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A couple of months ago, I posted a blog titled “Economy to Remain Sluggish” which cited a number of economic predictions.1 Based on current economic indicators, it would seem that previous predictions of the economy remaining sluggish have proven to be quite apropos. Real estate continues to have a difficult time with more residential foreclosures expected. Meanwhile banks are extending due dates for payments on record levels of at-risk commercial real estate loans to keep them classified as “performing” in an attempt to preserve capital. A high unemployment rate remains largely unchanged–especially considering that any recent offsets were, in the main, coming from temporary jobs in the public sector such as those associated with the census. In other words, we’ve seen very little offsetting growth in the private sector.
Not surprisingly, consumers have continued to be cautious with their hard-earned money. Recent data from the Commerce Department suggests that the rate of personal savings is on the rise, now at 4%. Historically speaking, the rate was 12% in the early 1980’s and had fallen to 1% in recent years while the 50-year average is 6.9%. A recent survey by PricewaterhouseCoopers indicated that 13% of households are saving at least 7% of their income and, in the next five to ten years, 36% of all households can be expected to do the same.2
According to a recent study of nearly 3,000 US adults conducted by Pew Research Center and consistent with findings from economy studies Trone has conducted over the last 20 months, 71% of Americans have resorted to buying less expensive brands. Interestingly, 57% have cancelled or postponed a vacation and 49% indicated they’d loaned money to someone in need.3 Data from the Trone studies also indicated that much of the reported brand switching behavior will be permanent. On average, 59% of mothers across seven product categories indicated they’d be likely to stay with their newer, less expensive brands.
Peter Boockvar of the firm Miller Tabak summarized as follows:
“People are now going to save more. Spending decisions will be based more on stable money in the bank, not your 401(K).”
Given the cautious attitudes and behaviors of consumers – especially their willingness to switch to less expensive brands and stay with them – brands need to be on top of their game. Present circumstances represent an increase in opportunity for relatively lower-tiered, lower-priced brands. A well-developed strategy to gain market share is imperative. On the other hand, incumbent brands had best develop a strategy for maintaining market share and minimizing customer attrition. Now, more than ever, brands need to be strategically planning for their future. Now is the time for brands to be investing in their future.
Notes
1 https://intranet.trone.com/EmployeeV3/TroneWebsite/index.php/our-culture/blog/page/2/
3 http://online.wsj.com/article/SB10001424052748703374104575337120086218434.html
I have a passion for wine. I fell in love ten or eleven years ago when I made a trip to California and learned that wine is much more than something to drink. It is an experience, it is a hobby, it is beautiful, it is science, and good wines are filled with passion. When I shop for wine for myself, I like to venture out and explore new brands that will fill my glass with all of those same attributes. Over the past several years, I have worked off and on at a wine store, not just for a little extra spending money, not just for the discount (although I have to say it is nice), but for the knowledge to deepen my passion for this liquid adventure. I am always intrigued by customers purchasing patterns and how they are swayed by brands.
There are plenty of customers that embrace the journey and then there are those customers that are under the spell of brand names, and nothing is going to convince them to try a lesser known brand. They walk in with their blinders on and just want their case of Meridian Chardonnay. You can suggest a wine that is comparable price with descriptions like “it has luscious tropical fruit, toasty oak and vanilla with a bright clean finish. It is vibrant and fresh with fruit flavors of peach, crisp apple and juicy nectarine.” You can tell them about a sale that allows them to purchase an $18 of wine for $12. But nope, the answer is the same, “just get me down a case of Meridian.”
TastingRoom Inc Sample Size
What to do in a case like this? If you stand behind your product, offer customers a free sample. Don’t have access to a sales force to offer your customers samples? Pair up with a company like TastingRoom Inc. In tough economic times, many are not willing to take a chance on a wine that they may not enjoy as much as their trusted brand.
Gifts are where the brand name really influences purchase. You might find someone willing to venture away from their trusted brands for themselves, but when it comes to a gift, it takes a lot more than a taste. I have several customers that will ask for brands such as Veuve Clicquot or Dom Pérignon to give as a gift. Both are excellent champagnes, both are popular brands and both have very recognizable labels. I have offered many of these customers an alternative — a beautiful bottle from Pertois Moriset. As you may know, Wine Spectator (as well as many other publications) rate wines on a 100 point scale. Wine Spectator gave the Pertois Moriset, Grand Cru Brut NV ($40), a score of 92. They gave Dom Peringnon VV ($130) a score of 91. Now, you do the math. As far as the wine in the bottle, there is no doubt that you are getting more for your money with the Pertois Moriset champagne. But, that is the beauty of a brand. When you are trying to elicit admiration of others, you can’t ignore the value of a well crafted brand.
Perhaps you heard about the roller coaster in the UK that got stuck upside down a few weeks ago. Fortunately for the passengers, they were “only” left hanging for about 20 minutes (I’m sure it felt longer upside down!).
Without a doubt, the economy over the last two years has felt like a very unpleasant roller coaster, and many people have gotten stuck upside down with their investments. The stock market (which is not a proxy for the economy, though many people use it as such) has been all over the board. The latest news driving a selloff – the crisis in Greece. This, of course, drives us all crazy. We have no control over the market (unless Warren Buffett or George Soros is reading this). I encourage you to think about your brands in this same investment context. The major difference being that you can and do have control over the investment in your brands.
Think of your brand as a long term investment. We’ve all heard to maxim that $5,000 invested in your early 20′s as a lump sum will be worth more upon your retirement than beginning to invest hundreds of dollars a month in your 40′s. That’s the power of compound interest, and the value of not trying to “time the market.” Your brand is a long term investment, and you must invest accordingly. During tumultuous times it’s all too easy to cut the marketing budget, watch those dollars fall directly to the bottom line, and plan to “catch up” when you can. However, that’s the real difference between investing in brands and investing in the stock market. Your investment in your brand is temporal — once the time is gone, it’s gone forever and you can never get it back. You lose your momentum with your consumers and your customers, not to mention any cuts you may have to make internally.
Take control of your brand, and your future. Chart the course for your brand, and keep investing. Those who do will reap the rewards in the long run.
According to Trone’s last two economy surveys, most Americans (well over 80%) were worried about the state of the economy. A solid majority (over 60%) also expected it would take at least three years for the economy to recover. In fact, over a quarter of all Americans thought recovery would take 5 years or even longer.
A survey of leading economists recently released by the Associated Press may well explain why Americans view the economy as mentioned above. According to the article summarizing the survey:
The pillars of Americans’ financial security — jobs and home values — will stay shaky well into 2011.
http://news.yahoo.com/s/ap/20100412/ap_on_bi_ge/us_ap_economy_survey
Among the key predictions of these economists were:
- The unemployment rate will stay stubbornly high the next two years. It will inch down to 9.3 percent by the end of this year and to 8.4 percent by the end of 2011. The rate has been 9.7 percent since January. When the recession started in December 2007, unemployment was 5 percent.
- Home prices will remain almost flat for the next two years.
- The economy will grow 3 percent this year, which is less than usual during the early phase of a recovery and the reason unemployment will stay high. It takes growth of 5 percent for a year to lower the jobless rate by 1 percentage point.
- Sales of previously occupied homes, the biggest chunk of the market, will tick up to 5.4 million this year and to 5.9 million in 2011. That would mark continued improvement from the low of 4.9 million in 2008 and be in line with sales in a healthy economy. But there’s a catch. Sales are forecast to rise in part because of another anticipated wave of foreclosures. That will keep prices from rising — and consumers from spending freely.
Given the expectations of these economists and the related financial uncertainty among consumers, the market is going to become increasingly competitive. Engaging the consumer at every point along the purchase cycle will be essential to winning purchases. To these ends, a fully integrated and seamlessly executed market communications strategy is indispensible.
Well, perhaps that’s an overstatement. Recently we reported on consumer shopping behavior and how many brands are being abandoned in the name of economy.
Walmart had seen this, too, and had embarked upon a strategy of playing even harder ball with their vendors (um, sorry, I mean partners), removing many national brands from their shelves. The allure of doubling their retail margins with private label products, while reducing actual consumer cost at the same time, was too tantilizing.
In June of 2009 we reported on the impact the unstable economic environment was having on mom’s relationship with brands. With the economy stabilizing somewhat, we felt it was a good time to review the status of those mom-brand relationships.
In February, a study was fielded to 475 respondents with children under the age of 19 living at home. Among the many subjects on which this study probed was the behavior modifications moms have experienced re: product and retail brands.
Not surprisingly, some key measures of saving behavior actually increased during the period. For example, in the June ’09 study 66% of moms reported being more cognizant of in-store offers. In our most recent study that number has increased to 72%. Similarly, 58% of moms reported using more coupons in June. By February, that figure had increased to 63%. These numbers are hardly shocking. Undoubtedly, given the ebb and flow of the economy, some households that had not previously been impacted have experienced a personal downturn in the last eight months.
Conversely, many families who had felt the economic sting prior to last June have seen their personal situations improve in the interim. Lost jobs have been replaced; salary cuts have been restored, etc. Even more likely, people expecting the worst back in the summer of 2009 never realized it. How have these moms’ behaviors changed?
As a result of these economic realities, we anticipated that a large portion of our sample would have migrated back to their previously established brand relationships. But, while some brand migration is evident, it is nowhere near the levels anticipated.
On the product side, 65% of the respondents reported making substantive changes in the brands they’ve purchased. Of that number, only 9% said that they have returned to many or all of their previously favored brands. Of special interest are the influences on the decision to revert to prior brand behaviors.
In some instances (33%), comfort level with an old brand was identified as a major influence on moms reestablishing their relationship. Other brands benefitted from a lack of performance on the part of the competition. 37% of respondents identified dissatisfaction with their alternative selections as a primary driver of their return to prior purchase patterns. Of equal importance, however, were the steps their original brands took to woo mom back. 34% cited lower pricing and 31% reported more aggressive promotions as major influences on their decision to return to their historic brand relationships.
Retailer loyalties, while significantly impacted by the economy, have not experienced the same degree of migration as product brands have. 54% of moms reported substantial outlet switching. Of these only 8% have returned to most or all of their previously favored retailers.
The reasons for switching back mirror the rationale provided for returning to historic brand behaviors. Comfort with their prior stores was noted as a primary influence by 36% of the moms who’ve reverted to at least some of their old outlets. 30% cited dissatisfaction with the product assortment offered by their alternative choice. And, as was the case with product brands, many retailers had to win customers back with better deals. 36% cited lower prices and 35% noted more aggressive promotions as primary motivators in switching back to their old retail relationships.
The economy, while more stable than it was last summer, remains in flux. As a result, there are continuing pressures on brands’ relationships with moms. The longer this situation continues, the greater the likelihood that the attitudinal and behavioral shifts we have seen will remain permanent. The result will be more cautious and demanding consumers, particularly among those responsible for family. Retailers will continue to go out of business and brands will disappear from the shelves. The winners will be those organizations that understand the true needs and wants of their audiences and can successfully strengthen their customer relationships at every touchpoint.
If you are interested in connecting with moms, email Nicole, our mom team lead.
I went to lunch at a new pizza place the other day with a coworker. I was happily perusing the new menu when I was overwhelmed by excessive use of the ™ symbol. It was on pepperoni™ pizza. It was on the word margarita™. It was even on the word dessert™. What did they think they were protecting? It was not a logo, company name, new phrase or even a corporate typeface. They certainly did not invent the idea of pepperoni pizza. But there it was, on every mention. It’s true, being in this business makes me notice things like that a little more than other people, but the trademark did a lot more than just stand out to me. It cluttered up the design of the menu and signage in the place. I was less focused on what they were trying to communicate to me and more focused on the trademarks. It instantly changed my perception of the brand.
You may ask what does trademarking have to do with how well they make a pizza? Maybe nothing, but like the paintings on the walls and the music playing in the kitchen, it does contribute to my overall feeling of the place. Could I have overlooked this annoyance if the pizza was amazing? Probably. But the fact is that the pizza was average and overall disappointment is the feeling that now comes to mind when I think of the place. And unlike other average pizza places that have kept me coming back time and time again for a quick bite, I don’t think I will be revisiting this one.
There is a legitimate need for trademarks and I use them in lots of things that I write. Just remember, they should be used sparingly and never in a way that takes the attention™ away from™ the real message™ you are trying™ to communicate.™
Trone, Inc. recently (October 2009) conducted a nationwide study of over 900 mothers with children aged 18 or under. Given the state of the economy, one topic the study examined was changes in their shopping behavior across seven key product categories: children’s clothes, their own clothes, household cleaning products, food and drinks for the children, soaps and shampoos, detergents and paper products such as napkins and paper towels.
While it wasn’t much of a surprise to learn that 88% of the mothers surveyed had switched to less expensive brands in at least one of the seven product categories to save money, the broader extent to which mothers have been switching brands to save money may come as a surprise to some. The data showed that nearly two-thirds (66%) had switched to less expensive brands in all seven product categories.
What was even more interesting is that, on average, 59% of mothers who’d switched brands to save money in a given product category indicated they’d be likely to stay with their newly adopted, less expensive brands. Mothers were most likely to return to their former brands where food and drinks for the children were concerned (45% likelihood) while only 38% were likely to do so when purchasing clothes for themselves or paper products.
Given these findings, brands need to be on the alert. The times are ripe with both challenges and opportunities. The fact that 59% of mothers, on average, expressed intent to stay with their newly adopted brands represents a recent increase in opportunity for relatively lower-tiered, lower-priced brands. However, these challenger brands will need to develop a strategy for “staying in the game” down the road and keeping these newer customers in the event they later become open to increasing their spend. On the other hand, incumbent brands had best develop a strategy for maintaining market share and minimizing customer attrition. Now, more than ever, brands need to be strategically planning for their future.
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I know, summer’s winding down, so how could you start such a lengthy reading list now! Hopefully, you’ll be able to cross off the ones you’ve already read. And you can claim that no marketing book published before Fall of 2008 is still relevant. That’ll shorten the list. But at the very least, I hope you can find one or two of these that sound worthwhile. Better yet, you can post your suggestions in the comments area.
I’ve spent the last two years caring for an increased amount of pets for my friends and neighbors through our buddy system. There are no monitary exchanges of payment for the sitting, just a reward with baked goods or a night out to dinner. My reward also comes in the form of being an “aunt” to the pets and seeing the first hand examples of brand loyalty by pet owners.
What do I notice? The pet owners that buy only organic foods for themselves pass along the same eco-conscious decisions with their pets. They buy only items from their neighboring Whole Foods® or Fresh Market®.
For those that do not like change, they constantly buy the same brand and formula of both food and hygiene products (litter for cats and training pads for new puppies) for their loved ones. They are fearful that if they shift to a new formulation or brand, that their pet will be disheveled.
People often ask me about the brand of cat litter or food that my friends use. Here are my observations to how some of my friends and family made their decisions:
1) Sampling is good way for your pet to try and respond to new products. Try enough products until your pet responds positively. Some vets sell or give away samples and most pet stores or big boxes sell or give away samples. Even try visiting a company’s website to order free samples (e.g. Greenies® - http://www.greenies.com/en_US/FreeSample/).
2) Research! Use all of the online resources available that reference real veterinarians. Try news sources, professional publications, and websites by trusted branded manufacturers (e.g. Drs. Foster and Smith® – drsfostersmith.com).
3) Ask around other friends and neighbors- Go to online forums or face-to-face with others to see how they made their choices. Also, consider if you want to pass along your lifestyle choices to your pet (e.g. Facebook.com- search pet pages).
Choosing a brand as an “unofficial” pet sitter or as a new pet owner can be a daunting task, but it’s one that is rewarding when the right choice is made. Just like a child, a pet is a reflection of who you are and your brand loyalty.
