This is a summary deck - To download the full report click here. September 2017

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1 This is a summary deck - To download the full report click here. September 2017

2 Executive Summary Digital penetration: Video, vernacular, and views 650M+ users will be online by 2020 Time spent on Digital same as TV Digital households: More valuable Spend 2X of non-digital HHs Riding the natural wave Digital influence: Large, brace for exponential growth $45B digitally influenced FMCG consumption by X e-commerce Winning strategy on digital Digital playbook for FMCG organizations 2

3 Digital penetration: An all-pervasive force 3

4 India s Internet user base is expected Digital penetration: An all-pervasive force to surpass the population of G7 countries Million Million ~ Million ~390 Million Internet users in India Population of G7 countries Sources: TRAI, March 2017, BCG CCI Digital Influence Study,

5 Time spent on digital was the same Digital penetration: An all-pervasive force as time spent on TV in Video Digital: 1.5 Hrs 3.6 Hours TV: 1.5 Hrs Vernacular Print: 0.6 Hrs Views Time spent by urban internet users with digital access on various media channels (Hours/day) in 2016 Source: BCG CCI Digital Influence Study,

6 Digital video has grown significantly Digital penetration: An all-pervasive force over the past two years. 3x in two years 2/3 of TV reach 60M 200M 275M Digital video reach 2015 Digital video reach 2017 Urban TV reach 2017 Source: BARC Broadcast Survey of India 2016 (BARC Urban Universe 15+); BCG analysis 6

7 There s been a significant boom Digital penetration: An all-pervasive force in digital video since last year % 10 11% 14% 24% 28% 31% 0 Key activity being tried out for the first time on mobile by adopters on a new entrant s network Given as a % of users trying the mentioned activity for the first time Source: BCG TiE Billion Digital Volcano Study,

8 Consumers are increasingly searching, Digital penetration: An all-pervasive force viewing, and demanding content in their local language. 10X 5X 2X Growth in local language searches over the past 18 months Higher growth in Hindi content consumption on websites than English content Growth in watch time for regional content on YouTube 88% of Indian-language internet users are more likely to respond to a digital advertisement in their local language than they are to one in English. Sources: Google Internal Data, Indian Languages - Defining India s Internet report

9 Consumers turn to digital to look Digital penetration: An all-pervasive force for views of advocates. On YouTube and on search 100 6X 5X 80 Cooking Watch time YoY growth Beauty and Fashion Watch time YoY growth Food & recipes Beauty & personal care Baby care Home care Sources: Google Internal Data, YouTube Watch Time growth in H1 17 vs H1 16, Monthly Searches Indexed to the largest category (Jul 16-Jun 17) 9

10 Higher searches for problem Digital penetration: An all-pervasive force solutions vs products Hair care Skin care Oral care Sources: Google Internal Data Jan 17-Jun 17; Relative Search Volume for different spaces 10

11 Digital households: More valuable 11

12 Consumers with digital access spend 2X Digital households: More valuable more on FMCG than offline consumers. Personal care Food and beverages Home care Relative spends on purchased product in Online Household to Offline Household; Online Household defined as a household with access to internet via Desktop, Laptop, Tablet or Smartphone Source: IMRB Kantar Worldpanel

13 Consumers with digital access spend Digital households: More valuable even more on natural brands. 24 Shampoo Skin cream Toothpaste +22% +64% +25% Average Natural brands Average Natural brands Average Natural brands Relative spends on purchased product in Online Household to Offline Household; Online Household defined as a household with access to internet via Desktop, Laptop, Tablet or Smartphone Source: IMRB Kantar Worldpanel

14 Digital influence: Brace for exponential growth 14

15 $45B digitally influenced FMCG Digital influence: Brace for exponential growth consumption by $45B $7-10B 40% $6-7B $45B* 10-15% E-commerce Digitally influenced spend *7X of e-commerce in 2020 Digital influence is defined as the use of internet for conducting pre-purchase, purchase & post-purchase activities Sources: BCG CCI Digital Influence Study 2016; BCG RAI report: Digital in Retail, Feb 2017; *Constant currency 15

16 Digital influence by category. Digital influence: Brace for exponential growth <25% 25%-50% >50% Digital influence is defined as the use of internet for conducting pre-purchase, purchase & post-purchase activities Sources: BCG CCI Digital Influence Study

17 28M elite + affluent households (HHs) Digital influence: Brace for exponential growth contribute 60% of digitally influenced consumption. Type of HH basis annual income No. of HHs (million) 2015 No. of HHs (million) 2020 Consumption contribution 2020 Digitally influenced FMCG consumption 2020 Elite Affluent 10 (4%) 11 (4%) 15 (5%) 13 (5%) 39% 60-65% Aspirers 20 (8%) 31 (11%) 22% 18-20% Next billion + strugglers 224 (84%) 228 (80%) 40% 18-20% Total 265M 287M Sources: BCG CCI Digital Influence Study 2016; BCG RAI report: Digital in Retail, Feb

18 Higher digital influence was observed Digital influence: Brace for exponential growth in relatively underpenetrated categories. 5x 5x 5x Underpenetrated categories 2x 2x 3x Penetrated categories 1.2x 1.5x 1.5x 1x 1x Source: BCG CCI Digital Influence Study

19 Winning strategy on digital 19

20 Digital spend doesn t equal time spent Winning strategy on digital by consumers on digital. While costs of online video advertising reduced by 66% in last two years 90% 10% 3X Others 2016 Digital $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Share of advertising spend on different formats (%); Others includes Print, TV, Radio, Cinema and Outdoor. Sources: Pitch Madison Advertising Report 2017; Google Internal YouTube Auction Data, 2017; BCG analysis 20

21 Advertisers lag for multiple reasons. Winning strategy on digital 63% 38% 13% 13% Lack of awareness of importance of digital Lack of clarity on what to do in digital/returns from digital Limited capability in the organization for digital Inertia of current way of working/ traditional media What stops you from spending more on digital? Source: BCG Google CXO Survey, Aug-Sep

22 Advertisers lag for multiple reasons. Winning strategy on digital 25% 75% 0% Clear understanding of returns on digital spend with defined metrics Metrics in place with limited linkage to business results Limited understanding of returns from digital campaigns Which of the following best represents the current state of your digital impact measurement? Source: BCG Google CXO Survey, Aug-Sep

23 Companies are aware of importance Winning strategy on digital but leadership isn t spending adequate time driving digital. 63% 37% 0% 25% 75% Top 3 Top 5 Top 10 >10% of the management committee s time <10% of the management committee s time Do you see using digital as one of the top priorities for your business? Is progress on digital strategy clearly monitored and discussed with the management committee? Source: BCG Google CXO Survey, Aug-Sep

24 Magnitude and shape of digital influence Winning strategy on digital varies significantly based on intent of consumption and category penetration. Intent: Conventional usage Intent: Solutions space Penetrated categories Underpenetrated categories Problem solutions space Soap, home cleaner, edible oil, etc. Hand wash, deodorant, conditioner, etc. Weight loss, natural breakfast, hair style, etc. Increasing order of digital influence 24

25 Brands can follow a simple approach Winning strategy on digital to understand how best to approach digital. Intent: Conventional usage Intent: Solutions space Penetrated categories Underpenetrated categories Problem solutions space Remain relevant and capture attention. Use digital as one more medium to engage the customer. Think digital first, invest in online for cat. creation. Think digital first to target the right customers and create/adapt content specially for digital. Establish content destination backed by authority of trust. Drive association with trust, build familiarity, and use insights for innovation. Increasing order of digital influence 25

26 The share of digital in ad spend for FMCG Winning strategy on digital can potentially grow to ~30% by Can be significantly higher for select, premium spaces 70% 25-30% % Others Digital Share of advertising spend on different formats (%) 26

27 Key implications for FMCG companies Winning strategy on digital The new reality Call for action Digitally influenced spend in FMCG likely to rise to $45B by 2020 Leverage digital across touchpoints in consumer journey Significant growth of 3 Vs: Video, vernacular, and views Actively create and shape the digital strategy around the 3 Vs 10% of households to account for 60% of digitally influenced FMCG consumption by 2020 Invest in data driven marketing to win with these HHs Extent and nature of digital influence depends upon the intent of consumption and category penetration Index the extent of digitally based relevant categories; differentiated approach for different spaces Spend in digital is under-indexed. Organizations are unclear of how to leverage digital effectively. Institute the right measures of performance for digital spends and build capability in the org. 27

28 Are we ready to make the shift? 28

29 THANK YOU September