Brand Loyalty in Recessionary Times
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Transcript of Brand Loyalty in Recessionary Times
Can We Apply Today‟s Lessons Tomorrow?
Brand Loyalty in Recessionary Times
Gian Fulgoni
Executive Chairman and Co-Founder, comScore, Inc.
2© comScore, Inc. Proprietary and Confidential.
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
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The Past: Marketing was Transformed by the
Great Depression of the 1930s
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Marketing In The Thirties Clients demanded the same level of 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
The Great Depression transformed marketing during the 1930s
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Companies Had To Innovate To SurviveAmerican food brands introduced in the 1930s…
1930
Birds Eye Frozen FoodsWonder Bread (Sliced)Hostess TwinkiesMott's Apple SauceSnickers candy bars (Mars, Inc.)
1931
Beech-Nut Baby FoodsBisquick (General Mills)Tootsie Pops
1932
Frito Corn ChipsSkippy Peanut ButterHeath bar (Candy Bar)
1933
Nestle Toll House Chocolate Chip CookiesCampbell's Chicken Noodle and Cream of Mushroom soupsKraft Miracle Whip
1934
Pet Evaporated MilkRitz Crackers (Nabisco)
1935
Adolph's Meat TenderizerKit Kat bar
1936
Betty Crocker (General Mills)Elsie the Cow (Borden)Spry (Unilever)Hungry Jack pancake mix (Pillsbury)Mars Almond Bar
1937
Pepperidge Farm BreadSpam (Hormel)Kraft Macaroni & Cheese DinnerRagu Spaghetti Sauce
1938
Lawry's Seasoned SaltMott's Apple JuiceNescafe (Instant Coffee)
1939
Lay's Potato ChipsCream of Wheat Dairy Queen (Ice Cream Stores)
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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
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What Happened to Brand Loyalty During
The Global Recession of 2008 – 2009?
Many Preferred Brands Were Losers
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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.
Background & Objectives
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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
Methodology
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0%
10%
20%
30%
40%
50%
60%
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)
“I buy the brand I want most”
How has the recession affected the brands shoppers buy?
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Category SegmentMarch
2008
March
2009
March
2010
Health & Beauty
Aids
Toothpaste 67% 64% 57%
Mouth rinse 61% 59% 44%
Shampoo 65% 64% 52%
OTC Cough/Cold/Allergy 58% 59% 43%
Apparel Jeans 54% 49% 39%
Food
Soup 56% 51% 52%
Pasta sauce 53% 48% 45%
Fruit juice 51% 44% 40%
Household
Products
Laundry detergent 57% 50% 47%
Facial tissue 43% 40% 39%
Paper towels 36% 34% 35%
Housewares Small Appliances 45% 38% 34%
“I buy the brand I want most”
However, the degree varies by category and segment
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Category SegmentMarch
2008
March
2009
March
2010
Net shift
2008 to 2010
Health & Beauty
Aids
Toothpaste 67% 64% 57%
-14%Mouth rinse 61% 59% 44%
Shampoo 65% 64% 52%
OTC Cough/Cold/Allergy 58% 59% 43% -15%
Apparel Jeans 54% 49% 39% -15%
Food
Soup 56% 51% 52%
-7%Pasta sauce 53% 48% 45%
Fruit juice 51% 44% 40%
Household
Products
Laundry detergent 57% 50% 47%
-5%Facial tissue 43% 40% 39%
Paper towels 36% 34% 35%
Housewares Small Appliances 45% 38% 34% -11%
“I buy the brand I want most”
…as does the severity of the decline over the three years
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• 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
Some observations on category differences…
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Net Shift 2008 to 2010
Category“I buy the brand I
want most”
“I sometimes buy a
different brand if it is
on sale”
“I buy less expensive
brands to save
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
If not the brand „wanted most‟ than what are they buying?
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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
Most”
from „08 to ‟10
2008 Latest 52 Weeks Point Change
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
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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)
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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
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What Happened to Brand Loyalty During
the Global Recession of 2008 – 2009?
Some Big Winners
19© comScore, Inc. Proprietary and Confidential.
In e-commerce, larger online retailers gained dollar share from
smaller retailers
U.S. Sales
($ Billions)
2008 2009 % Change
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
Time Period: Nov. 1 – Dec. 31 2009 vs. year ago
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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 AmazonSource: comScore e-Commerce Measurement
89.8%87.3%
7.5%2.7%
9.5%
3.2%
“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
10%
90%
Nov 1 - Dec 31, 2008
Amazon & Walmart All Others
13%
87%
Nov 1 - Dec 31, 2009Amazon & Walmart All Others
21© comScore, Inc. Proprietary and Confidential.
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 Served
Across the Web
Total Display Ads Served
on the Retail Website
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 Display Ad Impressions Delivered in Nov. and Dec. 2009 Source: comScore Ad Metrix
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
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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 ShippingSource: comScore e-Commerce Measurement
31%
36% 37%36% 35% 36%
39%42%
41%39%
42%39%
43%41% 41%
46%
50%
45% 44% 45%
41%
20%
30%
40%
50%
60%
Series1
Series2
2008
2009
Average Order Value
27% Higher with Free Shipping
23© comScore, Inc. Proprietary and Confidential.
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
blogs) influenced me to purchase it13%
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
offers/deals7%
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
24© comScore, Inc. Proprietary and Confidential.
Consumer Usage of Twitter
Update as of April: 14% of Twitter users follow businesses to find
special deals, promotions or sales. 14% to find product reviews.
40%
34%
19%
18%
17%
16%
14%
14%
13%
12%
5%
6%
17%
Reading tweets from users I follow
Posting my own tweets
„Retweeting` other users` tweets
Finding breaking news
Conversations with other users
Following celebrities
Following businesses to find sales/deals/special prices/promotions
Finding product reviews/opinions
Finding political news
Following my favorite sports teams
Asking for help/advice from other users
Other
None of the above
% of Twitter users
Q. For which have you used Twitter?Source: comScore Survey April 2010
Combined 23%
25© comScore, Inc. Proprietary and Confidential.
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
Thank You!