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The current economic environment is presenting huge challenges to marketers all over the world. And, the situation isn’t getting any better. Finding more efficient and effective ways to engage customers has never been more important. Companies must make a commitment to remain competitive and uncover opportunities to become even stronger.
An economic downturn is not the time to stop investing in marketing. Instead, companies should be focused on how marketing can help them flourish in a down economy beginning with a hard look at their marketing plan.
Retool your marketing plan. The times have changed and to survive companies need to adapt. And no, that doesn’t mean cutting your marketing budget in half. It means reevaluating how you communicate with customers. Now more than ever your marketing programs must deliver to the bottom line.
Reevaluate your marketing approach. When times are good it’s easy to fall into a routine. When you examine how every dollar is spent you’ll be surprised to see the number of opportunities that present themselves.
Know your customers better than anyone else. Want to spend less money and drive better results from your marketing programs? If you know, I mean really know your customers, then you’ll know exactly when, where, and how to spend marketing dollars. Companies making investments to learn all they can about their customers will see returns.
Your customers are looking for a good value. Do you know what value you provide to your customers? Understanding the challenges your customers face gives you the ability to connect with them on an emotional level. Customers respond when they believe a company understands their struggles and offers solutions to ease their daily stress. Do the research. Your marketing plan will thank you.
Focus on existing customers. Don’t forget about your current customers. Instinct says we need to acquire more customers when times are tough. I’m not saying to stop looking for new customers, but optimizing the relationship with existing customers may be the quickest way to drive new revenue. Opportunities are likely exist for cross-selling and up-selling within your customer database. While the investment to engage current customers is low, the potential revenue impact is high.
Getting a customer to be loyal to your brand is as old a practice as branding itself. The two go hand-in-hand. If there is no loyalty, then the competition can steal your customer away with the slightest of effort. And since you have invested in attracting your customer, why waste the investment? Instead, every brand should make a further investment in a loyalty program, something that rewards a customer’s devotion to the brand.
I am a coffee drinker. When the economy went south in 2008, I looked, like everyone else, for a way to save money. I figured that Starbucks was an extravagance I could do without, and I switched to a local coffee source, Sheetz Bros. Coffee. Sheetz is a convenience store and gas station that pushes their rewards up front in their advertising. And I felt the love when every tenth cup of 99¢ coffee was free. I’m talking about 20 oz. of caffeine, a Venti in Starbucks world, for 99¢. Very economical. And I stuck to this routine for about eight months. Even got myself a My Sheetz Card, so my gasoline consumption also fed my need for morning coffee. They had my business and my loyalty.
But then something in me snapped. I found out through a co-worker that Starbucks has a rewards program. Uh-oh, sounds like trouble. With the sense of economic ruin fading in me I ventured back to Starbucks, motivated by the fact that maybe I could get a discount on the coffee I loved. Actually, the Sheetz coffee kinda sucked anyway, so it was too easy to fall back into my old habit. But the truth is, with my Starbucks rewards card, I increased my frequency at Starbucks above my original usage pattern. By offering me a free drink after 15 purchases, and a freebie on my birthday and some refills and wi-fi, I became a man possessed by the need to have my Starbucks. My personalized gold card is in the mail, having earned it with 30 purchases, and I feel like Norm on Cheers whenever I walk into the place. (Even if they don’t actually shout my name, or even remember it.) Starbucks is an extravagance I now recognize as a necessity.
I am still loyal to Sheetz for my gasoline purchases. And about once every two months I get a discount of 10¢ a gallon on my fill-up. And I’m also an elite Marriott user, which gets me free stays and perks at Marriott properties globally. And Pet Smart, Harris Teeter, Best Buy and Lowe’s Foods are all hanging their logo on my key chain and spiffing me for shopping there. It’s not a guarantee that I will stay loyal, but it does give me some motivation.
Multi-generational households are on the rise, and we hear a lot about it this time of year with a new crop of college grads opting for living with the ‘rents over paying rent on their own. According to a recent study released from the Pew Research Center, there are now 49 million Americans living in multigenerational households. That’s one in 6 p
eople waking up to breakfast with a grown daughter, brother, dad or grandma! Moreover, there was a 30% increase in households containing three or more generations of family members between 2000 and 2009. That’s 6.6 million households last year! Said another way, as many as 20% of adults 25 to 35 and 20% of adults over 65 are living in multi-generational homes.
It’s a trend that is ripe with opportunity for brands paying attention. Whether a temporary fix or a permanent fixture in American households, this increase leads me to wonder about all of the consumer decisions being affected by this generational cross pollination. Having been a “boomeranger” myself about 10 years ago, I’ve experienced, firsthand, how moving back in with mom and dad can permanently affect brand and buying decisions for everyone. When I moved back home, I’d already been surviving on my own a few years. And I knew I couldn’t keep surviving on staples like Lean Cuisines and takeout, so I paid more attention to moms’ weeknight recipes and brand preferences in everything from pasta to brownie mix. I humored dad by watching Band of Brothers for his 70th, 95th, and 98th viewings, and they humored me by spending Sunday nights with The Sopranos and the ladies of Sex and the City (much to all of our discomfort in certain episodes). And mom got me hooked on CBS Sunday Morning – a weekend ritual I still enjoy. I convinced dad to move up from an ATM card to a Debit card, and he convinced me that calling Wachovia for my balance is not the same as balancing my checkbook. Even my cat became a wet-food snob under the influence of my parents’ pampered cat.
The So What for Marketers:
While those examples might not fit neatly into marketing plans, this shift in households is one worth exploring for your brand. Here are a few thought-starters for finding opportunities within this trend:
Take advantage of shared entertainment: Wii Tennis, anyone? More and more entertainment is catering across generational lines. And multi-generational travel is said to be the fastest growing travel segment. Whether it’s your media plan or a promotion, look for ways to connect to entertainment that crosses the new generational boundaries of households.
Reflect their reality: New shows like Modern Family and Parenthood feature plots that involve three generations, and Parenthood even explores an adult daughter moving back in with her retired parents, but there’s lots of room for advertisers to explore this space. Why is it that the only ad I can think of that reflects this reality is the Folgers father/daughter spot, where the adult daughter living at home announces to her father she is getting married? Complete patriarchal lameness aside, I give Folgers props for recognizing the multi-generational household.
Understand the generational dynamics of your category: Is your brand equally loved across generations or is there growth opportunity among younger or older generations? Who leads and who follows? Can you turn mom, granny or daughter into an influencer to the rest of the family?
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
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.
According to Trone’s most recent economy study of nearly 3,200 consumers, 45% of those surveyed indicated they’d planned at least one major furniture purchase from among the following types of furniture: bedroom, upholstered, mattresses and box springs, dining room suites and outdoor. While we expected a sizeable percentage of consumers to have abandoned their purchase plans for a big ticket and, in many cases, non-essential item such as furniture, we were somewhat surprised to learn that the vast majority (73%) had done so.
By way of comparison, 63% of the same consumers indicated they’d planned at least one major household purchase among non-furniture products such as flat panel televisions, computers, major appliances and outdoor power equipment. Even though a majority (58%) of these planned purchases had also been abandoned, the damage was quite a bit less than what the furniture industry has had to withstand – an industry with fewer planned purchases and a higher per capita abandonment rate.
Given the continued financial uncertainty among consumers, especially when considering big ticket purchases, the market for big ticket household items is going to become increasingly competitive. Manufacturers serving this market will have to engage the potential customer every step of the way through the purchase cycle, from brand and product awareness through the final phases of decision-making, to win purchases. To these ends, a fully integrated and seamlessly executed market communications strategy is essential. Those who don’t have such risk becoming another statistic.
The state of the economy is clearly going to crimp gift giving plans for most folks this year. However, it appears our pets will continue to make out just fine. A report recently published by MSNBC shows that while 84% of consumers say they are going to cut back on gift giving this year, only 23% are going to do so with their pets. (You can read the full article here: http://www.msnbc.msn.com/id/27582273/from/ET )
This finding certainly comes as no surprise to me. Earlier this year we reported findings from a Trone consumer survey that showed pets to be the last place consumers planned to cut spending, faring better than even our children. (Trone report here: http://www.trone.com/index.php/category/consumer-snapshots/pets/ ). What we know is that for a large percentage of “pet parents” their pets are much more than mere “animals,” they are part of the family. In fact, we have identified 8 distinct segments of dog owners and 6 segments of cat owners. Contained within these segments are 44% of dog owners and 33% of cat owner who are highly bonded with their pets. For these consumers, their relationship with their pet drives spending, and is a much better predictor of how much they’ll spend caring for Fido than any socioeconomic variable.
So, if you’re in the market for a Shark Attack Hoodie, you’d better hurry. There are only 17 shopping days till Christmas and it looks like demand for doggie gifts will be at an all-time high!
