The high cost of the
recession for brands
American consumers are buying more generic products
By Diego Vasquez
Nov 8, 2011
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| Campbell’s: Over the past year even this iconic brand has begun to suffer from the switch to generics |
In order to save money during the continued economic downturn, more and more people are buying generic brands or foregoing the brands that they prefer in favor of others that are cheaper or offer coupon discounts. That's according to a new report from comScore, the digital measurement company, which has implications for advertisers trying to get a share of those consumer dollars. From 2008 to 2011, the percentage of shoppers purchasing their most-desired brands has declined from 54 percent to 43 percent, the lowest in recent memory. Still, the research also suggests that higher-priced brands that continue to have a strong ad presence during a recession, when many advertisers tend to cut back, will come out stronger than those that have cut back. ComScore director Doug Crang talks to Media Life about which categories are seeing more people go generic, which brands are holding strong, and why a downturn usually strengthens category leaders.
What did you find most surprising or most interesting about this report?
I think the most interesting aspect is that, while the rate of decline is slowing, the percent of consumers who do not buy the brand they want most continues to drop. We are now four years into the economic downturn and this important barometer continues to slide on a year-to-year basis.
This is really a testament to the depth of the current economic crisis.
American consumers are hurting--not only the unemployed but also the employed who have seen real median income slide since the beginning of the recession. Without signs of improvement, more and more consumers are taking a hard look at how and where they can save money.
What is the most important thing media buyers and planners can take from it?
Media buyers and planners have an important role in helping the brands they serve best navigate these difficult economic times. With advertising budgets under strain, it is important that media be used as effectively and efficiently as possible.
Certainly media planning can help in achieving this objective.
Some of the media related strategies we have found in our research to be effective at making the most of limited advertising budgets include the aggressive use of shorter spots, such as 15-second ads; managing advertising wear-out so that creative is refreshed in a timely manner; taking advantage of synergies between different media options; and recognizing the advantage of having a continuous brand presence over flighting.
The report states, "History suggests that this type of economic decline can sometimes cause weaker brands to fail, while further strengthening category leaders." Why is that? Can you give some examples?
In large measure the weaker brands are not positioned to weather the economic crisis.
They may not be built on a strong selling proposition in the first place, leaving little reason for retreating consumers to stick with the brand. Or their resources may already be strained due to low margins or over-leverage, leaving them susceptible to short-term solutions such as slashing marketing expenditures or raising prices to make up for falling volume, that ultimately backfire when demand does not quickly rebound.
The literature on recessions provides many examples of this pattern. This most recent recession seems to have been especially hard on mid-tier retailers.
For example, the failures of Circuit City electronic stores and Borders bookstores show how well-known brands can succumb to larger rivals. These brands not only faced the larger physical store rivals of Best Buy and Barnes & Noble, but also the world’s largest online retailer, Amazon.
The study finds that just 43 percent of shoppers typically purchase their most-desired brands. How does that compare to past periods in American history? Is that number higher or lower and why?
We have been tracking this since the beginning of the recession, with the first survey fielded in early 2008. Since that time, the percent of shoppers purchasing their most desired brands has steadily declined from 54 percent in 2008 to the current 43 percent, which is quite a dramatic decline.
We don’t have data for earlier time periods, but we suspect this number would have fluctuated with economic conditions in previous years. However, we would hypothesize the 43 percent is at least a relatively low point in American history due the severity and length of the current economic downturn along with other factors such as the proliferation of brands, ease of comparison shopping and the rise of private label brands, all of which would tend to fuel this phenomenon.
Are there categories where consumers continue to buy the brands they most desire more than in other categories? What sets these categories apart?
Among the categories we have been tracking, those in the health and beauty aid segment, such as shampoo, toothpaste and mouth rinse, continue to have the highest levels of consumers buying their most desired brand.
We believe this is likely due to consumer reluctance at using lower-priced products in categories that are personal in nature.
On the flip side, are there categories where people are more willing to buy generic? Why?
The categories for which respondents were most likely to indicate they have converted to less expensive brands, such as private label, in order to save money include paper towels, facial tissue and the one OTC category we tracked--cough/cold/allergy remedies.
For the paper products, while certainly there is a difference in quality versus their premium counterparts, the generics or value brands may be perceived as good enough to get the job done.
The cough/cold/allergy remedy category is an interesting case, as it has seen the largest increase in conversion to lower-priced options since the start of the recession of any of the categories we are tracking.
At first blush this may seem surprising since it is a product used to take care of oneself, similar to health and beauty aids. However, these products can be quite expensive and so it is hard to ignore the potential savings. In addition, with retailers often stocking the store brand right next to the branded product and showing an identical active ingredient, consumers may easily believe they’re getting the same thing for much less money.
Given these findings, how can marketers convince consumers that it is actually worth it to buy their brand if they are more expensive?
First off, it is important to keep a strong marketing program in place rather than succumbing to the temptation to slash advertising expenditures. Ample research from prior recessions indicates that brands that did so came out of the recession in a much stronger position than brands that did not keep ad spending up.
Of course beyond keeping the advertising dollars flowing, brands need to get their message to consumers right. This is where research plays a critical role in helping brands find a message that resonates with consumers and will reinforce preference for the brand despite the higher price tag. What proves effective will vary from category to category and brand to brand. But we do know that clearly differentiating the brand in the mind of consumers is a powerful motivator regardless of the economic climate.
One strategy we’ve seen employed by premium household brands is a value claim, suggesting that consumers will use less versus lower-quality competitors and thus justify the higher price.
Marketers should also take advantage of innovative methods enabled by technology. One such approach cited in the study is the deployment of user-generated video reviews on web site product pages, which have been shown to be effective at brand differentiation and impacting price sensitivity.
Why after fending off declines did soup see the beginnings of a decline in customers buying the brand they wanted this year, when most other brands saw sharper declines during the depths of the recession? What's that say about the category?
Soup is rather unique among the categories we studied due to the dominance of Campbell’s, which has over 60 percent market share in the U.S. in the wet soup category. It is likely that this insulated the category from the buy down phenomenon for a time.
One aspect of this is that Campbell’s is not generally considered a premium brand, perhaps giving less incentive to buy down than in categories where the top brands are premium priced. We also know large brands tend to have more loyal buyers, and so it may have taken longer to shake even cash-strapped consumers from their commitment to the brand – after all, for many of us, Campbell’s is soup.
However, the difference in the past year, as anyone who does any grocery shopping can tell you, is that grocery prices have really spiked. This is particularly true in the soup category, with prices up 8.2 percent in the first eight months of 2011.
So we think this is the factor that finally has pushed shoppers in this category to take a look at less expensive options such as private label.
How is technology helping shoppers' price-seeking behavior?
Certainly technology is making price-seeking much easier, and consumers are taking advantage of it. Rather than collecting weekly circulars, shoppers can go online to use a price comparison site to find out what they should be paying for most anything they want to buy, at any time.
In our survey, we found that shoppers in all age groups except seniors indicated they were most likely to use PC-based internet when doing comparison shopping to find the best price. Nearly two-thirds of shoppers under age 30 exhibited such behavior, and even half of seniors age 60-plus claimed to do so.
And mobile devices are starting to become a big factor in price-seeking among the younger generations, allowing shoppers to know whether they’re getting a good deal while they are in the store itself.
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