Mumbai: The advertising industry is gaining momentum after COVID-19 due to large exposure to digital platforms. Large conglomerates are spending heavily on advertising consumers and also prefer quality products. In the current scenario to meet equilibrium companies are meeting their working capital needs. Hence revenue generation of the company is facilitated by rising cost of production and spending on marketing and advertising brands especially in the FMCG sector (Fast Moving Consumer Goods) increased advertisement costs almost by 10 % or more.
Artificial Intelligence (AI) tools and the introduction of Chat GPT bring ads closer to the target audience. It is helping consumers to make the right decisions to buy a product. Collective market information and intelligence consumers are getting on one click. However, it is not sufficient for brands to collect information depending on AI. It cannot assure arithmetic and qualitative accuracy but it helps brands to identify consumer purchasing behaviour.
As per a report by GroupM advertising expenditures of Indian companies are expected to grow by 15.5% on a year-on-year basis. In 2022 the FMCG sector had 38 % percent itself in overall digital advertising expenditure. According to this year's GroupM's ' This year, Next Year' 2023 Global End of the Year Forecast, Indian adex (Advertising Expenditure) grew by 11.2 per cent anticipated to generate Rs 16.9 billion. In FY24 adex is expected to grow by 12.1 per cent to reach Rs 152740 crores. Increasing digital spending on the plate is allowing brands to maintain profit margins. Spending heavily on R&D (Research and Development) causes companies to raise prices along with advertisement costs.
Marketer's eye on D2C (Direct to Consumers) - With rising costs marketers are concentrating more on product offering directly to the consumers without any intermediaries, channels, or middlemen. Companies want to omit variable costs. The rising patterns of Affiliate marketing, and direct sales taking shape in the FMCG Industry.
On this issue, Indiantelevision.com exclusively had interaction with Willpower Group of Companies chairman and CEO Jayant Bhat.
Edited excerpts
On Big Private FMCG players spending heavily on advertising budgets
Large Private FMCG leaders have been into heavy advertising for decades now. They are brand leaders only due to heavy advertising and the ability to hold on to heavy marketing expenses along with scalability factors. Smaller start-ups have tried to scale based on burning money without sufficient reach. It would be a killer attempt to spend money heavily on marketing as FMCG is a low margin if attempted to scale on the basis of a distribution model. With changing times modes of advertising have changed and so have the psyche of consumers. So one must have a deep thought process to reach people.
On finding the future of small retail businesses in rapidly changing technology
Small retail businesses won't be majorly affected as most of the smaller outlets are doing business on need-based requirements. This means as and when requirements arise customers visit them as they have been doing for since long time. There is space for everyone in the FMCG business arena. With the advent of DMART, everyone shouted that Kirana stores would be finished. With the advent of ' Big Basket' ' Zepto' etc, all thought Kirana stores will be killed. But nothing of that sort happened nor will happen. We are seeing Kirana stores are now taking orders on WhatsApp and delivering products at no extra cost.
On looking at the current market segmentation of FMCG when it comes to revenue generation
CMS (Current Market Segmentation) of FMCG varies business models and factors. Needless to say, FMCG will continue to grow by about 10 per cent to 12 per cent per annum. Newer categories and product variants will be introduced with a customer mindset ready to accept new concepts easily.
On Willpower entering into a new concept of business structuring
Willpower Group by design is into multiple businesses and multiple concepts. As our core business is consulting for scalability and mentoring to improve revenues as well as processes, we get good companies who are more than willing to tie up with Willpower and join with us.
Our last venture is Dropservicing and we are launching the same in January 2024. We firmly believe that the Dropservicing business model is going to rule 2024 till 2034. Till now, we have focused on setting up manufacturing units and investing heavily in businesses that would give returns years later. Now we have decided to be an intermediary between service providers and service seekers.
What typically happens is those who want services from freelancers are afraid that they will not get services as promised. We are building a network of freelancers who would get projects from us and will ensure that work is completed as promised. In case one freelancer fails to deliver we will get it done from someone else. It will be responsible for projects we take in hand.
On people's lack of awareness about organic and your take on spending on marketing
Emphasising natural products is one thing and its reach is another. Pricing plays a major role for most Indians and keeping pricing as per the expectations of the majority of Indians. It is due to the price sensitivity of the Indian market the addition of chemicals and other ingredients to the maximum possible.
But our business model is sustainable only under the direct-to-consumer business model. Our experience in the retail business has not been good. Our policy is against the heavy burning of money for customer acquisitions. Today companies burn about Rs 5 to earn one rupee revenue, forget profitability. We don't spend anything on marketing other than direct marketing as well as free sources on FM, Instagram, etc. I have seen many brands coming and dying every year in the name of brand building only because of heavy spending.
On the essence of your philosophy for the product and its marketing
• If it's not unique and different, it's just not Willpower
• Give a purity report to every customer and create awareness that they need to ask for a purity report from any company that sells it's consumable products to them
• Avoid chemicals or use chemicals to the minimum possible
• Honouring commitments, showing transparency, and admitting mistakes
• Focusing on the Direct to Consumers business model, using minimum expense on customer acquisition.
• Promote the subscription-based model and acquire advance revenue through a subscription model.
• This model helps in retaining customers for a longer duration
• Let the quality speak than discounts
On predicting something in the FMCG sector instead of e-commerce
- E-commerce would switch over to M-Commerce i,e Mobile Commerce. In effect, it is e-commerce only. Customers today are used to convenience. Customers visit large format stores only for convenience. We are going to start our own e-commerce website www.sirfsale.com in January 2024. That is going to be our extension of the direct-to-consumer business model.
The future would be with the ones who offer more convenience to consumers. Offering convenience is the key to success for every entrepreneur. Deep discounts are just fake whitewash and should not be considered a success because the customer is never loyal to brands that offer discounts. They keep rolling from one brand to another in search of discounts. So the burnt money to acquire such customers is often lost.
