KPMG: Price sensitivity and product quality, the key to success in 2012

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Despite a Sluggish Revenue Forecast for 2012, Consumer Companies Plan to Invest in Emerging Markets, Product Innovation and Mobile Commerce, says KPMG survey.

• Nearly half of companies identify the US and Canada as the markets with the most promise for near-term growth
• New product strategies hold the most potential for growth in emerging markets
• Sustainable practices evolve as more than half of CFOs see positive impact on operating costs
• CFOs see mobile technology as the most promising for driving sales

Nearly four out of 10 financial executives from the world’s leading global consumer companies expect their revenues to be lower in 2012 than 2011, yet many say they are still planning to invest in new markets, products and mobile commerce to grow market share, according to KPMG International’s annual Consumer CFO Survey.

KPMG’s 2012 Consumer CFO Survey: Turning Global Risk into Opportunity surveyed 350 senior financial executives at leading global retailers, and food, drink, and consumer goods manufacturing companies in December 2011. A series of in-depth interviews with the CFOs at Tiffany & Co., Dollar General, Fonterra, Metcash, Coop Lombardia and Aurora Fashions, were also conducted for the report.

Even with growth projected to be slow in the US and Canada, 43.6 percent of respondents believe those two markets will provide the greatest opportunity for growth over the next 2 years, with China and Brazil ranking second and third, respectively.

As Dinu Bumbacea, Management Consulting Partner at KPMG in Romania comments: “The global financial crisis has had a major impact on Romanian consumer behavior. Customers are now more price-sensitive than ever, but also willing to spend on quality if they think they are getting value from their purchases. Tracking consumer behavior and changing product strategy in-line with its evolution will be critical to success. But companies must be careful not to dilute their brands, or lose coherence through overly frequent changes to their products and pricing”

“Surprisingly, even with the bulk of new consumers coming from Asia and India, and fragile consumer confidence in developed markets, the majority of respondents globally see North America as a great growth opportunity, at least in the short term ”, said Willy Kruh, KPMG Global Chair of Consumer Markets.

Notwithstanding, more than two-thirds of respondents say they are increasing their budgets over last year in preparation for expansion to new markets—with over 80 percent saying that marketing to new middle class consumers in emerging high-growth markets will drive long-term success. Respondents from the Asia Pacific region are most likely (44 percent) to be increasing this year’s overall budgets than other regions as they target neighboring markets.

Even with tempered optimism for growth and expansion, however, the biggest threats according to survey respondents continue to be economic uncertainty for 44 percent, followed by political instability (27 percent) and sovereign debt crises (21 per cent).

Product innovation leads the growth strategies that companies are pursuing this year with over 40 percent of respondents in North and Latin America, Asia Pacific and the Middle East /Africa saying they will adapt products developed for their home markets to meet the needs of others. European companies, however, were more likely to sell their products unchanged in other markets, adapting only the labeling, packaging and/or instructions.

“The overall goal among respondents is clearly one of growth”, said Kruh. “Which strategies companies pursue depends on the maturity of a given market. We’re seeing that in emerging markets, product innovation has the most potential as a growth strategy. But most important, as many of our respondents have remarked, it’s always critical to determine how well an opportunity aligns with a company’s core competencies and if there’s willingness to wait for the return on investment.”

Sustainability continues a steady climb up the corporate agenda. Nearly three-quarters of the respondents cite sustainability as a tool for competitive positioning, innovation and brand reputation. Moreover, over half say that sustainability has had a positive impact on their operating costs and increasingly on sales and market value.

This year, over a third of respondents will use mobile technology to maximize sales, outranking both the internet and e-commerce. Customer relationship management (CRM) placed second behind mobile as the technology most likely to positively impact sales.

“In the space of just a few years, mobile has transformed the landscape for the retail and consumer sectors. Mobile technology is a key tool for driving sales and awareness, both in developed and emerging markets”said Bumbacea. “Location-based services can help to drive traffic to stores, and be used to reach out to customers on a real-time basis about offers and promotions. But mobile also shifts the balance of power between customer and company. With constant access to price information, consumer reviews and competitor information, customers are more knowledgeable than ever. Building strong, lasting relationships with these customers will be a key challenge in the coming years.” notes Dinu Bumbacea.

“The growth picture for consumer companies is quite divergent and this year will be a turning point for them”, commented Kruh. “Those that successfully make the right trade-offs between investing in developed and emerging markets, are attuned and responsive to the continuing price sensitivity among consumers, and grasp the ongoing importance of product quality and perceived value as well as service localization should see their efforts rewarded.”

Source: KPMG

This article is also available in: Romanian

This post is also available in: Romanian

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