Decoding Consumer Behavior in FMCG: The Quantity vs. Price Point Dilemma

Consumer behavior is a fascinating and ever-evolving aspect of marketing. Understanding how and why consumers make purchasing decisions is crucial for businesses, especially in the fast-moving consumer goods (FMCG) industry. In this LinkedIn article, we'll delve into the intriguing dynamics of consumer behavior, focusing on the contrasting purchasing patterns of two FMCG product categories: Milk and Biscuits.

Quantity vs. Price Point:

In the world of FMCG, Milk and Biscuits stand out as prime examples of how consumer behavior can be shaped by different metrics. Let's take a closer look at these two categories:

1. Milk - The Quantity Metric:

When it comes to Milk, whether it's branded or unbranded, consumers primarily base their decisions on the quantity. Instead of asking for a specific price point, customers often request a certain quantity, such as a 1 Liter, 0.5 Liter, or 2-liter pack of Milk. It's a rare sight to see someone asking for ?50 of Milk. In this category, Quantity remains constant, and the price point isn't the defining factor.

2. Biscuits - The Price Metric:

On the other hand, when we shift our focus to Chips or Biscuits, the primary purchasing metric is the price. Consumers opt for a ?10 chips packet or a ?5 biscuit pack, emphasizing the cost rather than the quantity in grams. Rarely do we hear someone asking for a 30g chips pack. Price points, such as ?5 or ?10, play a significant role in consumer decision-making in this category.

Price Points as Holy Grails:

It's worth noting that for certain FMCG categories, price points like ?5 or ?10 are treated as sacred benchmarks. Even in the age of digital payments and UPI adoption, these price points continue to hold immense sway over consumer preferences. Rarely any brand has managed to thrive by offering products at unconventional price points, such as ?7, ?12, or ?14.

The Profitability Challenge:

One of the fascinating aspects of this dichotomy is how it affects the profitability of FMCG businesses. In categories where price points are rigidly adhered to, companies may resort to reducing the grammage of their products to maintain profitability. In contrast, for products where the price point is less rigid, businesses have the flexibility to increase prices without altering the grammage or quantity of their offerings, thus boosting profitability.

Conclusion:

Consumer behavior in the FMCG industry is a dynamic interplay of various factors, and the dichotomy between Milk and Biscuits serves as a striking example. The metrics that consumers prioritize, be it grammage or price points, can have a profound impact on how businesses operate and strategize in these categories. Understanding these nuances is essential for FMCG companies looking to meet the ever-changing demands of their customers and remain competitive in a dynamic market.

As the FMCG landscape continues to evolve, staying attuned to consumer behavior patterns is crucial for businesses aiming to navigate the challenges and opportunities that arise in this exciting industry.