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Of the 5 types of Americans … which are you?

January 7, 2010

Dr. Frank Luntz has used dozens of attitudinal, behavioral, and demographic questions to segment Americans into five statistically distinct psychographic categories that explain not just who they are, but also how they are likely to behave and their view of life around them.

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Excerpted from: WHAT AMERICANS REALLY WANT by Dr. Frank I. Luntz

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According to Dr. Luntz’s surveys, there are five segments of American consumers:

1. Thirty percent of Americans are Relationship People.

The largest segment of the American population, it’s also the youngest.

To them, relationships can mean friends, family, or spouse. Their whole idea of the good life is to be with someone all the time.

They get their satisfaction out of interacting with other people. They don’t care as much about jobs or careers. They are generally satisfied with their life today, but very nervous about tomorrow.

They don’t save; they spend, and they enjoy spending on other people as much, if not more than, on themselves.

2. Twenty-five percent of Americans are Spiritual People.

This is the oldest and most female-oriented of the five segments.

What unites them, in addition to the importance of religion and prayer, are the principles of simplicity and efficiency.

They don’t need or want to spend money to be happy.

They have older cars and TV sets; they don’t have TiVo or satellite radio.

They’re not just late adopters, they’re non-adopters because stuff doesn’t matter to them.

If Relationship People are the loudest group, Spiritual People are the quietest.

They tend to do things in their spare time that don’t require other people, such as reading and listening to music.

They appreciate the outdoors (they are environmentalists) and they have a respect for natural beauty.

3. Eighteen percent of Americans are Health People.

They’re younger than average, more male than female, and they’re the segment most likely to participate than to observe.

You won’t just meet this segment at the gym or on the basketball or tennis court — you’ll find them shopping at Whole Foods and having a snack at Jamba Juice.

They’re similar to the Spiritual segment in their desire to be outdoors, but they’re parallel to the Relationship segment in their desire to be with others.

They are the most physically active of all the groups and put a lesser emphasis on career and financial success.

4. Twelve percent of Americans are Control People.

These people can be very unpleasant to be around.

For them, it’s not about money; it’s about more time and less hassle.

They have everything planned out.

Their intensity is similar to the Health segment, but while the Healthy are engaged in physical activity, Control People are engaged in mental or intellectual activity.

Control People want to be doing something other than what they’re doing; they think today is awful, but tomorrow is going to be great.

This is the flip side, demographically, of the Spiritual segment in that these people are almost exclusively under 50 and more male than female.

They’re the mirror image in another way: Stuff matters. Their stereo is high-end, and their TV screen is huge. In fact, everything is bigger; they want the newest and the best of everything.

They’re willing to spend money, and they work longer hours than the other segments to be able to afford it.

5. Eleven percent of Americans are Financial Security People.

The fastest-growing segment, these people are always unhappy and dissatisfied, and in the current economic mess, they’re downright miserable.

They judge themselves by how other people judge them.

Their reputations mean more to them than they do for any other segment.

They’re the opposite of self-satisfied; they’re almost self-loathing.

They have a ton of material goods, but they buy things to make a status statement rather than to enjoy them.

They tend to be older and wealthier than average, although you’ll find plenty of people in their 30s in this segment.

They own; they don’t rent or lease because they want whatever it is to belong to them — and they’re dissatisfied when they can’t have everything they want when they want it.

 

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From: WHAT AMERICANS REALLY WANT. . . REALLY – The Truth About Our Hopes, Dreams, and Fears
by Dr. Frank I. Luntz

Posted in Mktg - Consumer Behavior, Mktg - Segmentation | Leave a Comment »

How many gallons of soda do YOU drink in a year? How much time in a car each day?

January 6, 2010

Some interesting stats from WHAT AMERICANS REALLY WANT by Dr. Frank I. Luntz

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Americans say they average of 87 minutes a day behind the wheel. For car commuters, it’s an average of 100 minutes.

More than one-third of working Americans are awake by 6:00 a.m. and out the door by 7:00 a.m.  … for a commute to work that is an hour or longer.

More than 3 million Americans travel 50 miles or more one-way to work.

Less than 5 percent of the population takes public transportation to work, and only 12 percent carpool.

About 100 million people drive alone to work each day.

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Americans drink an average of more than 50 gallons of soda per person per year.

Put another way, people drink more soda than coffee, milk, and
fruit drinks combined.

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Three-quarters of Americans are overweight, meaning they weigh more than the recommended weight for their height … 25 years ago, 50% were overweight.

One-third are obese, meaning they weigh at least 20 percent more than their ideal weight … that’s doubled over the past 25 years. 

Bottom line: All-you-can-eat is no longer just an occasional trip to the buffet line — it’s now a way of life.

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From: WHAT AMERICANS REALLY WANT. . . REALLY – The Truth About Our Hopes, Dreams, and Fears
by Dr. Frank I. Luntz

Posted in Mktg - Consumer Behavior, Polls & Surveys | 2 Comments »

The 5 things that Americans really want …

January 5, 2010

Excerpted from: WHAT AMERICANS REALLY WANT by Dr. Frank I. Luntz

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According to Dr. Luntz, the five core attributes define what Americans really want.

1. More money.

Financial success has always been the highest priority for American men, but with the economic downturn it has leapt to the top among American women as well.

For millions of Americans approaching retirement, it’s less about more money and more about just getting back to where they once were.

For women, money is all about personal security, about having no fears and no worries of the financial kind.

Women measure success in life based on personal satisfaction and happiness — and the lack of economic anxiety leads to personal happiness.

For men, more money means more freedom, although that does manifest itself in the desire to buy more stuff. Men are much more likely than women to measure their success by their accumulation of material goods: house, car, technology, toys, the whole package.

For both men and women, money is more important today than at any time in a long time.

2. Fewer hassles.

Having fewer hassles is now the number two day-to-day priority of Americans.

Companies that sell products in shrink-wrapped hard plastic shells that are impossible to open don’t understand the importance of a hassle-free life.

Other examples are products that don’t perform like they do on television, services that sound much better in the advertisement than they are in reality, and
technologies that break or never work right in the first place.

3. More time.

Time used to be the highest priority for women — and for good reason.

From getting the kids up in the morning to paying the bills at night, women shoulder the majority of family responsibilities and household chores, even though the vast majority of women now work outside the home.

They have little time for themselves, and they crave it.

4. More choices.

There is an important distinction between choice and the right to choose.

Young people embrace as much choice as possible. Give them 15 choices of exercise equipment or 20 choices of coffee — the more the better.

Conversely, older people want the right to choose but don’t actually want to make the choice.  If you give them a choice of 20 different health-care plans, you’ve created a situation somewhere between confusion and chaos. To them, too many choices is no choice at all.

But for most Americans, limiting their choices is like denying life, liberty, and the pursuit of happiness.

If you sell the right to choose, or seem to expand people’s choices, you will find a lot of buyers.

5. No worries.

This can mean anything from “Yes, it will get done” to “I will take care of you.” It’s an expression of confidence that things will turn out right. 

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From: WHAT AMERICANS REALLY WANT. . . REALLY – The Truth About Our Hopes, Dreams, and Fears
by Dr. Frank I. Luntz

Posted in Mktg - Consumer Behavior, Polls & Surveys | Leave a Comment »

Busted. Marketers’ grocery store tactics revealed

January 5, 2010

TakeAway:  As manufacturers and retailers strategize to squeeze pennies out of our now incredibly cost-conscious consumers, it appears the consumers are starting to catch on.

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Excerpted from New Jersey Business, “Savvy marketing ploys can cost unwitting grocery shoppers plenty,” The Associated Press, November 06, 2009

If you ever leave the grocery store with a slight sense of bewilderment at what you’ve just bought, you are not alone.

Despite the utilitarian look of most grocers’ shelves, careful science goes into deciding how to display the thousands of items each store carries and how to make them appeal to consumers.

Marketers tug shoppers toward items they did not intend to buy … with package design, shelf placement, tie-ins and temporary price cuts …

Marketers have put more thought into grocery stores than any other type of store because they see an opportunity in the monotony of shopping for necessities …

For a bundle of 30 products that would cost an “impulsive” shopper $288 … research found a “savvy” shopper would pay just $166 at the same grocery store. In addition to guarding against marketing ploys, the savvy consumer tracked down coupons, used a store bonus card and chose the most economical sizes …

Here’s what to watch for next time you head out for groceries.

1. END OF THE AISLE: Marketers pay grocers dearly to put their wares on the end of each aisle shelves because products there can sell 30 percent more …

2. EYE-LEVEL, EYES OPEN: … Shoppers look straight ahead or, at most, from side to side, as they shop. So products on shelves at eye level often cost more than their lower-shelf siblings …

3. MORE CAN BE LESS: … One in four times a smaller version of a product was cheaper per serving …

4. D-I-Y CARROT STICKS: … convenience can be pricey.

5. DON’T PICK THEIR NUMBER: … Be wary of … the buy-five-for-$5 type. You usually don’t have to buy all five to get the promotional price …

6. THAT ONE LAST THING: The items in the display by the cash register are always marked up …

7. REMEMBER THE TRIED AND TRUE: … Buy store brands, which can be even more economical than shopping at warehouse clubs …

Edit by TJS

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Full Article
http://www.nj.com/business/index.ssf/2009/11/savvy_marketing_ploys_can_cost.html

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Posted in Mktg - Consumer Behavior, Retailing | 1 Comment »

Shopping therapy saves the day … yeah, right.

December 3, 2009

TakeAway:  Shopping therapy is not a new concept but asserting that it will carry the consumer economy through this recession is quite brazen. 

To what degree does our emotional connection with or satisfaction from a product overrule our rationale behavior, especially during a recession?

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Excerpted from WSJ, “The Bonhomie of Buying,” By Laura Vanderkam, November 1, 2009

As the economy tanked last year, pundits claimed that we were entering a new age of frugality. We would stop shopping and learn to “use it up, wear it out, make it do or do without” …

There was just one problem with this prediction: Given how much money is riding on the consumer economy, legions of people now spend their lives figuring out how to make the buying experience more alluring … “We probably know as much about the behavior of the human shopper in its natural habitat, the mall, the grocery, or the department store, as we do about the activities of any species of animal in the wild.”

Now former Esquire editor Lee Eisenberg adds his own take, examining why modern Americans find shopping so irresistible … “Shoptimism” aims to offer a novel view on the big idea of buying and selling … Eisenberg approaches consumer culture as an anthropologist … He turns up some interesting tidbits.

Black Friday shoppers … say that they’re battling the crowds on behalf of themselves rather than shopping for loved ones …

The brains of tight-fisted folks react to high prices in the same way they do to physical pain.

We absorb advertising messages so well that—in a world saturated with PC Guy vs. Mac Dude ads—we actually perform better on creativity tests after being cued by references to Apple products …

Brands are losing their vice grip as shoppers figure out that generic items are often made in the same factories as branded ones and retailers manage to turn their private labels into desirable goods …

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The overarching argument inherent in this book: Shopping, in modern America, is fundamentally an optimistic activity.

While our shopping habits are easily manipulated, they are not quite as irrational as critics like to believe. For most of us shopping … really does make us feel better.

We buy because it “confers instant membership in a community.” We buy “to express ourselves.” Most important, we buy because “buying is fun, sociable, and diverting …”

If a sweater or an iPod can do that, … then no wonder, recession or not, it’s hard to keep Americans out of the stores.

Edit by TJS

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Full Article
http://online.wsj.com/article/SB10001424052748703399204574505382492105704.html

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Posted in Mktg - Consumer Behavior | Leave a Comment »

Which is your scarcest asset: time or money?

October 9, 2009

TakeAway:  In today’s economy, motivating consumers to pull the trigger and purchase (now) is job one for most marketers. 

Sometimes, the answer may be as simple as changing the brand message to emphasize time instead of money … or vice versa.

If buyers are “experiential”, focus on time; if they’re “possessive”, focus on money.

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Excerpted Knowledge@Wharton, “Time vs. Money:  Analyzing Which One Rules Consumer Choices, ” September 16, 2009

Pick up a magazine or turn on the TV and prepare for a flood of marketing messages about how you spend your time and money … Yet with all this talk of time and money, little is known about how consumers’ attitudes and behaviors are influenced by a product’s association with these concepts …

A new paper … argues that when companies weigh whether to go for an ad campaign with a time or a money theme, they should be aware that each evokes strong reactions from consumers …

Emphasis on time … typically leads to more favorable consumer attitudes and purchasing decisions because … time is less fungible than money … and people feel less accountable for how they spend their time because it can be more difficult to measure than monetary outlays. These two characteristics — fungibility and ambiguity — are important differentiators in how consumers think about time and money …

When money matters … for the prestige possession, subjects reported greater feelings of personal connection when they were primed to recall the money spent on the product …  those who highly valued the mere possession of the product had more favorable attitudes when prompted to consider the money involved in the purchase … 

Ultimately, the researchers conclude: “Brands can cultivate consumer relationships by first considering how consumers most identify with the product (through experience or possession) and then highlighting either their time or money spent accordingly.” … 

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Full Article
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2341

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Posted in Mktg - Consumer Behavior, Mktg - Pricing, Mktg - Promotion | Leave a Comment »

Twitter Loses Touch … Fritters Away SUbscribers

May 7, 2009

Excerpted from Ad Age, “Why Twitter’s Reach Is Limited” By Abbey Klaassen, April 28, 2009

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Over the past few weeks we’ve seen countless stories about the “Oprah effect” on Twitter — TechCrunch suggested more than one million people signed up and many a blog linked to Hitwise data that suggested the talk-show doyenne’s endorsement of the service led to a 43% spike in Twitter traffic.

While those numbers are important, the breathless reports have not accounted for what people do after they sign up for a Twitter account. Creating a Twitter account doesn’t equal becoming an uber-user, or even a casual user, of the micro-blogging site. Nielsen Online data suggest more than 60% of people who sign up for Twitter abandon the service.

David Martin, VP-primary research at Nielsen Online, posted the data on the company’s blog, noting that Twitter’s retention rate — the percentage of a given month’s audience that comes back the following month — hovers around 40%. So that means only 40% of the people who visited Twitter last month will come back this month. However, that number is slightly higher than the 30% retention rate Twitter saw before Oprah Winfrey’s endorsement

One problem, Mr. Martin noted, is that it’s very hard to grow reach when that much of your audience fails to return month after month. He plotted the reach and retention rates of the major websites Nielsen follows and came up with an audience curve that suggests that at Twitter’s current retention rate, it will only reach about 10% of online consumers …

“Twitter has really big hype — it’s the hype that much bigger sites like MySpace or Facebook had when they were coming up … But it’s just not going to live up to that hype in the long run, audience-wise, if it can’t get retention up.”

He also looked at MySpace and Facebook’s retention in their first few years, when their reach looked more like Twitter’s current reach. Even then, the two larger social networks had steadily growing retention rates of more than 40%, which moved closer to 60% as time went on. Twitter’s retention rates, on the other hand, have fluctuated without passing 40%.

Twitter’s user interface can be confusing to people who aren’t familiar with the service, from the hard-to-follow conversation threads to the codes for direct messaging, “retweeting” and “hashtags.” … On the flip side, said Mr. Martin, to “keep people engaged there has to be interesting content. And Oprah, to a large number of Americans, is interesting content. If people continue to stay engaged and are compelled to stay on the site, there’s no reason that engagement shouldn’t go up. But it’s yet to be seen.”

Edit by SAC

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Full Article:
http://adage.com/digital/article?article_id=136318

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Posted in Internet - Soc Networking, Internet Marketing - eCommerce -, Mktg - Consumer Behavior | Leave a Comment »

Hollywood’s Newest Concern? A Big Red Vending-Machine

April 17, 2009

Excerpted from LA Times, “Redbox’s $1 vending-machine video rentals worry movie studios” By Dawn C. Chmielewski, March 30, 2009

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The hottest thing in movie rentals is as old as the Coke machine — and just as red. Redbox movie kiosks are popping up by the thousands in supermarkets, drugstores, restaurants and convenience stores around the country. The kiosks stock DVDs that rent for $1 a day, a remainder-bin price that is less than a cup of coffee at Starbucks.

For all the talk about the Internet, Wi-Fi and cellphones becoming the new gateways to watch movies and wiping out the corner Blockbuster, a ubiquitous vending machine the size of a refrigerator is becoming a growing concern to Hollywood.

Consumers are pulling DVDs out of the Redbox kiosks in record numbers, undermining longtime economics that have propped up the movie business — and in the process triggered a backlash from a major studio that sought to cut off Redbox’s supply of hot new DVDs …

Redbox operates nearly 12,900 kiosks throughout the U.S. — four times as many locations as Blockbuster — and plans to introduce 7,100 more by the end of the year … Consumers rent a DVD from the machine using their credit or debit cards, which enables Redbox to charge an additional day’s rental if the DVD is not returned within a 24-hour period. A typical kiosk can earn significant coin: about $50,000 annually in revenue per machine in operation after three years.

Blockbuster … started rolling out its own DVD-vending kiosks last summer … “We have been watching very carefully as they have progressed … We think it is very consistent with what Blockbuster does, which is to provide convenient access” to home entertainment.

The discount DVD rental business worries Hollywood movie studios because of fears that it is undercutting DVD sales, which dropped 13% in the fourth quarter … DVD sales historically have been how the studios earn a profit on movies, because ticket sales are barely enough to offset production and marketing costs. Some studios believe that consumers will forgo buying DVDs if they have a cheap option to rent movies …

The kiosks caught on, especially in supermarkets, where they catch customers’ eyes as they push their grocery carts through the checkout counters.

The combination of errands to fill the cupboard and rent movies, as well as the consistent flow of customers, turned out to be advantageous … “It’s a regularity of traffic, and the biggest single place people are going after the supermarket is to their homes,” Redbox’s Kaplan said. “Consumers tend not to rent DVDs when they’re not going home” …

Video industry analyst Adams estimates that the kiosk rental market, which totaled $519 million last year, will reach $1.4 billion in five years — or about one-fourth of Blockbuster’s 2008 revenue.

“You could view that as directly competitive” with Blockbuster, Adams said. “It’s a cheaper option, and during a recession people embrace it.”

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Full Article:
http://www.latimes.com/business/la-fi-cotown-redbox30-2009mar30,0,3496501.story?track=rss

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Posted in Digital Media, Mktg - Consumer Behavior, Retailing | Leave a Comment »

When Every Hour is Happy Hour … Restaurants Make More Room at the Bar

April 16, 2009

Excerpted from WSJ, “Bar Wars” By Katy McLaughlin, Apr 3, 2009

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When chef Eric Greenspan opened the Foundry, a $1.3 million restaurant in Los Angeles, two years ago, he created a menu of high-end cuisine, showcasing the culinary skills he had honed at some of the world’s top restaurants. Three months ago, Mr. Greenspan turned the restaurant into a lounge with nightly live bands, cocktail waitresses and promotions such as “fried-chicken-and-waffles night.” The dining room has been banished to a back patio.

Around the country, proprietors are turning their restaurants — or significant parts of them — into glorified bars. They’re ripping out dining-room tables to make more bar space, applying for late-night and cabaret licenses and adding the word “bar” to their names. Top chefs are serving up bar snacks like grilled cheese sandwiches and hot dogs.

The reason: While consumer spending at restaurants is falling precipitously, drink orders, particularly for cheaper drinks like beer, are barely dropping off. For restaurants, it’s now proving more cost-effective to serve lower-priced dishes that diners can munch on as they buy drinks …  

The morphing of some of the nation’s top dining rooms into bars and lounges with food demonstrates how dramatically and quickly consumer behavior has changed since the economy plummeted this fall … this year fine dining sales will plunge at least 12%, after falling 4% last year. Meanwhile, analysts are predicting a less painful contraction in alcohol sales …“Historically, consumption of alcohol tends to outperform compared to other parts of the economy in a recession” …

Selling alcohol, and cocktails in particular, is typically a better business than selling restaurant food because the margins are higher. While ingredient costs may account for as much as 35% of the price of an entrée in a high-end restaurant, they typically only account for about 14% of the price of a cocktail or 25% of the price of a glass of wine.

Bar snacks, which often include inexpensive items like pizzas, can also have better margins than fine-dining dishes with expensive proteins such as filet mignon or organic lamb. Since restaurants are already paying to run a kitchen, selling additional, easy-to-make food is simply an extra revenue stream.

Beyond thrift, there is a social component to noshing at bars. Restaurateurs say patrons seem especially eager to rub shoulders with one another at the bar, rather than isolate themselves at dining-room tables.

“People want to socialize and be out; they don’t want to be miserable at home,” says Chris Douglass, co-owner of three Boston-area restaurants … Informal dining is increasingly popular, and some of the restaurants launching bar menus and lounges will likely keep them even after the economy bounces back …

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Full Article:
http://online.wsj.com/article/SB123871155276784313.html#

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Posted in Food & Drink, Mktg - Consumer Behavior, Mktg - Product Line Mgnt | Leave a Comment »

A Balancing Act for Credit Card Issuers: Cutting Costs While Keeping Customers

March 26, 2009

Excerpted from Reuters, “Credit Card Firms Slashing Rewards to Cushion Losses”, March 11, 2009

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U.S. credit card issuers are slashing rewards, raising interest rates and increasing fees as loan losses mount, taking action to “maintain a certain profit level in the business.”

Reward programs are expensive for credit card companies—for example, Discover Financial Services posted revenue of $5.7 billion in 2008, while the net cost of its rewards program was $710 million—so issuers want to make sure they are worthwhile.

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In a recent presentation to investors, JPMorgan said cardholders using its reward program showed a faster increase in spending, generated higher revenue and had lower credit loss rates.

But that does not mean card companies will keep offering freebies to attract customers. They are trying to determine which customers are good bets. 

In addition, lenders are trying to pass on part of the cost of reward programs to merchants by offering joint promotions that could bring new businesses and customers to battered retailers.

Not only have rewards been cut back—it has become more difficult to cash them in.

Still, losing a few rewards may be the easy part. Other credit card companies are raising interest rates and increasing fees, or simply closing down accounts entirely.

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But this strategy could backfire: Higher costs and fewer rewards could frighten clients away, reducing the risk of default but also cutting into card company revenue.

“The people who have better credit quality have more offers, and if you raise their rates too much they will in fact leave you for somebody else.”

Edit by DAF

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Full article:
http://www.cnbc.com/id/29637583 

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Posted in Credit Cards, Mktg - Consumer Behavior, Mktg - Loyalty Programs | 1 Comment »

The American craving for small cars …

March 23, 2009

Ken’s Take: How often do you hear: “the Detroit 3 just make gas guzzlers … not the small, fuel efficient cars that Americans want.”  Maybe some day …

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Excerpted from WSJ, “Industry’s Big Hope for Small Cars Fades”, March 23, 2009

Last summer, when gas cost $4 a gallon, buyers snapped up small cars so fast that dealers couldn’t keep them in stock. Ford decided to convert some truck plants to make small cars. GM added an extra shift at its Lordstown, Ohio, plant that makes the Chevy Cobalt, a diminutive sedan. Import brands also pumped up their production of small models.

Now, with gas prices half that level, almost 500,000 fuel-thrifty models are piled up unsold around the country. Practically every small car in the market is stacked up at dealerships.

The turnabout comes at a bad time for the struggling U.S. car industry, which has revamped factories and shifted product plans to produce more small cars in coming years.

“I don’t think Americans really like small cars,” said Beau Boeckmann, whose family’s Galpin Ford in southern California is the country’s largest Ford dealer. “They drive them when they think they have to, when gas prices are high. But we’re big people and we like big cars.”

AutoWay Honda in Clearwater, Fla.,  has a whole row of Civic hybrids that draw little interest.

Over the five months ended in February, industrywide sales of small cars totaled 718,000. That was down 28% over the same period in 2008, but small cars grew to 18.4% of total market, up 2.1 points from the year-earlier period.

Full article:
http://online.wsj.com/article/SB123776430557508813.html#mod=testMod

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Posted in Autos - Travel, Environment - Green, Mktg - Consumer Behavior | 1 Comment »

It’s payday … and I’ve got a deal for you.

March 12, 2009

Ken’s Take:

(1) Surprised this is new news to consumer goods companies. 

(2) Wouldn’t want to be around a cash strapped senior at the end of the month.  Keep reading to find out why 

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Excerpted from WSJ, “Consumer-Goods Makers Heed ‘Paycheck Cycle'” By Anjali Cordeiro, Feb 23, 2009

Makers of household goods and food are paying more attention to the “paycheck cycle” as cash-strapped consumers are showing a tendency to make their largest purchases when their salaries first come in and to cut back as that money runs out.

With more consumers living from paycheck to paycheck, some companies have looked at ways to time their promotions around periods when consumers’ wallets are likely to be well cushioned.

PepsiCo Inc.’s Frito-Lay … has tried “promotions that are different at the beginning of the month than at the end of the month,” CFO Richard Goodman said in a recent interview. “People have more money to spend at the beginning [of the month] and a little less at the end,” he said.

The insight to promote around paychecks came from one of the company’s retailers … That retailer noticed “the strength of the first of the month compared to weakness at the end of the month as people were simply running out of cash” … Early in the month the food and beverage maker started promoting large “multipacks” of snacks sold in the range of $5.98 to $6.98, while near the end of the month it pushed smaller packs that sold for less than $2 … The company’s direct store delivery system, which delivers products directly to retail store shelves, gives it more flexibility on merchandising and promotions.

Consumer purchases can be driven by a paycheck cycle in good times and bad. But the cycle has been heightened in the midst of the U.S. recession and global slowdown. Reaching consumers at the right time and stocking store shelves with the right package size can be key for makers of branded consumer goods …

Kimberly-Clark has watched the paycheck cycle “to make sure we understand it so we have the right things in stock” … The company has seen volume spikes in the first week of the month in its Depend incontinence products business, which is used a lot by senior citizens, who get Social Security checks around that time.

“We want to make sure we’ve got extra inventory, displays set up so we don’t run out of stock at retail … It’s just an understanding of how the consumer wants to buy, so they’ve got the right mix of goods at retail so they are not disappointed.” Consumers have been picking smaller pack sizes rather than the big bundle packs later in the month …

As consumer companies gathered last week at one of the industry’s largest annual conferences, the theme of offering consumers better “value” took center stage. Most consumer makers aren’t cutting list prices for their brands, so finding ways to help consumers stretch paychecks is key. Some companies are rejiggering products to keep prices down and push the value concept …

Heinz is offering consumers larger ketchup bottles that sell at smaller price gaps to private label in the U.S. Meanwhile, Frito-Lay in North America will begin adding 20% more product to take-home bags of its corn-based Tostitos, Fritos, Cheetos and Doritos without increasing the price.

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Full Article:
http://online.wsj.com/article/SB123535246479645145.html

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Consumers Trade Down, At Least For Now

March 11, 2009

Ken’s Take: Insightful article re: how consumers are (and will) react to the economic downturn.

Key ideas: downward mobility, cautionary spending, renter mentality.

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Excerpted from Knowledge @ Wharton, “The Shopper of Tomorrow: Trading Down”, Feb 18, 2009

Attention Shoppers: We no longer have the following items — “a sense of entitlement,” “conspicuous consumption” and “a golden period of luxury.” At least that is the word from Wharton faculty and other experts who point to a new logic that is defining not just what U.S. consumers buy, but how they view the shopping experience.

While shoppers typically pull back during the downward phase of any economic cycle, the severity and uncertainty of today’s crisis is likely to have longer-lasting effects on their attitudes than most slumps, these experts note. Consumers, they suggest, will eventually start spending again, but without the vigor enabled by easy credit in the Roaring 2000s …

Over the next 18 months … consumers will learn to become more frugal and are likely to carry those skills over once the economy recovers. “At some level, everybody has now been schooled about financial markets and overextending one’s credit — something American consumers have been notoriously bad at. We had a habit of not paying a lot of attention to the cost of using borrowed money” …

In the future, shoppers will learn to focus on the value of goods and services … [the] “crazy mindset” is over and shoppers are only willing to pay for what they absolutely need or items that present extraordinary value. … As for the pre-meltdown “go-go times, we will never go back to that, at least not anytime soon.”

According to consumer consultant Paco Underhill … [there] are three consumer segments now, divided not by income levels, but by income security. One group is made up of those who have lost their jobs and are downwardly mobile. For the wife of a Wall Street banker, that could result in the elimination of weekly hair and nail appointments … Those in the second group are not at immediate risk of losing their jobs, but they have friends or family who are out of work. These consumers, he says, are cutting back as a cautionary measure … A third group is relatively untouched by the downturn. The individuals in this group have paid off their mortgages and, while their investment portfolios may be down sharply, they still have an adequate cushion. Nonetheless this group is also cutting back because engaging in conspicuous consumption seems like bad manners …

Armendinger points to another impact on shopping patterns — having enough space to store all one’s purchases. U.S. shoppers do seem to lead the world in consumerism, in part because they have enough land to build huge homes and storage units to house all their belongings … In Europe and emerging economies such as India … “You don’t see the Costco mentality of stockpiling toilet paper or huge vats of ketchup, simply because [people] physically don’t have the space.”

Carl Steidtmann, chief economist and director of Deloitte Research emphasizes that the Great Depression, combined with World War II, amounted to a 15-year period of consumer constraint, first because of the economic contraction and then because of rationing for the war effort. He predicts that the current downturn, which began in December 2007, will start to abate by the end of this year, and is not likely to have as great a long-term impact on consumers as the Great Depression.

He also suggests that the most lasting impact of the current downturn may be on homeowners who are severely stressed by mortgage debt. Going forward, he expects more of a “renter mentality” in the housing market, with less emphasis on homeownership as an investment vehicle …

 

Wharton marketing professor David Reibstein says the current angst about consumer spending reminds him of the periods of recession in 2001 and 1991. At both extremes of any economic cycle — the highs and the lows — conventional wisdom holds that during the highs, everyone feels the status quo will continue, while during the lows, everyone feels that life as we know it has forever changed. “While we’re in the midst of it, there’s always that concern … What’s amazing to me is how resilient we are.”

Reibstein points to the … terror attacks on September 11, 2001, when it seemed no one would ever have the courage to board an aircraft again. By the time the current financial crisis reduced demand, air travel volume had recovered. “It’s going to take a long time for us to get through this because of the severity and depth of this cycle … but once we do, it will be amazing how quickly people do rebound.”

Gradually, he adds, as the recent shocks to the economy are absorbed, people will begin to reinvest and cautiously step up purchases. Confidence will improve even more as job losses stabilize and hiring begins again, he says. “It’s only going to take time.”

Edit by SAC

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Full Article:
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2161

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Go Beyond Demographics to Really Understand Your Customer

March 3, 2009

Excerpted from Harvard Business Publishing, “It’s Not Who Your Customers Are, It’s How They Behave”, by Peter Merholz, February 11, 2009

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Businesses cannot exist without customers, so it’s sadly ironic that many, if not most, businesses, actually understand so little about them.

As a company grows, a smaller and smaller percentage of the staff interacts with the customers. In fact, those folks on the “front line” (think call centers, service counters, retail stores) are typically among the lowest-paid and have the least authority.

Meanwhile, back at headquarters fundamental decisions are made with extremely limited information about customers. There, understanding the customer is often considered someone else’s responsibility, because, “we have a department for that.”

No department has a complete view of the customer, however, and so in place of true understanding are models and frameworks that attempt to describe the customer. Many companies don’t go beyond demographics and market segmentation. While it’s helpful to know how they break down by age, sex, income, region, and other easily measurable characteristics, there’s actually very little you can actually do with that information.

In order to become customer experience-driven, you need to go beyond who your customers are, and understand what they do.

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Case Example: A large national bank with a sophisticated demographic model, but didn’t understand what cinched the deal.

Initial efforts focused on the “goal” of buying a product and outlining the steps that people took to achieve that goal.

And in doing so, there was evidence of an underlying motivational layer of emotion that actually guided their decisions. Buying financial products is challenging, because unlike physical goods, it’s hard to define what you want ahead of time. At Best Buy, you can point to a 52″ television and say, “something like that.” You can’t do that with a loan or a line of credit.

So what happened was that while people appeared to engage in the appropriate steps to make a purchase decision, because they couldn’t articulate an end state, they were simply going through the motions and would never commit.

We realized that customers must satisfy three sets of requirements — functional (does the product meet my basic needs); intellectual (through comparison, am I confident I’m getting the best deal); and, crucially, emotional (could I have a relationship with this bank?).

The bank wanted to drive all applications for new products online, but the customer research analysis made clear the importance of maintaining a quality cross-channel experience.

Edit by DAF

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Full article:
http://blogs.harvardbusiness.org/merholz/2009/02/its-not-who-your-customers-are.html?cm_mmc=npv-_-WEEKLY_HOTLIST-_-FEB_2009-_-HOTLIST0218

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Let’s eat in … what’s in the freezer?

February 19, 2009

Excerpted from WSJ, “Consumers Cut Food Spending Sharply”  By J. Lahart, T. Martin, and J. Adamy, Feb 13, 2009

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The bad economy is hitting America right in the stomach. Consumers have cut back sharply on food spending, shunning restaurants, opting for generic products over brand names, trading in lattes for home-brewed coffee and shopping for bargains. That is hurting sales and profits at many food processors, grocery chains and restaurants.

In 2008’s fourth quarter, consumer spending on food fell at an inflation-adjusted 3.7% from the third quarter … That is the steepest decline in the 62 years the government has compiled the figure …

The big drop likely comes from two things, said Joseph Carson, an economist … First, consumers have been trading down to lower-priced items. Second, he thinks many households dug into their pantries for staples rather than going to the store, a trend that can’t continue indefinitely. “You can’t contract at this rate for long … It’s just shocking.”

Cindy Greco, a Chicago resident, said she’s shopping more at Costco and buying less expensive meat, such as chicken, shrimp and ground turkey …“I’m someone who used to never ever pay attention to the prices of groceries … But now it’s a different story.” She showed off a bottom round roast she had unearthed that was marked down to $7.21 from $18.26.

“In recent years, a lot of discretionary income has gone into buying fancier food, whether it’s Starbucks coffee or prepared dinner or restaurant meals” … Now, that trend seems to be waning.

Last week, Kraft Foods Inc. lowered its earnings forecast for the year, saying customers are cutting back purchases of snack foods and trading down to private labels. Groupe Danone SA said this week that U.S. consumers sharply trimmed their purchases of yogurt and other dairy products at the end of last year. Even makers of chocolates are worried about how well their products sold for Valentine’s Day …

Citi Investment Research warned of a “modern-day price war” based on Wal-Mart’s plan to freshen up its Great Value private-label foods and the analyst’s expectation that it will trim national-brand prices. That could force grocery stores to cut prices to compete. U.S. sales of private-label food rose 10% in 2008 from 2007, to $82.9 billion … At the same time, branded food products saw sales rise 2.8% to $416.6 billion …

When times get tough, restaurants are one of the first places where people economize … The shift has a silver lining for some companies. While supermarkets passed along last year’s high ingredient costs to customers, McDonald’s Corp. and other fast-food chains absorbed some of the expense and kept many items priced at $1. Now, some consumers consider a fast-food meal a bargain. On Monday, McDonald’s said same-store sales rose 7.1% in January, including a 5.4% increase in the U.S.

Other consumers are opting for home cooking. In Bellevue, Neb., stock broker Kevin Vaughan and his wife cook chicken to make broth from scratch instead of buying it in cans, and use all of the resulting meat for multiple dishes … another bonus from reduced food purchases, he added: less trash to take out.

[food spending]

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Full Article:
http://online.wsj.com/article/SB123448606475780133.html

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Scan It! Bag It! Save Time! … and, oh yeah, Spend More!

February 5, 2009

Excerpted from Mediaweek, “Stop & Shop Deploys Scan It! in 50 Stores” by Katy Bachman, January 8, 2009

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Launched in Aug. 2007, Modiv Media’s Scan It! system is designed both to save shoppers time, and offer targeted promotions based on current shopping behavior and purchase history. Here’s how the system works: Shoppers pick up a hand-held device as they enter a store and scan their loyalty cards, allowing the system to track the shopper’s progress through the aisles.  They scan and bag their items as they make their way through the store. 

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Coupon offers appears on the device for products in the area where they are shopping.  If the shopper scans the item, the offer is instantly redeemed and the new price is reflected in the total on their scanner.  Once they are ready to check out they scan their loyalty card and pay. 

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A number of major brands have launched campaigns with Modiv Media, including Coca-Cola, Unilever, ConAgra and Procter & Gamble. Retailers—which get a share of the revenue from participating brands—pay for the installation of the system. “Our partnership with Modiv Media is helping us increase customer loyalty and sales by extending our ongoing effort to provide the fastest, easiest and most rewarding personal shopping experience possible,”

According to the CEO of Modiv Media, the Scan It! system saves shoppers as much as 10 to 15 minutes in the store and leads to an increased average spend of $7 more per basket, compared to shoppers that don’t use the system.  

Edit by NRV

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For AMS students – past & present:: A Rogers’ Five Factors analysis of the new device:

The good news…

  • Observable: Yes, very.  Other shoppers notice and watch to see how it works.
  • Trialability: Good.  Store associate there to assist with “training” and answer questions and convince shoppers to give it a try. 

The bad news…

  • Relative advantage: Exclusive coupons may entice some shoppers to continue to use it.  Looking at how long self-scan lines have been in operation it is obvious that most shoppers prefer to use the traditional method of checking out.
  • Simplicity: Questionable.
  • Compatibility: This will likely be the biggest hurdle for most shoppers.  “Trusting” the technology and their ability to master it is likely to take time since it is very different than the current shopping experience. 

Possible vertical niche? 

(Patient) Moms shopping with kids.  Some blog comments from mothers shopping with little ones say that the device keeps their kids engaged and entertained while shopping.

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Full article:
http://www.mediaweek.com/mw/content_display/news/out-there/place-based/e3i7463e6c2968d742bf50c4fcc2b357a09 

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Stubborn Customers Shun the Greatest Product Innovations …

February 4, 2009

Excerpted from MediaPost.com,”Stubborn Customers Shun The Greatest Product Innovations”,Kalehoff,  Mar 14, 2008

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40% to 90% of all new products fail.  According to Harvard prof John Gourville that’s because consumers are creatures of habit and they irrationally overvalue the benefits offered by products they’re already using. They despise having to change their behavior to use an innovation. Consequently, they often reject products that are objectively superior to the incumbents they’re already using.

Conversely, companies mistakenly mark their own innovation as a frame of reference, and therefore irrationally overvalue the benefits it provides. This deadly combination results in a “mismatch between what innovators think consumers desire – and what consumers really want.”

In response, Gourville suggests anticipating and managing consumer resistance to changes as innovation requires during adoption. Specifically, he recommends:

1. Gauge the Degree of Behavioral Change Required. For example, is your innovation an “Easy Sell,” which provides limited benefit and limited behavioral change? Or is it a “Sure Failure,” offering few benefits and significant behavioral change? Is it a “Long Haul,” providing great benefit but also great behavioral change? Or is it a “Smash Hit,” offering tremendous benefit and little behavioral change?

2. Minimize Consumer Resistance. Not surprisingly, Gourville recommends making products that require little behavioral modification. Uniqueness and features – often marketers’ top selling points – can be detrimental. Second, market to new consumers who aren’t loyal to competing incumbents. Thirdly, market to consumers who “prize” the benefits they’d gain, or don’t value those they’d have to give up.

3. Manage Consumer Resistance. Gourville recommends bracing for slow adoption. Especially with “Long Haul” innovations, be careful to deplete marketing resources too quickly. Furthermore, consumers overvalue existing benefits of incumbent products by a factor of three, on average, while companies overweight the benefits to consumers by a factor of three – resulting in a nine-fold gap. To overcome the “9X Effect,” companies must introduce products with 10 times the benefit.

http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=78486&passFuseAction=PublicationsSearch.showSearchReslts&art_searched=gourville&page_number=0 

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Radical idea: thinking before buying … what will be next?

February 3, 2009

Excerpted from WSJ, “New Info Shoppers,” By Mark Penn, January 8, 2009

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With so much attention on psychological marketing these days — finding new ways to tap into people’s heads — perhaps the single most neglected trend out there is the move towards more hard-nosed information-based shopping and purchasing … 

A special kind of consumer has taken a major role in the marketplace — the new info shopper. These people just can’t buy anything unless they first look it up online and get the lowdown … They have become highly suspicious of many TV ads: in a shoppers survey we did, 78% of them said that ads no longer have enough information they need. So many of them search online for virtually everything …

A whopping 92% of respondents said they had more confidence in information they seek out online than anything coming from a salesclerk or other source. They believe the information they find, not in the information that is spoon-fed to them, and the vast number of clicks today prove that they really are devoting time and energy to ferreting out detailed info before they buy.

We have seen many of the big market areas convert to an information-driven model — cars, homes, personal computers and medical care are areas where nearly 4 in 5 shoppers say they gather information on their own from the Web before buying … Now this trend is spreading down the product chain. In our survey, 24% said they are doing online research before buying shampoo …

The point is that advertising isn’t just moving to the Web, it’s got to grapple with an entirely new kind of shopper and way of shopping. Marketers now have to balance traditional media, online media, and content that is generated by experts, bloggers and consumers themselves. An astonishing 70% of Americans now say they consult product reviews or consumer ratings before they make their buying decisions …

New Info Shoppers are bigger than a microtrend. They represent a broad shift in the marketplace brought about by the Internet, higher education, and changing economic times. But the question is when is the marketplace is going to really catch up to them.

Edit by SAC

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Full Article:
http://online.wsj.com/article/SB123144483005365353.html

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Consumers Go Cheap as Brand Loyalty Suffers

December 11, 2008

Excerpted from WSJ “At the Supermarket Checkout, Frugality Trumps Brand Loyalty” by Ellen Byron, November 6, 2008 

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When Summer Mills visited her local CVS drugstore recently, to save a few dollars she bought the store-brand facial scrub rather than the Olay she normally uses.

“I thought I’d be able to tell the difference, but I couldn’t — I looked at the ingredients and they seemed almost the same,” says Ms. Mills…On her next shopping trip, “I’m going to buy the store-brand moisturizer and cleanser — it’s less money.”

Many Americans are changing their everyday purchases and abandoning brand loyalty, prompted by the persistent financial pressure of rising food, gasoline and electricity prices. Over the past 24 months, consumer prices have risen 7.8%…From coloring hair at home instead of at the salon to trying cheaper laundry detergents, new evidence indicates that Americans are modifying even minor household habits to save money.

Kimberly-Clark’s CEO noted that sales of the company’s potty-training pants, once one of the biggest sales-growth products in the baby aisle, have fallen off in recent months. “You’re seeing consumers leaving children in diapers longer…the diaper is less expensive per piece than a training pant”...Shoppers are even buying toilet paper differently. “When they get to the end of the month, and they’re out of paycheck, they may buy a smaller-count pack”…

To be sure, overall sales of name-brand goods are still higher than those of store brands. Still, about 40% of primary HH shoppers said they started buying store-brand paper products because “they are cheaper than national brands”…Store brands on average cost 46% less than name-brand versions, Mintel found…

Paper napkins suffered the steepest declines over the past year, followed by facial tissue and paper towels. “Not surprisingly, toilet tissue is holding up the best,” Mr. Lockwood says.  Laundry habits are changing, too. Early signs indicate shoppers are switching to cheaper detergents and softeners, a rare shift in one of the most brand-loyal product categories…

Though low-income consumers have been cutting back for the past several months, now upper-income shoppers — those with household incomes of $100,000 or more — also are making significant changes…

“This isn’t belt-tightening, it’s belt-notching…These ritual changes are much deeper and happening much faster than we expected”…

Shoppers’ changing behavior prompted P&G to alter its marketing approach and focus on in-store promotions. “More decisions are made in the store, and we have to be competitive,” CEO A.G. Lafley said…

[Household Spending Habits]
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Full article:
http://online.wsj.com/article/SB122592835021203025.html

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They’d rather play than eat … huh??

December 10, 2008

Excerpted from Marketing Daily “How We Cut: Restaurants First, Video Games Last” by Sarah Mahoney, November 12, 2008

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While there’s no shortage of consumers who are dialing down their spending-.  Guess what consumers axe first when they are worried.

When asked how they planned to trim the fat, dining out is in the hot seat–with 57% of respondents saying they plan to spend less.

Clothes were the next casualty, with 54% cutting back–followed by entertainment, with 50%.

Somewhat safer were beauty products and music, both identified as categories to cut by 44% of the survey, and movies at 43%.

Only 39% say they plan to spend less on toys, and 35% on video games…

How long consumers will continue to tweak their purchasing habits is anyone’s guess, but as far as people are concerned right now, the changes are for the long haul…

Younger consumers are the least hopeful…Those in the 65-plus category come in second in the pessimism parade, with only 7% saying they believe that recovery in less than a year is possible.

Overall, men tend to be less likely to believe we are in a recession, and more likely to believe the economy will bounce back fast.

Edit by SAC 

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Full article:
http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=94580

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What Downturn? Luxury Brands Keep Consumers Dreaming

December 10, 2008

Excerpted from Knowledge @ Wharton “Luxury Brands: Marketing the Upscale During a Downturn“, November 12, 2008

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As 2009 shapes up to be the most challenging year in more than a generation for luxury items such as high-end apparel and fragrances, marketers’ plans for targeting aspirational 16-year-olds and expanding rapidly into the new money hubs of Russia or the United Arab Emirates are suddenly “out.”  What’s now “in” for marketing luxury in this difficult era is pampering the wealthiest and most loyal customers…

In a recession in which even upscale consumers may find themselves strapped for disposable cash, it is a bad strategy to chase customers too far down the economic ladder. “We don’t want to see huge price cuts that will create a lower-priced brand…you don’t want to tarnish your brand…you still have your brand reputation to uphold”…

Many experts believe that the economic pain of the deepening recession could fall disproportionally on these marketers of high-end perfumes, trendy clothing or sleek fashion accessories…Conspicuous consumption seems practically un-American in these troubled times…As a result of the hard times, consumers are likely to see some moves aimed at selling high-end products at a slightly lower cost.

The key is not to make any move that will diminish the value of a brand with a well-established name for luxury…For luxury goods, the business plan places trust in the artistic vision of a designer — and hopes that will lure customers.

Because of the luxurious image they must portray, these marketers said they also need to guard their brands in ways that mass-market companies do not…That does not mean, however, that luxury firms do not want their products to reach a fairly broad audience… But to boost the bottom line, fashion firms are likely to focus now on pampering their best and most loyal consumers, using computer technology to increasingly customize upscale products that will be designed or tailored especially to their needs.

The success of individualized luxury goods — such as designer clothes or eyewear — is a development that could keep a customer repeatedly coming back for more, according to the panelists…Among the designer trends in customization are monogrammed handbags, personalized options for a color or a fabric in accessories, or a wider array of fragrances that are “personalized”…

Ironically, while the panelists were not particularly enthusiastic about the short-term prospects for emerging overseas markets, their companies continue to position themselves for when the time is right…

Still, regardless of where the global economy winds up, luxury marketers say their principle mission will remain the same: Selling a more glamorous way of life to aspiring consumers. “You’re buying into that dream…And you’re buying into that grand theme, which is our job.” 

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Full article:
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2091

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