Wallet’s are opening … for consumers and advertisers.

TakeAway:  Whew.   Consumers are spending again. But this sigh of relief is not heard in the halls of the big CPGs. 

The latest recession provided private-label brands with the momentum needed to overcome consumers’ quality perceptions and induce trial. 

The result: consumers liked or were at least satisfied with the PL products. 

Now that the economy is recovering and consumers have the dough to go back to the brand-name staple goods, companies are hoping that a long-held theory – more advertising will increase market share – will ensure that consumers trade-up for their staple goods.

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Excerpted from WSJ, “Consumer-Goods Makers Pour Out Ads,” By Ellen Byron, April 12, 2010

As wary Americans start to crack open their wallets, household-goods makers like Procter & Gamble, Colgate-Palmolive, Kimberly-Clark and Clorox are cranking up their advertising, hoping to coax consumers farther out of their shells.

Amid signs of an improving economy, recent survey data show consumers are more willing to splurge by eating out or buying new shoes, but the same doesn’t necessarily hold for everyday household goods.

“In consumer staples, you saw consumers trade down” to cheaper products due to the recession, and they were “quite satisfied,” says chief executive of Consumer Edge Research.

To lure them back to premium products—and prices—brand-name manufacturers are churning out “new and improved” goods ranging from more-absorbent diapers, to specialized toothpastes to closer-shaving razors. The strategy relies on advertising to get the word out.

That’s one reason the industry’s ad spending is expected to grow in 2010. So far such spending has been running well ahead of 2009 levels, with year-to-year increases for household products of 15% in January and 11% in February …

P&G, the world’s biggest ad spender, plans a 20% increase in “consumer impressions,” or instances when consumers see its ads … and it will introduce 30% more “significant” innovations in products this year, which its CEO describes as the most in his 30-year career at the company …

The big-name marketers face the challenge of overcoming consumers’s newfound thrift. While U.S. sales of household staples have posted middling gains overall, sales of cheaper private label, or store-branded, goods, have risen more sharply.

In the four weeks ended March 20, overall U.S. sales of household and personal products increased 0.2% from a year earlier, compared with a 5.4% gain in private-label sales …

The new spending will test a long-held theory: that boosting a brand’s share of advertising beyond its market share will raise that market share. Among major household products, market share stayed the same or rose 64% of the time over the past 16 quarters when a company’s advertising reach exceeded its market share by 50% or more …

Some experts say winning over consumers will require not just advertising, but a new approach: emphasizing value.

“For many years, any hint of price was a no-no. It was all about generating emotional connections,” says chief brand strategist at consulting firm Portnoy Group:”Now you’re going to have to work harder to convince me that I’m getting much more value by trading up.. You need to show me that I’m getting more for my money, and it’s not frivolous.”

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Full Article
http://online.wsj.com/article/SB10001424052702304703104575174042139131092.html#mod=todays_us_marketplace

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One Response to “Wallet’s are opening … for consumers and advertisers.”

  1. Business plan Advertising Outdoors small business Says:

    […] Wallet's are opening … for consumers and advertisers. « The Homa Files […]

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