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Recession Marketing

Cutting Edge

The Price of the Black Friday Arms Race

Black Friday may need a name-change – to Black Thursday.

Many big-box retailers this year are opening their stores on Thanksgiving Day itself to kick off the traditional after-turkey shopping rush.  Toys R Us is opening at 9 p.m., with Wal-Mart following soon after at 10 p.m.  Best Buy, Kohls, and Target are all opening at midnight.

The benefit of opening early seems clear: retailers hope that shoppers will head to their stores first and complete all of their holiday shopping in one fell swoop.  Also, opening on the night of Thanksgiving may attract shoppers who are bored after the turkey’s been eaten, the dishes have been washed, and the kids have been put to bed; an early opening may also attract those who love sleeping in (but are still awake at 9 or 10 at night).

And the demand may be there.  Brick-and-mortar retailers have increasingly more competition.  Amazon is offering daily deals leading up to Black Friday, and Amazon offers a lot more convenience than the hassle of dealing with Black Friday’s crowds, traffic, and sleep-deprivation.  In addition, consumers are retaining many of their recessionary behaviors, so they are more likely to hunt for the best deal.

This doesn’t mean that it is a good idea all around, though.  The early openings mean that employees have less time to spend with their families on Thanksgiving Day.  This early start to their Black Friday shifts means that many will have to duck out of Thanksgiving dinners early to sleep and prepare for work.

In a lot of ways, it’s a reflection on just how miserable the consumer economy in the US might be. Retailers know that they’re alienating their staffs by opening earlier and earlier each year, but it’s a clear effort to capture a greater percentage of consumer wallets. Retailers used to be able to do that by lowering prices, offering better products – that sort of thing – but as consumers fail to respond to those kinds of stimuli, stores are competing in other areas – like opening hours – instead.

Employees aren’t letting their bosses get off easy: A Target employee has launched an online petition to protest Target’s hours, and it has generated over 180,000 signatures as of Nov. 18.  A quick look through the comments suggests that consumers (as well as the employees) think Target has gone too far.  Many argue that Thanksgiving is a holiday that should be spent with family, and shopping should wait until about dawn on Black Friday.

Do you think consumers will relish shopping on Thanksgiving and adopt it as a new holiday tradition?  Or do you expect stores to be empty until the wee hours of Black Friday morning? Share your thoughts in the comment section below.

MarketPulse

The Back-to-School Blues

Marketers confronting the back-to-school landscape in the coming weeks might encounter a few ugly truths about demand: according to a recent study from Deloitte, which concentrates on food purchases, consumers are responding to perceived price hikes by cutting down on consumption and turning to lower-cost options like private label brands. But embedded in that study is an interesting nugget: among the responses to budget crunches that consumers could choose from, the least popular response was “purchasing fewer organic products”.

Think about that: consumers, when budget-constrained and given the choice between buying less food and buying food that clashes with their values, chose the former. It’s evidence for our assertion that shared values are among the most important differentiation and loyalty drivers available to brands – aligning your brand with higher-order needs is a great strategy to insulate your products from budget cutbacks.

But what are those values and higher-order needs, and how do they play into household decision-making process? To answer that question, we’re hosting a webinar next week that will dive into the evolving American family and present highlights from brands that have done the best job of engaging the modern family in recent months.

MLC members, for more, please register for the webinar or check out our research into accelerating loyalty with the use of shared values.

Cornerstones, MarketPulse

Not the Summer We’d Hoped For

Summer, for most of us, is a time to recharge our batteries, to relax, to enjoy some calm before the demands of life pick up again.  Unfortunately, investors have made that a good deal harder recently as they collectively removed over a trillion dollars in value from financial markets over the course of a few days.

Why the sudden volatility?  Consumers haven’t suddenly changed spending behaviors, nor have business customers. And suppliers look healthier than in some time, beating earnings estimates and sitting on plenty of cash. Credit availability has drastically improved. Inflation is hardly threatening.

The answer seems to lie in the health of developed economies. While many appeared to be on the mend for the past year (albeit slowly), it’s become clear the recovery is far more fragile than was thought, especially in the US.  We’re not in a recession, but we’re also not in a recovery that is self-sustaining.

In such an unstable place, most signals (economic data) are too weak or confusing for investors to proceed with confidence.  Even small pieces of information have outsized impact and prices gyrate.  Markets, after all, are just groups of people trying to discern future value and in this case they are struggling.

So, what are executives doing in the face of this volatility?  Some are being tougher on discretionary spending.  Many are revisiting assumptions for 2012 planning.  But the executives we’ve spoken with are not deviating from the strategies and tactics they put in place following the recession.

There is one thing all executives should be doing right now – getting used to operating in an uncertain environment.  Fortunately, that doesn’t require telling the future.  It does require, however, a structured exploration of what could be, and flexibility to respond regardless what becomes.

Most companies can stand to improve in this area.  Want to learn more? Join your peers in our upcoming webinar, Taming Uncertainty, on 25 August at 11:00 am EDT.  We’ll clarify why volatility has become “normal” and how the best companies are working around it.

Cornerstones

How B2Bs Should Respond to Recent Volatility

I thought we were done with this recession stuff!

Recent activity in the financial markets – not to mention news trickling out of policy-making bodies like the US Congress, Federal Reserve, and the European Central Bank – strongly suggests (but does not guarantee) that at a minimum, a period of soft growth lies ahead for businesses. At worst, we could be facing down another recession; InTrade suggests a 44% chance of the US entering a negative-growth period in 2011, and in Europe, commercial bank exposure to bad sovereign debt might be contagious enough to tip many countries into recession.

So: that’s the bad news. And it’s pretty bad; it could even be catastrophic if policymakers can’t (or won’t) come up with the right answers. But here’s the thing: even in the darkest throes of the last crisis, business and consumer activity continued. Most people remained employed, even if they didn’t get their usual raises and bonuses. And there was still an opportunity for B2Bs to grow. But how?

In our recent B2B research, we identified four kinds of business buyers: Number Crunchers, Service Seekers, Innovators, and Risk Avoiders. We used these profiles to identify the kinds of marketing communications each was most likely to respond to, but each group also reacts differently to slowdowns in the growth environment.

For instance, we defined Innovators as buyers whose prime driver is growth: they make strategic purchases to improve their capabilities, and they’re more interested in learning opportunities provided by their supplier than any other group. But in many businesses, this profile will be inconsistent with diminished opportunities for growth; stronger bottom-line pressure on these buyers will leave many struggling to justify innovation-oriented purchases.

Service Seekers, on the other hand, are highly-satisfied, long term customers making smaller, more transactional purposes. Their biggest priorities are customer service and a great rapport with sales reps, and they tend to be very stable customers. Bottom-line pressure will also result in service seeking buyers struggling to justify their supplier relationships.

I think, if the worst predictions about the economy come true, we’ll see customers begin to crowd into the “Number Cruncher” and “Risk Avoider” categories: customers who are extremely focused on bottom lines and lifetime values, and who want to make absolutely sure that the supplier and products are reliable. They’ll do it because budget pressures will be up and tolerance for risk across the enterprise way down.

So how do you reach Number Crunchers and Risk Avoiders? Our discussions with marketers around the world have unearthed some hints on how to tailor marcoms to these groups. Autodesk enlists fellow customers to calm fears of supplier risk, FedEx uses a tool to quantify customer concerns, and our risk tool will help suppliers understand which risks they should message about.

But the most important element of staying afloat in a bad economy is psychological: resisting the urge to excessively scale back, keeping risks in perspective, and understanding that even in the worst economies, there’s still room to survive and thrive.

Cornerstones

Responding to Economic Volatility

For B2C marketers, in many respects, it’s as if the 2007-2009 recession never ended: the key indicators of consumer health remain stagnant, and post-recession growth has been anemic for all but the leading brands.

But recent activity in the financial markets – not to mention news trickling out of policy-making bodies like the US Congress, Federal Reserve, and the European Central Bank – strongly suggests that, at a minimum, a period of soft growth lies ahead for businesses. At worst, we could be facing down another recession; InTrade suggests a 44% chance of the US entering a negative-growth period in 2011, and in Europe, commercial bank exposure to bad sovereign debt might be contagious enough to tip many countries into recession.

So: that’s the bad news. And it’s pretty bad; it could even be catastrophic if policymakers can’t come up with the right answers. But here’s the thing: even in the darkest throes of the last crisis, consumer activity continued. Most people remained employed, even if they didn’t get their usual raises and bonuses. And there was still an opportunity for brands to grow if they could offer the right value and strike the right message for the times.

MLC’s 2011 B2C study focuses in on the overloaded, frazzled, easily-distracted consumer, and the consequences that overload has for brands. We noted that overloaded consumers are highly associated with brand-disloyal behaviors, and were less likely to recommend or advocate, even for brands that they like. The result for consumer brands is commodification and, increasingly, no purchase at all, as the purchase decision complicates itself to the point of indecision.

Bringing things back to economic instability, what effect does loss of income (or the threat thereof) have on consumer overload, stickiness, and ultimately the bottom lines of consumer brands? It’s not good. Consumers with less money, or who think they might have less money in the future, begin to view purchases as more important or involving significant tradeoffs, sending them on the research spiral:

And they aren’t wrong. Small purchases do take on an inflated importance in times of economic trouble. The best brands are the ones that recognize this and figure out how to communicate value without overloading an already-anxious consumer. Brands like DeBeers, P&G, and Netflix are returning control to consumers by providing transparent buying guides and schemas, allowing people to rest easy and know that a better deal isn’t readily available. Buy-back programs, like Best Buy’s and Hyundai’s, allow consumers to more easily face the buy now-buy later tradeoff, knowing that the decision is at least somewhat reversible if hard times strike.

But consumer brands have one silver lining – many recession-era behaviors have yet to recede, consumers are still buying an elevated amount of private label brands, and so the potential transition from slow to negative growth might not be as difficult as it was last time. Regardless, though, smart marketers with good products still have a chance to grow their brands in the coming months, even if the worst does happen.

Cutting Edge

Retail: The Next 10 Years

While it’s difficult to objectively compare historical eras to each other, it’s safe to say, I think, that the retail industry is undergoing what may be the biggest shift since the advent of mass consumer culture in the earlier part of the century. A number of pressures – both from outside the industry and within it – are reforming retail into a space that might look very different in just a few years. Technological pressures, like the internet, cheap shipping, and mobile phones, are moving retail activity online as well as killing entire categories (think record stores). Economic pressures, like ongoing weak growth in the developed world and rising commodity costs, are eating into consumers’ discretionary income and changing decision processes. And social and environmental pressures, such as affinity for “green”, socially-conscious goods, are changing what consumers want out of the products they buy.

With these shifts in the landscape becoming more apparent every day, Deloitte Research has come out with a timely look at the ways – especially on the consumer end – it expects the retail industry to change by 2020. It’s a great piece of research – worth reading in full – and its conclusion is that in the new environment, retailers will have to prioritize four things above all others: aligning value with values, driving sustainable consumption, going everywhere your consumers go, and taking care of your people.

Let’s take them one by one: Read More »

MarketPulse

Can Consumers Pull Out of the Slump?

Whither the U.S. consumer? If that’s not the question on all marketers’ minds, it should be: for B2C companies, the amount of consumer dollars available is the most important driver of revenues and profits; for B2B marketers, consumer spending accounts for around 70% of the American economy, and indirectly drives business investment and purchasing.

What’s more, we’ve observed that consumers typically retain habits they form in bad times for a significant period of time after the economic situation improves. The longer this goes on, the longer consumers will remain austere.

So what’s the outlook? We don’t pretend to have a crystal ball, but I think it’s fair to say that the prognosis is mediocre at best. A number of indicators of consumer health are trending up, but others suggest some risk of problems in the mid to long term. In all, the data suggest that, at best, the consumer spending pie is growing very, very slowly, and may in fact be stagnant or shrinking.

Brands can grow in a recession or consumer spending downturn, but it’s generally zero-sum growth, coming at the expense of other brands. Making product and brand messaging as simple as possible is one way to maintain share of wallet during downturns, and we’ve also got some thoughts on resource allocation and optimization during recessions, as well as some ideas on how coupons and incentives in particular can shore up market share in bad times.

Here are three indicators that suggest consumers might be holding their own, as well as two that suggest trouble ahead: Read More »

Cornerstones

Setting Mature Brands Up for Growth

If your brand or company is more than a century old, competing in a crowded consumer marketplace, what can you do when growth slows down? Like many companies that have been around for awhile, the Clorox Company (established 1913) was facing low growth in several of its most mature brands.  It noticed, though, that some of its mature brands managed to yield high growth rates despite the challenges that come with managing this type of brand.  To get the rest of its brands on par with these high-achievers, it developed a “high-flying” brand development program (MLC members can find the whole case, as well as an implementation toolkit, behind the link). Read More »

Cornerstones

Cause Marketing: A Second Look

Posted on  7 April 11  by  admin

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(this is a guest post by Mandy Levenberg of Iconoculture, our sister program that tracks and analyzes consumer trends)

A recent study on cause marketing and its effectiveness has been getting some attention and begs for our responseRecent research from the University of Michigan suggests that consumers who buy products benefiting a cause are less likely to donate directly to that cause. In addition to the sample size, 300 college students, not being wholly reflective of the general population, the conclusions are contrary to a few noteworthy studies (Cone et al) and observations we’ve seen over the last several years regarding consumers and cause. When students are on a limited budget, they may stop at the cause purchase, but generally this is not the case and certainly not with a broader consumer group. Consumers may have turned to cause buying–we refer to this as “pragmactivism”–more than in the past, but we often see this activity lead to a more holistic connection with the cause in the form of future donations, hands-on volunteering, cause ambassadorship, and much more.  From our vantage point, cause marketing—the dollars non-profits receive, the potential “halo” effect on brands, and the connections consumers make with causes—is very much alive and well. Read More »

Diversions

The Best and Worst Super Bowl Ads of 2011

This year’s Super Bowl ads ran the gamut from as good as the second half of the game, to as bad as the halftime show. Congrats to Packer fans!

Here are our picks for the best and worst ads of this year’s big game. Agree/disagree? Let us know in comments. Read More »

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