Key Drivers of Customer Equity in the FMCG Industry in South Africa

Abstract

Highly competitive and with a rapidly evolving customer base, the South African fast moving consumer goods (FMCG) industry is facing new challenges. Composed of two distinct players, the FMCG manufacturer and the retailer, the industry has traditionally relied on branding to stimulate purchase. A proliferation of brands clutter supermarket shelves, and the noise of mass marketing media combined with new media, makes building brand equity less effective. As such, the FMCG customer is becoming more important, and building Customer Equity will give organisations a competitive advantage. The purpose of this research report is to investigate the key drivers and sub-drivers of Customer Equity in the FMCG industry, and to determine their relative importance. Specifically, the research investigates the non-alcoholic ready to drink (NARTD) category within the FMCG market. Coca-cola, Pepsi and a house brand are measured in terms of performance against these sub-drivers. Data was collected from 216 respondents, using structured questionnaires. Data was collected over email surveys, via in-home and mall-intercept surveys. The literature highlights three key drivers of Customer Equity. These are value equity, brand equity and retention equity. Six industry experts interviewed in the qualitative analysis verified that these key drivers are appropriate in the FMCG industry in South Africa. A principle components factor analysis was used to determine the sub-drivers of each key driver, and the relative importance of each was determined. A key highlight is that value equity is disproportionately more important compared to brand and retention equity. Taste, a sub-driver of value equity, is the most important sub-driver. Coca-cola, Pepsi and a house brand were then compared to the seven product sub-drivers, to determine the relative performance of the key players in the category. Recommendations to the FMCG industry are offered. Recommendations are also made to the relevant organisations, to add perspective in terms of their marketing strategies