Why retailers and FMCG companies are increasing digital and online ad spends and paring broadcast, print expenditure

a hand holding a cellphone: Why retailers and FMCG companies are increasing digital and online ad spends and paring broadcast, print expenditure

© Sounak Mukherjee
Why retailers and FMCG companies are increasing digital and online ad spends and paring broadcast, print expenditure

While surfing the internet have you ever double-clicked on an image on Instagram or reacted to a video on Facebook? Or have you ever clicked on something in a Google search results page that takes you to a website, only to realise you had clicked on an ad?

This is how Fast Moving Consumer Goods (FMCG) companies, brands and apparel retailers are luring customers to shop products or apparel from their websites during the Covid-19 lockdown.

With most people resorting to online shopping due to the fear of getting infected with the deadly virus, FMCG and apparel retailers have increased their digital and online advertising spends and reduced broadcast and print advertising.

“Retailers and FMCG brands do show the tendency to favour online advertising, as well as digital and television to an extent. What is suffering is print,” said Harish Bijoor, brand strategy specialist and founder, Harish Bijoor Consults Inc.

FMCG brands see a clear trend of moving as much as 12 percent of expenditure into digital and online, Bijoor added. Earlier, only 7 percent of expenditure was spent on digital media.

Digital marketing/advertising refers to the use of digital channels, devices, and platforms to promote a message, irrespective of whether they are online or not. Online marketing/advertising is a subset of this and includes advertising on search engines, social networks, pay per click, banners and pop-ups, among others.

Experts believe that brands are not shying away from spending online as most have seen robust sales through digital ads.

“We have come across brands that were doing business of Rs 1 crore pre-Covid and after online or digital ads their business has doubled to Rs 2 crore in the last few months,” said N. Chandramouli, CEO of TRA Research, a consumer analytics and brand insights company.

Why not television and print?

Brand experts feel that most companies are shifting to online as the ticket size on digital ads can be controlled, depending on the budget of the company.

“Out of our total advertising budget, we are spending more than 50 percent only on digital ads and it has definitely helped us garner good sales,” said the CEO of a well-known apparel brand, who did not wish to be named.

“Spending just a few bucks we get more visibility and we are certain that it will  translate into an increase in traffic towards our website and boost online sales,” the CEO added.

Most industry experts complained that print and television advertisements are too expensive and are not helping brands to translate this into revenues.

The most expensive ad medium is television, followed by print and digital.

For example, an FMCG product ad on television can cost around 4-7 lakhs per 30 secs, while ads during the IPL cost Rs 12-13 lakhs for a 10 second play.

In the print media, the brands are forced to go by the page or column charge set by a particular publication (half page, full page or column centimetres), which may cost anywhere from Rs 5 lakh to 70 lakh.

In terms of online ads, brands have the flexibility to choose which type of ad they want, based on their budget. They can go for search engine optimisation (SEO) ads, pay per click ads, pop-ups or banners.  Pay per click costs Rs 8,000-25,000 per month, SEO ads go for Rs 10,000-25,000 per month.

Cut in ad spends

Both the FMCG and retail sectors have had to face their own set of challenges in the past few months due to the Covid-induced lockdown.

The FMCG sector had to face demand and supply chain challenges, while retailers had to face a complete closure of shops during the lockdown as they were counted among non-essentials.

Low demand within the FMCG space and complete closure of retail shops had prompted FMCG and retail companies to cut their ad spend. Advertising is highly discretionary in nature and companies were not willing to spend when demand was weak.

Marico reduced its advertising spend by 18 percent in the fourth quarter of financial year 2020 from the corresponding quarter of the previous year. The company spent Rs 126 crore in Q4FY20, an 18 percent reduction from Rs 153 crore in Q4FY19.

Dabur’s advertising spends plunged 39 percent YoY and 20 percent QoQ in Q3 of FY20.

Godrej Consumer Product’s ad spend dropped 20 percent YoY in January-March FY20.

Will the open the tap?

Brand experts feel that to get back in the game, companies will have to start spending on advertisements and promotions as the festive season is inching closer. They believe that the focus should be on the digital medium as it is useful for advertisements, since most people in the apparel industry’s target audience have access to it.

The experts also said that print media may not be preferred for advertising since people are not buying newspapers.

Going forward, advertising on mobile phones, which is a tiny fraction of the humongous sums spent on television and print ads, could gain traction. Tie-ups with over-the-top (OTT) platforms may be explored too.

Rating agency CARE Ratings says the aggregate advertising and sales promotion spending across all sectors in India during FY20 stood at Rs 39,000 crore, reflecting nil growth during the year. This came in the wake of a 22 percent increase in FY19.

Overall in FY20, the FMCG sector was the biggest spender (Rs. 9,652 crore) on advertising and sales promotion activities, the rating agency stated.

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