A Journey to Crisis Land
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Iulie 2010 |
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CMG MEDIA SOLUTIONS S.R.L. |
Adresa
Bulevardul Iuliu Maniu, Nr. 103
Cladirea B, Etaj 5, Ap. 24
Bucureşti, Sector 6
Telefon
+40-21-315.90.31
Fax
+40-21-325.90.29
Website
www.magazinulprogresiv.ro
What have we learned from what happened in 2009 and what should made by GfK at the beginning of this year identified several important characteristics downturn, both in FMCG as well as with regards to the consumers.
What are the conclusions for 2009?
Some of last year's defining characteristics included the political instability towards the end of the year, the intense media coverage of the crisis, the currency devaluation and reducing costs by the public, amid fears rather than actual lack of money. Therefore, it was only natural that the FMCG industry would react by reducing or blocking investments, especially the marketing budgets. Most players preferred to wait, although successful brands continued to invest, which proved to be a winning approach. Although it may seem paradoxical, some categories continued to increase last year, but at much lower rates than before.
Main problems in 2010
"A year surprisingly unstable, with many changes, which makes it difficult to plan ahead for the entire year," that could sum up the FMCG managers' views for 2010, after a weaker first quarter results than those obtained in early 2009. Expenditure per capita fell by 30% (average basket of goods), and the price immediately became the main argument and the most important proposal, which both producers and retailers made to a disoriented and frustrated consumer. What can there be done? The first reaction was cutting marketing budgets, because "it is easier to cut media investment first, rather than optimize production costs or to rationalize the cost of raw materials." Manufacturers were more oriented towards short-term profitability, given that it was more expensive to produce, but without being able to increase prices.
Taking this context into consideration, the acute need felt by all FMCG players was to better understand what was going on, in order to better plan their actions. Major courses of action included cautious investment in brands and trade activities, especially promotion, but also television and Internet, the latter becoming the favourite medium of expression for brands in many cases. With regards to retailers, the discounters strengthened their position and private brands found the right time to intensify expansion.
How did the consumer react?
Below is how producers perceive the changes in consumer behaviour:
• Overly-cautious: FMCG manufacturers believe that the Romanians react excessively so in periods of economic boom and the recession. Now they want lower prices without spending more.
• Rational beats emotional: during economic crisis, consumers no longer respond to emotional stimuli, which affected brands that used such stimuli to attract clients. People are forced to buy only what is necessary, only those products they feel that they can afford.
• Consumers no longer experiment with new products.
• Pessimism, lack of motivation, lack of confidence in the future: people no longer believe in positive change and, most alarming, do not believe that change for the better depends on themselves.
• Attention to price: shift to cheaper goods in the same category.
• Rediscovering moderation: people reassessing their relationship with money, with revenue, loans and work in general.
• No more stocks: customers no longer buy more than they need, and prefer to return to the store when they run out of a certain product.
• For categories in which brands are important, people will remain loyal to those who have proven their efficiency.
• Search for bargains, that is places where they find the best prices and the most attractive promotions.
Survival options…
Producers believe that maintaining price competitiveness is essential for survival, a solution achieved by reviewing and cutting costs internally. Rapid adjustment to market signals is another measure, which requires accurate market data in real time, in order to be confident they can react on such information. Market data refers to monitoring and understanding consumer behaviour, attitudes and values, concerns and hopes they have during a crisis. Equally crucial is retail data, relating to human behaviour in stores and to the perceptions about prices. Strong brands are seen as safe elements during such times, which is why manufacturers know they must focus their efforts and investments in their direction.
At the same time, experiments such as releasing a new product or brand are reduced or abandoned, and evaluating real effects becomes more important than ever (investment return) in terms of promotional activities. Some elements which have proven efficient in such a context are seen as essential by FMCG producers: investing in people and motivating them, as well as continuing social responsibility programs. Constraints caused by the new consumer behaviour forced companies to seek innovative and creative solutions, which may lead to a renewed industry. Since 2009, all players operated cost reductions, which resulted in significant efficiency of their activities. In fact, everyone should get used to live in a harsh and unpredictable environment and learn the lessons of the crisis.
