How many of you have heard of the ‘Cobra Effect’?
It originates from an event during the British colonial rule of India.
There were a lot of cobras in Delhi. The cobras were dangerous. The Governor wanted to get rid of them.
He decided to solve the problem with an incentive scheme. Cash for cobras. For every dead cobra you brought in you would get paid.
Initially it seemed to work. People killed cobras and brought them in. They got paid. Which made them want to find more cobras.
But then came a problem.
Some people started farming cobras. They brought in more dead cobras in. They got more cash. So they bred and killed more cobras.
The administration saw the problem. They stopped the scheme.
But now the cobra farmers had a big population of cobras to deal with. They had nobody to sell them to.
So they released them all. Delhi was swarming with cobras.
The ‘Cobra Effect’ occurs when you give people the wrong incentives. The attempted solution to a problem that actually makes the problem worse.
Trying to rid Delhi of cobras led to… more cobras.
Why are we talking about this? In the FMCG world our job is to give shoppers incentives. Incentives to change their behaviour.
But often we don’t give shoppers the right incentives. We give them incentives that work in the short term. For instance, a price discount. One that encourages a shopper to buy your brand this time.
It might work. Many shoppers do buy your brand this time. But then your competitor gives them a discount. So, shoppers buy their brand next time. Then whichever brand is on deal the next time.
The size of your slice goes up and down. But the pie doesn’t get any bigger.
Instead we need to give shoppers more of the right incentives. Give them incentives that can work in the long term. Ones that can re-set behaviours in the category.
That make the category pie bigger. That then enable brands to take a bigger slice.
So, how can you do this? There are 4 key behaviour changes that drive category growth…
More Shoppers. This is about increasing category penetration not just brand penetration. It’s about getting shoppers to start buying.
It’s about driving the visibility of the category. It’s about giving shoppers a simple, clear and compelling reason to start buying (& using.) It’s about reducing the risk of trial – the initial cost shoppers pay or amount they have to buy. It’s about using higher penetration categories to trigger the demand for your category.
To grow the pie you need more shoppers to buy you.
More Volume. This is about buying the category more often. It’s about driving core behaviours. Hardwiring this behaviour. For instance, getting a product that could or should be used daily to be used daily.
It’s about expanding the potential usage occasions for your product. Think Hellmann’s “Love your leftovers.” It’s about encouraging more usage. Think Sure “Whole Body” deodorant.
To grow the pie you need shoppers to buy more volume.
More Products. This is about increasing the repertoire of products that shoppers buy. It’s about driving extended behaviours.
It’s about a regime. Think detergent + fabric conditioner + scent booster. It’s about different products for different purposes. Think Alpro. Almond “splash on cereal.” Oat “splash in coffee.” Soya “pour on porridge.” It’s about different formats. Think Quaker – sachets, pots, boxes. It’s about different tastes. Think Nando’s and different heat levels.
To grow the pie you need more shoppers to buy more products.
More Spend. This is about trading shoppers up. It’s about driving advanced behaviours.
It’s about getting shoppers to make a better choice. Buying something that delivers superior performance on the thing(s) that matter most in the category. It’s about getting shoppers to make an easier choice. Think prepared fruit. Think marinated meats. Think microwave rice. It’s about getting shoppers to make a smarter choice. The best value choice. A product that lasts longer. That enables you to use less.
To grow the pie you need shoppers to spend more.
Many categories have seen value growth in recent years. But this is an illusion of health.
Most of this growth has come from price increases NOT shopper behaviour change.
Too many brands are focused on brand growth. Their slice. Not category growth. The pie.
But if the pie gets smaller, the slice gets smaller.
Our own FMCG cobra effect.
Feel free to forward. Have a great weekend. Speak to you in a fortnight.