Brand loyalty in  recessionary times
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Brand loyalty in recessionary times Presentation Transcript

  • 1. Brand Loyalty in Recessionary Times Can We Apply Today‟s Lessons Tomorrow? Gian Fulgoni Executive Chairman and Co-Founder, comScore, Inc.
  • 2. Learning from Recessions  The Past: Marketing Was Transformed by the Great Depression of the 1930s  The Present: Many Preferred Brands Lost Share in the Recession of 2008 / 2009. But There Were Also Some Big Winners Who Leveraged Digital Marketing  The Future: The Role of Digital Marketing in Building and Maintaining Brand Strength © comScore, Inc. Proprietary and Confidential. 2
  • 3. The Past: Marketing was Transformed by the Great Depression of the 1930s © comScore, Inc. Proprietary and Confidential. 3
  • 4. The Great Depression transformed marketing during the 1930s  Clients demanded the same level of Marketing In The Thirties service from ad agencies even as they spent less  There were harder sells  Value messages became more explicit and direct  Price became the most prominent element  Contests, promotions and premiums came to the fore as a means of adding value to brand purchases Source: Bob Heyman, Digital Automat © comScore, Inc. Proprietary and Confidential. 4
  • 5. Companies Had To Innovate To Survive American food brands introduced in the 1930s…  1930  1935 Birds Eye Frozen Foods Adolph's Meat Tenderizer Wonder Bread (Sliced) Kit Kat bar Hostess Twinkies Mott's Apple Sauce  1936 Snickers candy bars (Mars, Inc.) Betty Crocker (General Mills)  1931 Elsie the Cow (Borden) Spry (Unilever) Beech-Nut Baby Foods Hungry Jack pancake mix (Pillsbury) Bisquick (General Mills) Mars Almond Bar Tootsie Pops  1937  1932 Pepperidge Farm Bread Frito Corn Chips Spam (Hormel) Skippy Peanut Butter Kraft Macaroni & Cheese Dinner Heath bar (Candy Bar) Ragu Spaghetti Sauce  1933  1938 Nestle Toll House Chocolate Chip Cookies Lawry's Seasoned Salt Campbell's Chicken Noodle and Cream of Mott's Apple Juice Mushroom soups Nescafe (Instant Coffee) Kraft Miracle Whip  1939  1934 Lay's Potato Chips Pet Evaporated Milk Cream of Wheat Ritz Crackers (Nabisco) Dairy Queen (Ice Cream Stores) © comScore, Inc. Proprietary and Confidential. 5
  • 6. New Media thrived in the „30s  Radio was the “new media” of the „30s  In the average household, radio was left on 4 hours a day  Radio was the top rated amusement  Soap Operas were invented by P&G  Bingo became popular in the „30s  Piano sales plummeted Source: Bob Heyman, Digital Automat © comScore, Inc. Proprietary and Confidential. 6
  • 7. What Happened to Brand Loyalty During The Global Recession of 2008 – 2009? Many Preferred Brands Were Losers © comScore, Inc. Proprietary and Confidential. 7
  • 8. Background & Objectives  comScore ARS conducted a series of three studies in 2008, 2009, and 2010 in the U.S. to determine if shoppers were willing to “buy down” or switch brands within certain categories in light of the challenging economy.  Each study focused on women who are purchasers in the category.  Results were analyzed across time in order to identify any emerging patterns and commonalities in shopping behavior overall. © comScore, Inc. Proprietary and Confidential. 8 8
  • 9. Methodology  The samples for each study included 1,000 Women in the United States.  Shoppers were given a list of products from the following categories:  Health & Beauty Aids –Toothpaste, Mouth Rinse, Shampoo  OTC Medicines – Cough/Cold Allergy Medicine  Apparel – Jeans  Food – Soup, Pasta Sauce, Fruit Juice  Household Products – Laundry Detergent, Facial Tissue, Paper Towels  Housewares – Small Appliances  They were asked to indicate how they currently shop for each segment:  Buy the brand I want most  Buy a different brand if it‟s on sale  Convert to less expensive brands to save money © comScore, Inc. Proprietary and Confidential. 9 9
  • 10. How has the recession affected the brands shoppers buy? “I buy the brand I want most” 60% 50% 40% 30% 20% 10% 0% March 2008 March 2009 March 2010 • As the economic downturn has continued, the percent of shoppers who typically buy the brands they want most has steadily declined across the categories examined • In March 2010, less than 50% of shoppers report purchasing the brand they want most “Please indicate by checking the boxes below, how you shop for each type of product listed. I buy the brand I want most”…. (% of “yes” responses) © comScore, Inc. Proprietary and Confidential. 10
  • 11. However, the degree varies by category and segment “I buy the brand I want most” March March March Category Segment 2008 2009 2010 Toothpaste 67% 64% 57% Health & Beauty Mouth rinse 61% 59% 44% Aids Shampoo 65% 64% 52% OTC Cough/Cold/Allergy 58% 59% 43% Apparel Jeans 54% 49% 39% Soup 56% 51% 52% Food Pasta sauce 53% 48% 45% Fruit juice 51% 44% 40% Laundry detergent 57% 50% 47% Household Facial tissue 43% 40% 39% Products Paper towels 36% 34% 35% Housewares Small Appliances 45% 38% 34% © comScore, Inc. Proprietary and Confidential. 11
  • 12. …as does the severity of the decline over the three years “I buy the brand I want most” March March March Net shift Category Segment 2008 2009 2010 2008 to 2010 Toothpaste 67% 64% 57% Health & Beauty Mouth rinse 61% 59% 44% -14% Aids Shampoo 65% 64% 52% OTC Cough/Cold/Allergy 58% 59% 43% -15% Apparel Jeans 54% 49% 39% -15% Soup 56% 51% 52% Food Pasta sauce 53% 48% 45% -7% Fruit juice 51% 44% 40% Laundry detergent 57% 50% 47% Household Facial tissue 43% 40% 39% -5% Products Paper towels 36% 34% 35% Housewares Small Appliances 45% 38% 34% -11% © comScore, Inc. Proprietary and Confidential. 12
  • 13. Some observations on category differences… • In some categories, particularly CPG household products and housewares, consumers were already more likely to buy a brand they didn‟t “want most” at the start of the recession • Some categories (e.g., paper towels, facial tissue) have not seen increased buying down from a brand perspective, possibly because such categories have led the way in tiering, allowing consumers to stick with their preferred brand at a more attractive price point • As the economic downturn has persisted, this buying down behavior appears to be spreading to categories previously immune (e.g. HBA, OTC) • The increases in buying down in these categories have largely occurred in the last year. • Higher ticket items have seen large increases in buying down possibly due to larger absolute savings on a single purchase © comScore, Inc. Proprietary and Confidential. 13
  • 14. If not the brand „wanted most‟ than what are they buying? Net Shift 2008 to 2010 “I sometimes buy a “I buy less expensive “I buy the brand I Category different brand if it is brands to save want most” on sale” money” Health & Beauty Aids -14% +7% +7% OTC -15% +10% +5% Apparel -15% +3% +12% Food -7% +4% +3% Consumables -5% +4% +1% Housewares -11% +7% +4% • For most categories, the drop in likelihood to shop for the brand wanted most is not restricted to buying brands on sale • Rather, a sizeable percentage of the change in shopping approach is being driven by a decision to convert to less expensive brands to save money © comScore, Inc. Proprietary and Confidential. 14
  • 15. In a down economy, as consumers begin to shift from buying the brand “they want most,” we see a direct, positive impact on private label market share; degree of impact varies by product category Private Label Market Share (by volume) Total U.S. Food, Drug, Mass Merchandiser Source: IRI InfoScan Net Point Shift in "Brand Wanted 2008 Latest 52 Weeks Point Change Most” from „08 to ‟10 Mouth Rinse -17 26.96 27.39 +0.43 Shampoo -13 3.34 3.50 +0.16 Cough/Cold Allergy -15 39.99 44.20 +4.21 Soup -4 13.95 14.82 +0.87 Pasta -8 27.83 27.90 +0.07 Fruit Juice -11 18.99 20.54 +1.55 Laundry Detergent -10 6.20 6.97 +0.77 Facial Tissues -4 24.49 28.77 +4.28 Paper Towels -1 28.75 30.25 +1.50 © comScore, Inc. Proprietary and Confidential. 15
  • 16. What can a brand do to counteract these trends?  Premium brands should invest in marketing and promotion activities to maintain buying at “preferred” levels and thus: – Minimize short-term erosion of share to less expensive brands – Position the brand for a “bounce-back” when the economy rebounds  Prior studies on recessions bare this out: – 1.5 point increase in market share among businesses increasing ad spending during recessionary periods (Cahners and SPI, 2002) – 2.5 times increase in market share vs. average of all businesses in post- recession period for those who aggressively increased media expenditures during last recession (CARR Report, August 13, 2001) – 256% relative sales growth for those businesses which maintained or increased media spend during the 1981/1982 recession over those who did not (McGraw-Hill research analysis of 600 B2B companies) © comScore, Inc. Proprietary and Confidential. 16
  • 17. How can this be done?  comScore ARS advertising development and testing solutions have been proven to increase the business building performance of advertising  Strong advertising increases brand volume, share and loyalty – Improving the brand preference building power of advertising by 4 percentage points translates to a +0.5 share point gain for an average brand  Focusing upstream on message strategy (before creative) improves the preference building strength of advertising based on the winning strategy – Success rates vs. normative levels increase to 70% for brands working from strong message strategies © comScore, Inc. Proprietary and Confidential. 17
  • 18. What Happened to Brand Loyalty During the Global Recession of 2008 – 2009? Some Big Winners © comScore, Inc. Proprietary and Confidential. 18
  • 19. In e-commerce, larger online retailers gained dollar share from smaller retailers Time Period: Nov. 1 – Dec. 31 2009 vs. year ago U.S. Sales 2008 2009 % Change ($ Billions) Total E-Commerce $27.9 $29.0 4% Largest 25 Retailers $16.6 $18.5 +11% All Other Retailers $11.3 $10.5 -7% Sales Share 2008 2009 Point Change Total E-Commerce 100.0% 100.0% N/A Largest 25 Retailers 59.6% 63.8% 4.2 pts All Other Retailers 40.4% 36.2% -4.2 pts © comScore, Inc. Proprietary and Confidential. 19
  • 20. Combined share for Amazon and Walmart grew significantly; Amazon‟s share is still substantially higher than that of Walmart‟s e-Commerce Dollar Share for Walmart and Amazon Source: comScore e-Commerce Measurement Nov 1 - Dec 31, 2008 Nov 1 - Dec 31, 2009 Amazon & Walmart All Others Amazon & Walmart All Others 3.2% 7.5% 2.7% 10% 9.5% 13% 89.8% 90% 87.3% 87% “In late 2009, as consumers showed their sensitivity to low prices, price wars returned to the retail landscape with Walmart and Amazon engaging in book and DVD price wars which eventually turned into an all out war to have the cheapest consumer electronics.” – WalletPop.com © comScore, Inc. Proprietary and Confidential. 20
  • 21. Walmart and Amazon aggressively used display and search advertising more than other top retailers to drive their online businesses. But, Amazon relied much more on paid search to gain traffic while Walmart leveraged display ads Total Display Ad Impressions Delivered in Nov. and Dec. 2009 Source: comScore Ad Metrix Total Display Ad Total Display Ads Served Impressions Served on the Retail Website Across the Web Wal-Mart 4.2 Billion 844 Million Amazon 1.9 Billion 4.8 Billion Best Buy 1 Billion 85 Million Yahoo! Shopping 763 Million 130 Million Total Paid Search Ad Impressions Delivered on Major Search Engines in Dec 2009 Source: comScore Marketer No. of Exposures No. People Reached Frequency Amazon 1.1 Billion 128 million 8.8 Walmart 207 Million 53 Million 3.9 Best Buy 50 Million 20 Million 2.5 © comScore, Inc. Proprietary and Confidential. 21
  • 22. The Appeal of Amazon Prime Explained: Free shipping growing in importance, accounting for an incremental 6 points of all e-commerce transactions in 2009. Average order value 27% higher with free shipping. 75% of consumers would shift to another retailer at checkout if shipping not free. Share of All E-Commerce Transactions that Include Free Shipping Source: comScore e-Commerce Measurement 60% Average Order Value 27% Higher with Free Shipping 50% 50% 46% 43% 45% 44% 45% 42% 41% 41% 41% 39% 40% 42% 41% 39% 39% 2008 Series1 36% 37% 36% 36% 35% 30% 2009 Series2 31% 20% © comScore, Inc. Proprietary and Confidential. 22
  • 23. Social media is an increasingly important driver of commerce How Social Media Influenced Purchase % of Holiday Shoppers Social media has influenced my holiday purchases 28% Reading a consumer-generated review about a product online (including personal 13% blogs) influenced me to purchase it Reading an expert review about a product online influenced me to purchase it 11% I have followed a company Fan Page on Facebook to take advantage of special 7% offers/deals A friend‟s status update about a product on Facebook influenced me to purchase it 6% Watching a related video online influenced me to purchase a product 5% I have followed a company on Twitter to take advantage of special offers/deals 5% A tweet about a product on Twitter influenced me to purchase it 3% Other 2% Source: comScore Survey Time Period: Dec. 4-7, 2009, n=425 © comScore, Inc. Proprietary and Confidential. 23
  • 24. Update as of April: 14% of Twitter users follow businesses to find special deals, promotions or sales. 14% to find product reviews. Consumer Usage of Twitter Q. For which have you used Twitter? Source: comScore Survey April 2010 Reading tweets from users I follow 40% Posting my own tweets 34% „Retweeting` other users` tweets 19% Finding breaking news 18% Conversations with other users 17% Following celebrities 16% Following businesses to find sales/deals/special prices/promotions 14% Combined 23% Finding product reviews/opinions 14% Finding political news 13% Following my favorite sports teams 12% Asking for help/advice from other users 5% Other 6% None of the above 17% % of Twitter users © comScore, Inc. Proprietary and Confidential. 24
  • 25. What have we learned from the most recent recession?  A reinforcement of the lessons of the past that brands need to deliver additional value if they are to maintain market share in recessionary times  Advertising can be an effective lever to maintaining and growing brand loyalty and success  The process of developing advertising – by first focusing on the strategy – is more important than ever given the economic conditions and given the confusion of today‟s digital marketing landscape  Based upon the dislocations created by past recessions, it‟s likely that the most recent recession has accelerated our entry into a new marketing age: – E-Commerce as a significant sales channel – Online display advertising as an effective and efficient brand building strategy – Search advertising as a powerful “direct response” tactic at the bottom of the sales funnel – Social networking as an effective and efficient advertising medium © comScore, Inc. Proprietary and Confidential. 25
  • 26. Thank You!