GLOBAL MARKETING TRENDS FOR CONSUMER PRODUCTS Kostas Dermoussis

GLOBAL MARKETING TRENDS FOR CONSUMER PRODUCTS Kostas Dermoussis 1

GLOBAL MARKETING TRENDS The following three (3) areas are covered: Marketing Practices Consumer Behaviour Retailing 2

A. MARKETING PRACTICES REAL PRODUCT DIFFERENTIATIONS ARE BECOMING MORE RARE § Companies struggle for launching NEW products which will be different from the existing ones § Consumers’ perceptions for what a new product is, do not coincide with companies’ marketing strategies and policies § Big supermarket chains “encourage” companies for new differentiated products 3

A. MARKETING PRACTICES MARKETING EXPENDITURES WILL CONTINUE TO RISE Regardless of sales increases, marketing budgets will be higher: § due to competition (impact on advertising and promotion spending) § due to complexity of distribution channels and the increasing requirements of retailers for shorter delivery times and more regular shipments (impact on logistics) 4

A. MARKETING PRACTICES DRAMATIC INCREASE OF OUTSOURCING § During the last 2 -3 years, we have experienced a considerable increase of outsourcing in marketing and sales § For the next 3 -5 years, the expenditures related to outsourcing will be dramatically increased in the following areas: Ø Marketing communications Ø Logistics Ø Marketing and sales strategy & planning Ø Marketing and sales training § Outsourcing will be a suitable strategy for large and SME companies § Main reason for outsourcing: Cost reduction and “fresh”/ more creative approach by a third party 5

A. MARKETING PRACTICES EXCEPTIONAL CUSTOMER SERVICE WILL BE A KEY STRATEGY § Customers recognize excellent service as a unique differentiating factor § One unsatisfied customer talks about his/her negative experience to seven people § Mass advertising and promotion activities can not easily reverse the situation We are going to see: Ø A bigger number of customer service departments Ø Friendlier call centres Ø Service oriented and customer-focused employees Ø Better trained people in customer service Ø An increasing number of customer satisfaction measurements 6

A. MARKETING PRACTICES MOVING FROM CALL CENTRES TO CONTACT CENTRES § Today, the main purpose of call centres is selling products/services § During the next years, their image will be “redefined”. Their new name will be “contact centres” and apart from sales, there will be greater emphasis on high quality service Main characteristics Ø Handling of complaints Ø Customer satisfaction measurements Ø Information to consumers Ø Profit centres Ø An integral part of the marketing and service strategy 7

A. MARKETING PRACTICES HUGE INCREASE OF CALL CENTRES WORLDWIDE § 50% increase in Europe, Middle East and Africa, up to 2008 § According to research in 26 countries, the number of call centres will exceed 45, 000, employing more than 2, 6 million people Ø Threat: Many call centres will operate in countries with low labour cost and low taxation Ø Call centres will be specialized, covering new markets: hospitals, clinics, hotels, restaurants, department stores, public services. 8

A. MARKETING PRACTICES COMPANIES FOCUSING ON THEIR MOST PROFITABLE BRANDS § Product portfolios are shrinking, especially in multinationals § Products with lower brand awareness and brand purchase will be eliminated § Concentration in mega-brands with big market shares and higher profit margins § Advertising investments in mega brands Risks Ø Consumers acceptance of global brands is not the same everywhere Ø Consumers may switch their brand which has been abolished with a competitive one Ø A new war in supermarkets for shelf dominance 9

A. MARKETING PRACTICES INCREASING SCEPTICISM OVER ADVERTISING MESSAGES § Too many advertisements - clutter effect § Advertising promises are not taken into consideration by consumers resulted to a lower degree of brand loyalty § Research shows that viewers do almost anything during a commercial break except watch the TV Implications Ø Companies will increase the frequency of social marketing and cause related marketing programmes, decreasing budgets of the traditional commercial advertising 10

A. MARKETING PRACTICES SALES PROMOTION IS BECOMING A STRATEGIC MARKETING TOOL § As a result of advertising clutter, an increasing number of marketing people have started to use sales promotion as a main element of their marketing strategy § Sales promotion objectives: Ø Increase sales - short and medium term Ø Increase brand loyalty - long term 11

A. MARKETING PRACTICES CO-ADVERTISING AND JOINT PROMOTIONS ARE BECOMING COMMON PRACTICE We are going to see: § Joint efforts between two or more brands of the same company or between different companies § Joint efforts between retailers and their suppliers Why? Ø Lower advertising budgets Ø Marketing synergies with complimentary or non-competitive products 12

A. MARKETING PRACTICES LOYALTY MARKETING CAMPAIGNS WILL BE ENRICHED § Although the number of loyalty programmes are increasing, consumers require more creative and innovative approaches § Consumers have experienced loyalty cards, air miles, etc, but now they want more in terms of quantity and quality Implications Ø Companies will have to use new techniques which will require deeper consumers’ involvement Ø Loyalty campaigns will be an integral part of the marketing communication strategy. 13

A. MARKETING PRACTICES MYSTERY SHOPPING COMES OUT OF THE SHADOWS § Mystery shopping is more than “spying” on the staff § Companies focus on improving the service offered to consumers by their staff § Mystery shopping is used as part of the training process which is related to personal selling, negotiation skills and customer service § Companies receive accurate information, regularly, about the shopping experience of their customers at the time of purchase § It is going to be used as a motivational tool for people § Spending on mystery shopping will be steadily increasing 14

A. MARKETING PRACTICES USE OF ON-LINE SURVEYS TO INCREASE § The on-line market research sector in Europe and N. America is set to rise, according to a recent survey § More than 80% of interviewed managers expect that on-line research will be booming since it is a cheap and fast way of collecting data 15

A. MARKETING PRACTICES CRISIS IN BUSINESS DECISION-MAKING RELATED TO MARKETING § Two surveys - in Europe and USA - reveal the continuing trends of marketing executives making more complex decisions in less time, flooded by data § The main problem will be the volume of data which will double and triple compared to previous years, making decisions more complex SOLUTION Ø Development of CRM and MIS from the company’s centralized data warehouse which will act as information provider to the marketing and sales departments 16

B. CONSUMER BEHAVIOUR AGE COMPLEXITY Children are becoming teenagers before reaching their teens. Today, a 12 year-old kid is more likely think he/she is 17. So, manufacturers are developing children products with “cool teen” attributes 17

B. CONSUMER BEHAVIOUR INDIVIDUALISM Consumers want even more personalization. Therefore, we are talking about one-to-one marketing instead of mass marketing 18

B. CONSUMER BEHAVIOUR SENSORY EXPERIENCES We are becoming more tolerant of risk and change We are actively seeking out more intense experiences. Hence, the increase in extreme sports and short and busy weekend breaks Consumers are more prepared to experiment with new products, discover ethnic foods and try new tastes 19

B. CONSUMER BEHAVIOUR HEALTH Three-quarters of Europeans are now more concerned about their health and well being People will put greater value on healthiness such that sales of healthy, de-stressing and self-medication products will be booming 20

B. CONSUMER BEHAVIOUR SUPERMARKET SHOPPING WILL NOT BE A “DECLARATION” OF LIFE STYLE ANYMORE During the past years, consumers were buying products from supermarkets based on their brand image. “Prestige” as a brand value was taken seriously by consumers This has started to change and in the next few years, consumers will express mainly their need for self-esteem and recognition, by buying products and services which have higher prices, such as cars, holiday packages, etc. 21

B. CONSUMER BEHAVIOUR PRETERMINED PURCHASES AND HIGHER FREQUENCY OF SHOPPING VISITS An increasing number of consumers visit supermarkets having a predetermined shopping list. The picture was not the same 5 years ago Reduction of consumers’ disposable income Consumers prefer to visit supermarkets more often (European average: twice a week), spending less each time 22

B. CONSUMER BEHAVIOUR CRITERIA FOR PURCHASING A NEW PRODUCT IN THE SUPERMARKET The type of sales promotion activity is one of the most important criteria for consumers to buy a new brand for the first time Although, consumers act less and less impulsively, certain sales promotion techniques will help new brands to achieve higher rates of brand trial. Consumers prefer the following types of promotions for new products: • Free samples • Coupons • Displays/ Point-of-purchase (POP) material • On-pack promotions 23

C. RETAILING INCREASING POWER OF LARGE SUPERMARKET CHAINS w Quick expansion of discounters w Strong competition between retailers w Price war and “squeezed” profit margins Impact on suppliers • Higher listing fees • Lower prices • Bigger quantitative discounts and year-end-discounts 24

C. RETAILING CONTINUING EXPANSION OF DISCOUNTERS IN EUROPE WHY? w Consumers are becoming more price-conscious w They are less brand loyal w They are less interested in brand image Main characteristics of discounters • Smaller outlets • Less staff • Limited product categories/ product lines • Private labels 25

C. RETAILING DOMINANCE OF PRIVATE LABELS ? NO!! Brands will prevail However: w Private labels are gaining consumers’ acceptance. They are not considered as “inferior” products w They are cheaper or much cheaper compared to advertised brands w Private labels will make marketing people’s life more difficult since they have to develop and pursue strategies aiming at: • new product development • continuous advertising and promotion support • focus on merchandising stronger presence in supermarkets • quality improvements 26

SOURCES § British Market Research Association §Marketing Society § Advertising Research Foundation §Marketing Week § American Marketing Association §Point of Purchase Advertising Institute § Association of Relationship Marketing §Product Development & Management Association § Business Marketing Association § Datamonitor § Euromonitor § Forrester Research § Federation of European Direct & Indirect Marketing § Institute of Sales Promotion §Sales Marketing Network §World Advertising Research Center §Goldman Sachs Research §A. C. Nielsen §M&M Eurodata §UBS § Marketing Research Association 27