June 05 2015
By Sane Mdlalose, associate consultant at Aperio, a business consulting company focused on accelerating growth of FMCG brands in South Africa and Sub-Saharan Africa.
The days of completely loyal consumers are over with many South Africans from various income brackets making the choice to switch brands. Our experience shows that once a consumer switches to another brand and they have a good experience, they rarely go back.
Today consumers switch for a number of reasons:
- They now have true choice
- There is proper competition at all levels at the premium and low end
- There is more variety
- Cheap no longer means inferior quality
- Consumers are cash strapped
Brand loyalty, coupled with price premium gaps, has a tipping point; consumers still prefer to use the brand they grew up with and have an emotional connection with, however when they are in-store the reasons above override their emotional connection.
What has shifted in the market?
Thirty years ago the number of brands available was significantly less than today. There were typically two or three top brands with one holding a significant share of the market; then there was everyone else. After 1994 this changed and for the first time leading brand players had to learn to compete, not only amongst good local brands but also with well-known international brands brought in by multinational companies entering South Africa.
In the 1990s consumers were very brand loyal. Very rarely did a cheaper brand come in where they delivered; the quality was usually inferior. When the consumer switched and had a bad experience, they did not try that product again. In this era it was easy for the upper LSM to switch and go back to buy what they liked if they had a bad experience. In the middle to lower LSM, they did not switch but would rather buy a smaller or bigger pack of what they knew, liked and trusted.
After the year 2000 – it all shifted
Consumer experiences and perceptions shifted markedly. Retailer-owned brands’ market share increased as retailers focused on specific categories and improved the quality of their products. The consumer also realised that spending on a cheaper product did not mean it was bad and brand switching became more acceptable. And this switching started happening at all LSM levels.
Post 2010 the middle to lower end income consumer became open to brand trial. On the formal side the trade started promoting no 2 and 3 brands more frequently to change the balance of power and to encourage trial. Informal traders also brought in smaller leading brands and foreign (unknown) products – and this is where the risk lies for brands today. These products come in very cheap and their quality is good. At this level the consumer is more cash strapped so the choice is to have some product – even if it is not a product they are familiar with – or no product at all. It is an all or nothing in their world. So, in essence the price value equation has been totally turned on its head.
From a trade side, the price and value gap between well-known and unknown brands was not equal; cheaper but good quality brands offered a far more competitive margin.
How can brands deal with this shift and maintain customer loyalty?
- Review commercial models – from a retailer perspective, brands need to review their commercial model that engages the trade. The reason why smaller products have been able to enter the market, no matter what the category or type of trade – formal or informal – is they are a function of the amount of money they make per units sold. Branded products are used to dealing with the trade by volume and therefore believe the retailer should be grateful for making a 1% margin. But this math doesn’t add up anymore. Because the trade is no longer selling the huge volumes they used to, they need to offset it somehow.
- Resources review – brands must review how they measure the capabilities of their sales and key account level staff across the whole chain, whether informal or formal. At key account level these individuals are not numerically experienced enough to have a decent dialogue with a buyer that is putting them under pressure.
- Allow consumers to participate – from a consumer perspective the price value equation has gone out the window mainly in the informal market – from the wholesaler right down. Right now these consumers have left the category, but if brands could find pack format sizes, price options and equations which give the consumer the ability to participate or continue participating in their brand, they could compete more effectively.
- Alignment is key – brands must move away from looking at their strategy at the consumer level only, which ultimately leaves it up to the customer and the consumer to make the choice. They can’t afford the luxury of marketing, sales, commercial models and distribution to not be aligned. The relative importance of trade and distribution carry more weight than in the past and can impact brand growth and market share significantly.
ABOUT SANE MDALOSE:
Sane is a skilled marketing professional with 18 years’ experience in the FMCG sector. With a depth of experience in understanding consumer needs and reaching business objectives for brands, she has earned a reputation for developing highly effective market penetration solutions across formal and informal sectors. She is best known for her strong influencing skills and ability to achieve results with, and through people.
Aperio is a business consulting company focused on accelerating growth of FMCG brands in South Africa and Sub-Saharan Africa. Aperio’s consulting ranges from developing and implementing business building strategies, advising on launch or expansion plans, conducting brand health interventions, rejuvenating orphan brands or implementing growth strategies for Africa. Some of its clients are Danone, Diageo, Kellogg’s, Royal Canin, GlaxoSmithKline, Mars, and Wrigley.
Profile: Sane Mdlalose Associate Consultant at Aperio
Sane Mdlalose is an associate consultant at Aperio, a business consulting company focused on accelerating growth of FMCG brands in South Africa and Sub-Saharan Africa.
Sane is a skilled marketing professional with 18 years experience in the FMCG sector. With a depth of experience in understanding consumer needs and reaching business objectives for brands, she has earned a reputation for developing highly effective market penetration solutions across formal and informal sectors. She is best known for her strong influencing skills and ability to achieve results with, and through people.
She joined Aperio in 2014 as a move into a new phase of her life where she sought an opportunity to further support the drive for growth in South Africa as well as Africa.
Sane heads up Aperio’s commercial strategy, sales, route to market and channel marketing projects with clients.
Before joining Aperio, Sane held the position of Main Market Channel Executive at SAB. There she was responsible for driving growth in taverns and counter serve segments, which is a very mature yet underdeveloped main market channel. In her role she developed the brand’s current commercial market entry strategy. This involved effective distribution, sales and a robust credit and payment model which leveraged payment solutions for 3600 customers.
While her main career focus has been in the FMCG space, her skills are not limited to this arena. Before joining SAB, Sane had a stint in business development which covered all areas such as finance, sales, management and so on. Experience in this area included Managing Director of Leadership Solutions, a leading internationally player in sustainable capability development, where she successfully set up their office in the Middle East. She was also a prinicipal consultant at InDeed Strategy Into Action Consultancy, where she developed total business strategies for clients.
Prior to that, her career was predominantly in the FMCG industry. She has developed channel strategies for Tiger Brands; Coca-Cola South Africa and Unilever where she successfully managed trade strategies and expansion into Africa. Sane was appointed by Leverponds under the Unilver Group as Category Manager to restructure the service model and drive market penetration of the ethnic hair category for the Sunsilk brand– this resulted in a R35 million increase in revenue.
In 1999 Sane was employed by Danone as Regional Business Manager for KZN. In her 4 year tenure, she increased turnover by 30%; played a pivotal role in the launch of Danone Smooth; and implemented changes in the commercial strategy which improved a 10% decline in volume to an increase of 12% in a year.
Sane grew up in KZN, and began her career in the Unifoods division of Unilver in 1995, as National Account Assistant, and was promoted to Senior Area Supervisor in KZN just one year later. In this role she set up the first key account structure for Independent Trade (wholesalers and general traders), which contributed to a 15% growth in trade. Sane very quickly climbed the ranks in Unilever, and by 1998 she was National Key Account Manager for Pick n Pay. During this time she implemented a business category management excel based tracking tool, which enabled the customer to manage turnover, profit and GMROI. The margarine category profitability increased by 3%
Sane is very passionate about people and business capability development, and can think of nothing better than helping people reach their full potential.
Sane lives in Johannesburg with her husband and 3 sons, and in her spare time is actively involved in business and leadership development for future entrepreneurs and endeavours to assist in financial emancipation for people of all walks of life. She believes that there is always a way to implement change, change is good and would like to be remembered as a person who helped peopled live a better tomorrow and reach their full potential.