The Truth Behind FMCG Brands: Are Australians Really Abandoning Big Names?

Yesterday, an article on news.com.au proclaimed that Australians are cutting back on big brands due to the cost of living crisis. 

For any brand manager or marketing manager in FMCG right now, you would be concerned this may have disastrous consequences.

Apparently, an “internal document” was leaked and revealed that categories like body wash, hand sanitisers and cleaning products were seeing a “sales slump”. 

Sounds like a strange place for Aussies to cut back, these aren’t luxury purchases. As we dig a little deeper (aka keep reading the article), it mentions that  Coles also reported that sales were down compared to the prior year because of COVID19 and a big flu season last year… 

That seems to make a bit more sense.

Anyway, aside from the sensationalist headline and potential misrepresentation of data, this article sparks some interesting questions.

Why are we obsessed with “big brands”? 

The article names some big brands from these categories like Ajax, Pine O Cleen, Dove and Palmolive. Implying these brands are being ditched by shoppers. This may be true, but is it because shoppers are switching brands, or because the market has declined and these brands largely make up ‘the market’?

The latest in marketing science helps us unpack this nuance with the concept of the “double jeopardy law”, brought to public attention by the work of Byron Sharp and the Ehrenberg Bass Institute – Australia’s Institute for Marketing Science.

And no, we aren’t talking about the 1999 film “Double Jeopardy” with a score of 27% on rotten tomatoes.

The Double Jeopardy Law for Brands 

The double jeopardy law contends that in markets where the products are largely substitutable and buyers’ needs are largely similar (i.e. our previously mentioned cleaning and body wash products), a law-like pattern occurs. The law states that brands with lower market share have fewer buyers and slightly lower loyalty. 

On the other side, this means brands with higher market share (like Ajax for example, the market leader) have more buyers and slightly higher loyalty.

So when buyers in the market decide to buy less, or there are simply less buyers in the time period in general, the brands with the most buyers tend to feel it the most. Makes sense, hey?

So what does this mean for the pursuit of “brand loyalty”? 

The double jeopardy law gives us some good clues about how a single-minded focus on loyalty won’t necessarily move the needle for brand growth. 

Let’s add some numbers to our earlier example to illustrate the point.

Assume Ajax shoppers buy the brand 4 times a year and they have a household penetration of 15%.

Now let’s compare that to a lower market share brand like Nifti. Nifti is likely to have slightly lower loyalty, perhaps a frequency of purchase of 3.5 times a year, but far lower household penetration of only 5%.

If Nifti focused only on loyalty, do you think they could grow significantly? 

Let’s say they develop super loyal shoppers, and their shoppers purchase more than the market leader Ajax at 4.5 times a year.

Here’s how the unit sales volumes would look if we pretend there are 1,000 households in the total market:

As you can see, even if Nifti achieved outsized results and eclipsed the loyalty of the market leader (unlikely, but let’s pretend), they won’t necessarily see an outsized return in unit sales or market share. 

Is pursuing loyalty worth it? 

100% loyalty doesn’t really exist.

And that’s okay.

Because brands grow big by having light connections with the many, instead of strong connections with a few. 

And over time, the Double Jeopardy law shows us that with more buyers, loyalty naturally increases.

An alternative to loyalty – rewards.

Instead of chasing loyalty from existing shoppers, brands can grow with the implementation of a rewards program.

Because a well designed rewards program is about more than just rewarding loyal shoppers.

It’s about attracting new customers. 

Encouraging back lapsed users. 

And driving more light buyers. 

In fact, marketers should be cautious about loyalty programs with blanket offers to the mass market, because it’s likely they are just rewarding existing customers and giving away margin to those who would have purchased anyway.

Technology based solutions

Marketers who are adopting the latest in marketing science are also turning to the latest in marketing technology. Melbourne-based Shping is a universal rewards program, designed to help brands build connections with Aussie shoppers. The Shping platform utilizes AI and a mobile app to collect, process and analyze shopping receipts from its members, transforming data into actionable campaigns for brands.

The benefit of the receipt data collected means Shping can tailor offers and communication so that it is relevant to the individual’s stage in the purchase cycle. Only presenting discounts and deals to “nudge” buyers over the finish line.

So what’s the lesson here?

Be wary of news.com.au articles!

But actually, the main point is that marketers should challenge conventional wisdom, embrace the latest in marketing science and continue to explore new ways to engage the market. 

If you found this article interesting, let us know in the comments.