
attributes such as the suppliers‟
reputation, trustworthiness, and esteem.
- firms use the other marketing mix
elements, such as advertising and sales force, to
communicate and enhance perceived value in
buyers‟ minds.
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60. Pricing Strategies
Value pricing
- charging a fairly low price for a high-quality
offering
- reengineering the company‟s operations to
become a low-cost producer without sacrificing
quality, to attract a large number of valueconscious customers
Practitioners of value pricing: IKEA Home
Furnishings, Procter & Gamble
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61. Pricing Strategies
Going-rate pricing
- the firm bases its price largely on competitors‟
prices, charging the same, more or less than major
competitors
- smaller firms “follow the leader” when the market
leader‟s prices change rather than when their own
demand or costs change
- where costs are difficult to measure or competitive
response is uncertain, firms feel the going price is a
good solution because it is thought to reflect the
industry‟s collective wisdom
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62. Pricing Strategies
Auction-type pricing
- usually done using the Internet (Ex. Ebay) to dispose of excess
inventories or used goods.
3 major types of auctions:
1. English auctions (ascending bids) where there is one seller and
many buyers
2. Dutch auctions (descending bids) where there is one buyer and
many sellers. The buyer announces what he/she wants to buy and
potential sellers compete by offering the lowest price
3. Sealed-bid auctions – would-be suppliers can submit only one bid
and cannot know the other bids
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63. Pricing Strategies
Geographical pricing
- the company decides how to price its products to
different customers in different locations and
countries
- company may charge higher prices to distant
customers to cover the higher shipping costs
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64. Pricing Strategies
Geographical pricing
Pricing options for geographical pricing:
Barter – the buyer and seller directly exchange goods, with no
money and no third party involved
Compensation deal– the seller receives some percentage of the
payment in cash and the rest in products
Buyback arrangement – the seller sells a plant, equipment, or
technology to another country and agrees to accept as partial
payment products manufactured with the supplied equipment
Offset – the seller receives full payment in cash but agrees to
spend a substantial amount of the money in that country within a
stated time period
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
65. Pricing Strategies
Promotional pricing
- companies use several pricing techniques to stimulate early
purchase
Techniques:
Loss-leader pricing
Special-event pricing
Cash rebates
Low-interest financing
Longer payment terms
Warranties and service contracts
Psychological discounting
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66. Pricing Strategies
Differentiated pricing
- companies often adjust their basic price to accommodate
differences in customers, products, locations, and so on
Customer-segment pricing
Product-form pricing
Image pricing
Channel pricing
Location pricing
Time pricing
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
67. 6. Digital marketing
“Digital marketing is marketing that makes use of electronic
devices such as
computers, tablets, smartphones, cellphones, digital
billboards, and game consoles to engage with consumers
and other business partners. Internet Marketing is a major
component of digital marketing.”
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68. 6. Digital marketing
Why is digital marketing so important?
• It‟s targeted, scalable and trackable
•
Consumers search products/services online
•
86% of mobile internet users are using their devices
while watching TV
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69. Types of digital marketing
efforts
•
Facebook Advertising
• Paid Search
•
Mobile Marketing
•
Your Website
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70. Facebook Advertising
•
•
•
•
•
Two Types of FBA - Ads & Sponsored Stories
Drives engagement to page and posts
Supports branding, showcasing product & events
Target based on location, age, status, etc.
Only pay for click throughs, which are a fairly engaged
consumer.
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71. Paid Search
•
Nearly all consumers (97 percent) now use online media
when researching products or services in their local area
BIA/Kelsey and ConStat.
•
Among consumers surveyed, 90 percent use search
engines with 67% being Google
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72. Paid Search Inches
More than just keywords
Broad match
Eg. women's jewelry: our ad may show if a search term contains your
keyword terms in any order, possibly along with others buy ladies
jewelry
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73. Mobile Marketing
• Smartphone ownership has surpassed 50
percent and growing.
• 70 percent of mobile searches lead to action
within an hour, in comparison to 30 percent
from desktop searches. (Mobile Marketer 2012)
• 61 percent of smartphone users perform local
searches on their device. (ComScore, January
2012)
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74. Types of Mobile Marketing
Pay Per Call Mobile - A form of mobile marketing where a potential
customer can directly tap or click a phone number placed in the
mobile ad
Mobile Banner Ads - Like a standard banner ad but now
customized to fit and cater to mobile websites.
Mobile Applications - A from of mobile marketing that involves
placing ads inside of an application design.
Text/SMS Marketing - Advertisers can send relevant marketing
messages in form of texts.
Barcodes/QR (quick-response barcodes) - allows mobile users to
easily obtain information via the use of their mobile.
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75. Our website and its
importance
•
•
•
Is now the first exposure to YOUR brand
Content is more important than ever
Web responsive design
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76. Budgeting for digital
marketing
• Within the next few years digital media spends will
account for 25% or more of overall marketing budget.
(ComScore, February 2013)
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77. 7. Sustainable Growth
Strategies
• SGS provides strategic, analytic and executive
management services to for-profit, non-profit and
entrepreneurial organizations. SGS focuses on longterm, sustainable business strategies through the multifunctional integration of corporate strategy, business
development, marketing, multi-channel
sales, operations, financeand competitive and industry
research.
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78. Developing a Sustainability
Strategy
Step 1 - Determine Business Drivers
Identify the pressures that are driving your business to become
more sustainable. They may include:
• Potential to improve the bottom line through increased
efficiencies;
• Demonstrating leadership and improving your image and
reputation;
• Compliance and risk management;
• Personal passion and commitment to making a difference.
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79. Developing a Sustainability
Strategy
Step 2 - Set a Vision
• A vision statement announces your future goals – it is
your „compass‟ to show the outside world where your
organisation is heading. The best vision statements are
short, clear and concise, realistic and have measurable
outcomes.
• You may choose to draft a sustainability policy that
formalizes your company‟s commitment to the
vision, and display it prominently in your workplace.
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80. Developing a Sustainability
Strategy
Step 3 - Set Objectives
• Your objectives relate to your sustainability goals. They
are more specific than your goals as they contain numbers
and dates.
Step 4 - Establish Current Position
• In order for you to reach your goals, you will need to
develop a good understanding of the current position of
your business – which includes an understanding of its
key impacts. Use the Sustainability Self Assessment tool
to establish benchmarks and raise awareness about what
sustainability means in the context of running your
business.
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81. Developing a Sustainability
Strategy
Step 5 - Analyse Gaps
• Identify the areas of your business that have the greatest
impacts - these areas are likely to reap the greatest
potential benefits.
Step 6 - Develop Strategies
• Now it‟s time to develop appropriate strategies to
address the most significant impacts of your business. A
strategy describes how you will reach your objectives
and should be aligned to the business drivers identified
in Step 1.
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82. Developing a Sustainability
Strategy
Step 7 - Develop Action Plan
The action plan is the key planning document that describes
what actions you will undertake to achieve your objectives.
It identifies aspects required for implementation including:
• Cost/benefit calculations and payback periods
• Targets, milestones and target dates
• Budgets
• Other resources, including staff, technical expertise, external
agencies
• Monitoring, evaluation and reporting processes
BITS Pilani, Pilani Campus
83. Developing a Sustainability
Strategy
Step 8 - Implementation
• After all this planning, it‟s now time for the doing! Integrate
actions into core business processes and regular reporting
cycles. This is also where you may need to develop or adjust
policies and procedures for the various aspects of your
business to ensure that each staff member understands their
role in the business.
Step 9 - Monitoring and Review
• This is critical to gauge your progress towards your overall
objectives. Regularly monitor using graphs and diagrams to
help with the communication process. You can use your
Sustainability Self Assessment tool to track and monitor your
progress.
BITS Pilani, Pilani Campus
84. Developing a Sustainability
Strategy
Step 10 - Improve
Incorporate this process into the company‟s overall
continuous improvement process.
Tips
• Gain senior management support at every step
• Be realistic about the time and effort required for
implementation
• Involve others
• Display simple reports in staff room
• Acknowledge & reward outcomes
• Share your successes with others
BITS Pilani, Pilani Campus