Bringing People Back In: Advertising, Technology, and the Personal Story

Everyone loves a good personal story, especially if it has elements that ring true and speak to common interests, human pathos, and the usual triumph over adversity. Advertisers know this, but they often consider their own imaginations as the prime source for good stories. That’s like a novelist who locks herself in a room, endlessly mining her own biography well past the first few novels. Enough already, we think.

Rather than chase their own tails in search of a storyline fit for an ad campaign, advertisers are beginning to put two and two together: the first part is knowing how to find human drama in real life experience and the second is giving consumers and citizens a sense of control over how they present themselves, how they interact with products and technology. The best of these are integrated marketing campaigns that include posting to websites, print and media ads, and social media.

Here are some examples of what I mean: the old version is the “personal testimony” –you know these ads ("how I lost 145 pounds eating turkey subs…") But more significant are the ones where the ad – or the site where the ad is generating attention – is not as intensely focused on the product alone.

The now-classic version of this is Dove’s Campaign for Real Beauty, which began in 2004 as a straight media format, but showed ordinary women celebrating the diversity of body types. Women posted stories and sent in photos; Dove’s site included space for commentary and has morphed into an activist campaign to help women of different ages develop self esteem and respond to unrealistic portrayals of women’s bodies in the media.

A less successful version was Microsoft’s Life Without Walls campaign (“I’m a PC… and I’ve been turned into a stereotype” featuring a John Hodgeman-like spokesperson who then gives over to vignettes of many different people using their pc…) which had potential but felt scripted too closely to its competition and also gave in to rumors that many of the spots on the commercial were created on Macs… The site itself has great stories, but it functions too defensively in favor of the product and less positively in favor of the terrific stories.

For an upcoming example: athletic gear maker Adidas is giving women a chance to star in a new campaign with WNBA basketball player Candace Parker. According to recent news,

The company is hosting an enter-to-win promotion, starting today, in which women can share stories about training struggles and successes. Three entrants whose stories are chosen will star in the ads. Throughout February, consumers are invited to become the new face of the "Me, Myself" campaign by uploading their photos and stories to www.adidas.com/women. They can invite friends and family to vote for them via an online widget that can be attached to one's Facebook or other social networking sites.

Another interesting version is Nationwide insurance, which has a version of that’s focused on Black History Month. The centerpiece of the campaign is a site, www.nationwide.com/mylegacy, where people can post their significant moments of personal achievement within their African-American heritage. The site allows people to share stories, family history, and photos. The company's presence on the site is subtle, which also adds to the imprint of sincerity.

photo credit: "Dad and Four of Five Sons, August 2008" by Jame C.E., Tignall Georgia on the Nationwide "My Legacy" site.

Back to Natural: Focusing on Functional and Generating Generational Sales

Yogurt’s a mainstay in our household – a regularly purchased product – and we’ve had a fair amount of brand loyalty over the years. Originally a local brand in New England, Stonyfield Organic went over well when there were small kids in my house, since it could be sweet, smooth, and without artificial ingredients. It wasn’t my kind of yogurt – not tart enough and a bit too gelatinous – but it’s better than a lot of what is available in your average grocery store. Recently, yogurt brands have been expanding out again (beyond the unfortunate direction of looking too much like a bad version of dessert, from the turn-your-tongue-green and sell me a cartoon character to the what-is-that-crunchy-chocolate-crap anyway) now there’s a renewed interest in yogurt as an actual health food --- priobiotics are one of the best selling functional foods out there. And greek yogurt –the “real” stuff with a richer texture --- has gone mainstream, too. I’m still buying the Stonyfield and a greek active culture yogurt for our regular use, but I’ve stood over the “probiotic” ones for a while, contemplating a taste. So far I’d resisted because they only come in the tiny packs and I'm suspicious that the benefits have been inflated. But the ad campaigns are definitely wearing me down, as I see Jaime Lee Curtis hawking the stuff with a big smile. The clincher was when I was offered some at a hotel breakfast bar this weekend, which I happily ate, especially when it had the words “ALL NATURAL” written across the top.

In the retail food and beverage market, natural and functional seem to be steady sales and growth areas. Although “natural” has a vague and watered down meaning, it’s clearly become more meaningful to consumers than “fortified,” “low-calorie,” and “low-fat.” According to the Mintel Global New Products Database, "Food and drink manufacturers today realize that natural and pure have become healthy eating ideals, as people look for holistic, genuine nutrition they can trust." Functional foods also have that edge – they have the tinge of science and nature all in one (Kraft has a LiveActive Chewy Granola Bar that smacks of healthy snacking while providing the consumer with all the fiber and probiotic culture you simply can’t find in potato chips). Ethical (eco) foods are also still a growing concern among consumers, so add that in to the mix.

I’m not Gen Y by a long shot – my kids and students are, though – and their food preferences match up with the trends described above. The Center for Culinary Development and Packaged Facts did some qualitative studies and found “their penchant for customizing foods through adds-ons or mix-ins (the reason they love fajitas and other "build-it-yourself" foods); their dedication to local, organic, fair trade and vegetarian/vegan foods (reflecting their belief that food choices can make a positive difference in the world at large); and their firm belief in the value of health/wellness and functional (including anti-aging) foods and beverages."

Sure enough, I looked around the classroom the other day and saw three women eating the same yogurt I’d had at the hotel – and the ones I bought for myself are mysteriously disappearing from the fridge awfully fast…. Honestly, the one I actually tasted was good, but until the science catches up with the marketing (or I magically become Gen Y), I think I'll probably go back to my regular brand.

image and an excellent analysis of the yogurt health claims from the great science magazine Inkling's Inky Circus Blog.

Do You Think “What You See” Influences “What You Get”?

If not, you might be wrong, as Evan at Storefront Backtalk points out in an excellent blog post.

We know the statistics: Wal-Mart's in-store TV network is now the 5th largest broadcast network in the US, after NBC, ABC, CBS and Fox. We know that YouTube and social video sites are at the top of the pack in terms of traffic, loyalty and "stickyness."  And we know that "kids these days", say anyone under 35, are tuning in to video sources on their cellphones and PDAs while on the bus or train, in class, and at work. While all of this distraction might have kept people busy, and thus not spending money, interestingly, “among the benefits of videos touted by web retailers are a lower
number of abandoned shopping carts, reduced return rates and higher
sales,” said Jeffrey Grau, eMarketer senior analyst.  Further:

[I]t’s clear retailers are just beginning to understand
the sales power of in-store videos, which is nice, because consumers
are just starting to understand the informational power—and, yes, the
convenience—that well-done videos can offer. Will these two trains
meet? And I do not mean in a Gomez Addams model train set kind of way.

The economy may also play a role. I’m hesitant to say that, because columnists, marketers and politicians (how’s that
for a trustworthy group?) today seem to find in the weak economy the
magic answers that will explain everything. (”Traditionally, Brussels
sprouts are not big sellers in school lunch programs, but with the way
the economy is headed, that’s going to change.”)

The question I have is whether there's a causal relationship between video viewing habits and purchase intent (or brand perception, or any other goal/measurement of success).  Are video watchers naturally inclined to be more accepting, hence their attitude toward watching the video in the first place?  Or are we simply seeing the self-selecting dynamic play out (as Evan notes himself)?  Or maybe it's novelty.  I guess I'm wondering how much selling the video itself is doing, and how much is coincidence.

Any thoughts?

The Web as The Source: Consumers, Information, and Trust

As we’re poised to watch a whole slew of expensive Super Bowl ads, undoubtedly focused on entertaining and emotionally enticing viewers, it’s worth stepping back a moment and considering that as fun as these ads might be, lately most people are making purchasing decisions using their brains and not their feelings.

Whether you consider this a new insight or a basic tenet of human consumption in the market era, consumers are becoming more focused on gathering information about products and brands. To me, it’s no surprise, but the accessibility of knowledge via the internet and social networks makes this a whole new ballgame for marketers and retail sales. Certainly there’s a glut of information out there -- and people struggle to decide what counts as an authoritative voice to guide them through purchases. (You can even see the Madoff debacle as an extreme example of how easy it is for the unbelievable to appear ordinary). One result of the current economic situation is that discernment is rising to the top of desirable skills for consumers. No one wants to make mistakes when they’re on a tight budget.

In a recent survey of consumer micro-trends, Penn, Schoen, and Berland Associates find that consumers no longer trust television ads or news as a means of gauging a product – and they’re more likely to trust online sources than store clerks for information. Again, no surprise when most retail outlets don’t work to create the sense that their sales force is there for the consumer rather than the company line. As I’ve pointed out in prior posts, those that do (Apple, for instance) are more apt to generate consumer loyalty. Blogs that provide retail insights (like this one, we hope!) are also a growing influence. Not that we have a buyer’s revolution on our hands, but it’s about time advertisers jettisoned their outdated notion of what consumers are really like.

Just to keep things in perspective, keep in mind that the micro-trends survey finds that most people are spending less than half an hour in product research online. That’s not a huge amount, but it also probably depends on the item in question. It also appears that it actually works when companies don’t presume that consumers are ignorant of technical information. Penn et al explain:

“Information-seeking is not just an activity, it's a way of looking at the world. New info shoppers are proud of the progress they have made in putting facts over pablum. More companies should treat their customers as Dyson did and let them in on the secrets of their unique success. And they should invest more than ever in helping form their consumers into citizen corps, arming them with PCs, cameras and even asking them to use the phone's new video cameras to document their product usage and put them online.”

The biggest obstacle in advancing a new approach seems to be the antiquated notion that an informed consumer is an unwilling consumer. Trust, it seems, is a two-way street.

Image source: Smart Shoppers in the 1940s, The National Archives.

Marketing Up the Scale: Foodies as Economic Indicator

As a writer and a market analyst, I am working hard to avoid using the word “recession” or even the less ominous phrase “current economic climate” when describing what’s happening in the retail world. Perhaps until things change, we can just reach a mutual understanding that this is the context in which we’re all working?

Sounds good.

That said, there are some interesting marketing trends reaching for two segments of the market – those who are somewhat insulated from current conditions and those who are affected more directly by a “fear of falling.” In this case, I’ll focus on the upscale side.

Food purchases are some of the best indicators of people’s attitudes about spending. Certainly restaurant-going is way down and there’s a fair amount of concern in the hospitality industry about who – or what – will survive the...well, you know the phrase. The new President’s economic stimulus plan (here it is in full detail) has retail and hospitality high on the list of industries that ideally will receive some help. But general food expenditures, outside of restaurants, remain robust in some sections of the market.

Despite a very recent spike in Baby Boomer savings, Packaged Facts reports that spending is still high among “foodies” (a term that I hate almost as much as I bet the foodies do). Natural Specialty Foods Memo also points to good sales at UK premium grocer Waitrose and other natural upscale food stores over the holidays.

Even though they end up promoting a rather frivolous-sounding label, Packaged Facts actually does a good job unpacking the segment to find that there are subgroups: Foreign/Spicy Foodies, Restaurant Foodies, Foodie Cooks, Foodie Gourmets, and Organic/Natural Foodies. Interesting though these segmentations are, they don’t translate outside the American marketplace to countries where regional cultures have a stronger influence on cuisine.

Among the many intriguing insights in their study, one point seems worth highlighting when thinking about retail marketing: even though foodies are willing to pay more for higher quality foods, they are also bargain hunters. (This goes along with our earlier blog about upscale shoppers being more effective coupon-users.) For example, Bon Apetit just featured 20 excellent wines for $10 or less. NPR reports that while some folks are still shopping based on taste regardless of price, wine sales are up especially among the less expensive vintages. (Remember the slumping restaurant industry? People perceive dining well at home as a less expensive option.)

Chocolate, on the other hand, seems to be benefiting from its association with good things in many of those foodie categories. Again, Packaged Facts finds that sales of premium chocolates remain high: from spicy (high end chocolates infused with chilis) to gourmet (premium microbatch bars) to natural (fair trade organic) to healthy (dark chocolate’s purported antioxidant properties).

The point for retail marketers to take home: Well, we can’t all survive on wine and chocolate, but many people, despite a desire to save and scrimp a bit, would prefer not to do without it. Marketing consumables as both a savings and a luxury is where it’s at.

Department Store Dreams: Fantasizing the Future from the Past

Le Bon Marche and the interior of the old Samaritaine in Paris


In their heyday, department stores were “palaces of consumption,” originally modeled on the great World Exposition of 1900 in Paris. Huge, turn-of-the-century fairs and expos helped usher in the consumer revolution, beginning an era of merchandising centered on fulfilling people’s fantasies through purchases made in a dream-like atmosphere. The rise of the department store from the mid 1850s to the end of 19th century was nothing short of a major revolution, not only for business but also for all of society. In Au Bonheur des Dames, writer Emile Zola skillfully describes these exotic and new places, bursting with fabrics, furs, and frills, with Oriental carpets and curtains recreating a harem-like setting where people were drawn in by awe and amazement. To many, the department store was the home of the democratization of luxury and the fantasy of wealth.

But more than a hundred years later, things have changed and some are wondering about the possibility that department stores are at the end of their lifespan. Both the experience of shopping as a form of entertainment and the availability of affordable beauty have diffused to different sites. Even prior to the current economic downturn, hints that the department store was not fulfilling people’s fantasies abounded. Specialty stores in cities and suburbs have increased their size and scope, whether it’s books, electronics, or high-end fashion. Malls, on the other hand, which are the traditional mooring station for the department store, are working hard to stay afloat. The malls that survive are often smaller, more focused on being entertainment and recreation centers, and provide more leisure rather than shopping activities (restaurants, cinemas, fitness centers, play areas, and day spas all do well, whereas specialty fashion stores and the big anchor box stores do not).

While many critics will point to Wal-Mart as a key factor in department store decline, it seems more likely that the experience of shopping as a leisure and pleasure activity has changed. When the original department stores opened, there was nothing else on the landscape that offered the same kind of variety, exoticism, and glitz in one potentially affordable site. People went to see the window displays and merchandise much in the same way one might go to a museum or show. La Samaritaine in Paris, one of the original department stores full of the latest fashions, was unable to stay out of the red and now awaits transformation into luxury condos. Today malls must add musical fountains, interactive game centers, and IMAX theaters to draw in traffic, none of which is enough to encourage wary shoppers to come out and spend money. What remains of the dream world of consumer fantasy?: Retail shopping in urban centers; Online inspiration provides almost instant gratification (and the collective experience via social media; Speciality stores really do specialize (not a bad thing). Frankly, the world is more densely populated with opportunities for consumption.

The department store, like the mall, may be at a particularly difficult point in its life cycle, occurring at an unfortunate moment in economic and social history. It will take some innovative thinking – and some real awareness of the long-term needs of people and their communities – to resuscitate these retail icons. Whether the new palaces of consumption are real, virtual, or some exciting combination, the story is far from over.

Are you a cart puller?

No, not in the pack mule sense of the phrase, but rather in the "move down the checkout aisle pulling your shopping cart behind you" sense.  If so, you may be missing a big chunk of marketing messages trying to get you to make a few last impulse purchases before you pay.

That's what boutique market research firm Relevation Research concluded (and AdAge reports) after studying shoppers moving down the checkout aisle.  While "pullers" as they're called (and you can count me among them) account for about 74% of shoppers, remarkably most marketing materials and POP around the checkout aisle are designed for pushers -- those folks who push their cart down the checkout aisle (why they do that I'll never know.  But then, I'm a puller). The critical takeaway ias that, "The front of the store is a department, accounting for 1% of sales or more." That's according to Nan Martin, a co-founder of Relevation, who continued, "It's designed for consumers to make impulse purchases as they push through. If you're pulling, your back is to the merchandise most of that time."

I can see this kind of information putting retailers in a bind.  It's definitely not intuitive or "pretty" to have POP and other promotional materials face backward.  And while many displays are designed to be shopped from 360 degrees, few visual aides are designed to be seen from 360 degrees.  And if you decide to simply double up the number of ads in hopes of attracting the attention of both pushers and pullers, it's going to start looking very noisy, very quickly.

On the other hand, one must imagine that retailers are happier knowing what's going on than not, right?

Right?

Tags: shopping, retail marketing

If the shoe fits: spending less, selling more, and doing good

Surprisingly, as I look back over what I’ve written about for In-Store and Retail Media News, I’ve missed one topic very near and dear to my heart: shoes. That’s one that perhaps stereotypes me as a woman shopper (although not of the Carrie “Sex in the City” Jimmy Choo type – I’m more of a Columbia sportswear/Dansko kind of gal). But shoes are a great gauge of retail market sales, so I’m happy to find something to say about them as the year winds to a close.

Brandweek just profiled Zappos.com as an online shoe company that’s done exceedingly well with little to no advertising budget. Indeed, the biggest print ad I’ve ever seen for Zappos was no more than a three-inch sidebar in the New Yorker. Word-of-mouth and excellent customer service are the key factors that make Zappos successful. Indeed, my own retail happiness comes from knowing that I will be treated honestly and decently by whomever I talk to if I call to ask about an order or email a question. I’ve not had the pleasure of a bar sitdown with CEO Tony Hsieh, like some other customers have, but it’s not outside the realm of possibility, whereas the ten things I’d really like to convey to the executives at the Gap, Target, Starbucks, and Apple will probably only ever make it as far as this blog. There’s a lot of hype about social networks and retail sales, but Zappos is one of the few companies where it seems to actually work. Partly it’s the item in question: shoes are deeply personal but highly coveted fashion items that are necessary and ultimately functional (okay, well, for those who have learned the secret to walking in those Manolos, that’s not true). Partly it's good sales strategy that's accessible to even the small scale retail business. If you want to know more about how Zappos manages to do what it does, for a mere $39.99 a month you can subscribe to their new video question and answer service that’s a lot cheaper than a marketing consultant firm.

For another shoe company of more modest means and goals, take a look at Tom’s Shoes. I have been a fan of Tom’s for a long time. They make a single product in a million varieties and have a single important mission: to help shoe the world. Tom’s makes a stylish sustainable shoe (not Jimmy Choo or Dansko stylish – more “I’m a yoga goddess” or “I’m Brad Pitt and I can wear whatever I want” stylish”). Even if you personally don’t love these (and I do), you probably know someone who does and you’ll love the reason why Tom’s wants to shoe the world. For each pair of shoes sold by Tom’s Shoes, the company donates another pair to a child in a less developed country where podocondoitis is common. This disease, transmitted through high levels of silicate in the soil, which travels through the bloodstream to create lymphatic problems, is completely avoidable if people wear shoes. Tom’s has brought thousands of shoes to South Africa and Latin America. If you still haven’t finished your holiday gift giving or if charitable acts are part of your New Year’s resolutions, you can help Tom’s reach its goal of 33,000 shoes sold before the holidays end. Like its big corporate counterpart, Zappos, Tom’s Shoes makes great use of Facebook and MySpace, where fandom helps spread the word and provides excellent social network buzz about these cool shoes. There's a lot of marketing noise about the power of cause-based sales, but Tom's Shoes really walks the walk, as they say, in that the company's existence is centered on the cause as much as on the sales. Starbucks will still go on selling coffee long after their Red marketing foray into ending AIDS in Africa. But Tom's will always have a purpose AND good shoes!

All in all, here’s hoping you stay well heeled and inexpensively marketed for the new year.

Happy Holidays Without the Hype

There’s Chanukah and there's Santa at my house, so we have a lot of gifting going on – Santa usually ends up with one serious present to the girls (believers, still, so let’s hope they’re not among my loyal readers), while Chanukah is a lot of smaller things, alternating between fun and necessity. I’ve been out and about observing the shopping situation here in western Pennsylvania since prior to Thanksgiving and it’s been slow, no surprise. But just as a recent NRF survey indicated, there seemed to be a late surge with a lot of last minute purchasing going on, if my experiences were at all typical.

Many shoppers heading out the last weekend before Christmas indeed found the stores and malls fuller than they had all week prior. The deals certainly got sweeter too, with online coupons and direct mail flyers pushing more and more discounts as shoppers got down to the wire.Interestingly, my observations and personal experience follow right down the line with NRF’s survey information about what people are buying. Here are some notes to mull over while sipping on the last of your holiday eggnog or eating latkes or whatever edible pleasures your holidays bring:

1. Clothing seems to be doing okay (about 48% of shoppers told NRF they’d already bought some), especially as the big retailers like Macy’s, Kohl’s, Target, and Old Navy barrage households with even deeper discounts as we get down to the wire. Advertising pays off here, as do loyalty discounts. Most purchases seem to be happening in the discount aisles, away from the frivolous and the "five-minute fashionables."
2. Books, cds, dvds, and video games are second at around 40%. Again, preferred customer discounts and email offers seem to be luring people into the big chain bookstores, as both Barnes and Noble and Borders had customers lined up with printed out coupons all this week. People mentioned these items as reasonably priced, perhaps more thoughtful than clothing, and definitely something that didn’t fall into the “necessity,” category, but also didn’t feel frivolous.
   
3. Electronics: sales are down (24%) but there’s a lot of online research going on behind those purchases. Santa’s bringing some small electronic gadgets to our house, since the price of video and digital cameras have gone way down and there are good comparative deals to be had, even if you weren’t willing to risk it all at Circuit City. The electronics clerk at Target mentioned that his customers seemed to be doing less in-store decision-making, ponying up to the counter with the information in hand.
   
4. Gift card sales are way down. Not surprising, given the vast number of store closings that make people nervous about sticking their loved ones with a useless piece of plastic (example: Sharper Image). Even American Express seems shaky to some people nowadays. In our household, a few iTunes cards seemed a safe bet for music teachers and college-age cousins.
   
5. Online Shopping Rules! Everyone I know has bought something from Amazon or eBay this season because of the bargains, lack of crowds, better variety, and good ideas. That’s a first. It’s also more of a topic of discussion, with people trading tips in person and, of course, on social network sites. “When heading online to shop, consumers are increasingly web-savvy in the way they look for bargains: 85 percent of online shoppers use tools or websites to find good deals online… they use price-comparison websites, online-coupon websites, online advertisements, bargain-tracking websites and shopping-themed social networks,” according to the Marketing VOX Web site. Art Technology Group, Inc. claims that close to half of the people they surveyed would shop online for gifts this year, while 44 percent said they still expect to frequent stores.
   
6. Chocolate, chocolate, chocolate. Watching people's carts, even with all the careful shopping, it's clear that indulgences are still important. I venture to guess that they’ve gotten smaller and more meaningful. Everyone – and I mean everyone except my dad, who likes everything except chocolate – is getting some form of the good stuff this year. From wine-infused bars to hazelnut dark chocolate logs to simple bonbons to, my favorite, the Vosges Bacon Bar – there’s chocolate for everyone. That kind of gelt still, as they say, holds currency.
   

Happy Holidays, and Happy New Year!

Chocolate gelt: available everywhere. Chocolate Christmas Trees c/o The Chocolate Tailor.

Not All Shoppers are Equally Frugal, Not All Coupons are Equally Creative

For as long as I’ve known her, my one sister-in-law has been an amazing coupon user. I just never really noticed it. To me, coupons evoke images of my mother in the 1970s, with her little file box full of tabs for certain items (“household,” “dairy,” “paper products,” they read). She managed the shopping for a medium-sized family on a tight budget until the '80s, when coupon use was just her routine and not a necessity. But my mom’s bargain hunting was really focused on groceries and everyday items. My sister-in-law, on the other hand, had perfected the gift buying bargain well before the current economic climate put a damper on everyone’s holiday shopping.

Back before I knew it was possible, she was using online savings, bookstore coupons, and, most creatively, Amazon.com discounts. We once got a holiday package from Amazon with the sales slip accidentally left in: she had so many discounts and qualified for free shipping that the entire 3 foot box had cost her a total of $5.00. And the most interesting thing is that of all my relatives, she’s in the most comfortable financial situation, in the high upper income brackets. As another family member put it, “well, that’s probably why she’s got money and we don’t!”

Anecdotal evidence aside, it’s quite obvious that coupon use is going to go way up in the coming year. What’s less obvious are two things: one, who’s going to be the main users and two, what kinds of coupons and special offers will work to entice very reluctant consumers to spend. The answer to the latter is complex, since the markets are multi-faceted and the full extent of the economic downturn is still up in the air. It seems likely that people will be more drawn to bargains in stores where they already shop. It’s also likely that younger consumers, who have been a steady market but are now slowing down, will have to learn some thrifty shopping skills. Here’s some other useful information: Packaged Facts has a recent study that gives some depth to my sister-in-law story.

When it comes to money-saving coupons, the highest-earning segments are most active. Coupon penetration is at 69% of all households through the early part of this year, but 46% in households earning less than $25,000--and it jumps to 71% in families earning more than $75,000. Usage is highest among those working in such white-collar functions as management, finance and administration. Also intriguing: Smaller households use coupons more than larger ones.

On-shelf point-of-sale coupon dispensers in the supermarket have been one of the most successful programs, making my mother’s file box obsolete. Here’s a lesson to be learned from this, though: Rather than barrage consumers with endless paper deals for items they don’t need, retailer should use their data to target coupons to people based on their purchasing history and demonstrated needs.

Fear of Falling? Organics, Slow Growth, and Making Too Much of Market Data

This week Mintel’s research on organic foods is all over the press, especially with the catchy headline “organics are not recession proof.” This strikes me as another one of those no-thinking-involved stories: let’s start at the beginning. First, is ANYTHING recession proof? Because if it is, you should let us all in on the secret now.

Second, we run into the same problems with definitions that we had prior to the economic fear factor. “Organics” means a whole lot of things – and often, not enough to define entire segments of the consumer population. People may be hesitating about buying organic shampoo, but they’re not ready to give up on organic meat or eggs. Or, more likely, they’re cutting back on meat (organic or not!) until the prices are more in line with their current budgets. Still, it looks like they’re still buying their essential pantry items from the organic side of the fence (not much downturn in sales of Annie’s Mac and Cheese, for example…).

It’s absolutely true that, despite its current legal battle and identity switch from "Whole Paycheck" to "Whole Deal," Whole Foods is not going to show the same profits and growth it has in its pre-recession history. CEO Mackey claims it’s not as bad as we think:

“We have worked hard to increase the value choices within our grocery and Whole Body departments without sacrificing our standards," he said. "We believe our efforts have been successful since these departments are continuing to produce positive comps. While we saw a decline in average transactions in grocery, our average basket size was up, which we believe is a reflection that customers are making fewer trips but stocking up with more on each trip."

Here's three things to consider when evaluating the organic market:

• One, it’s still expensive, especially in the produce aisle (here’s a hint to all you green consumers: shop local produce markets and shop sustainable rather than organic).
  
• Second, a good chunk of WF’s big sales have been in regions that have experienced big population and economic growth, but are now at the forefront of the real estate crash (Arizona, Florida, and California, for example). These areas are hard hit by the recession and all businesses will be struggling a bit here.
• And third, it depends on what you look at that people are buying. What's green is more often mixed in at mainstream stores now (ironic that WF is being accused of having a monopoly when some of their biggest competitors are now supermarket organic brands and the real candidate for global market control, Wal-Mart).

Although the Organic Trade Association has charted a greater price convergence between organics and conventional food (especially with the development of in-house organic brands), it’s important to note that certain items are going to remain high. Organic produce that’s not in season and difficult to transport is still selling at premium prices in supermarkets. Comparatively, organic vegetables and fruits that are locally sourced and sold in local markets generally sell for the same if not less than their supermarket counterparts. Certainly, consumers have gotten used to buying strawberries even when there’s snow on the ground, so the shift away from those products may be a general trend, not limited to oganics. On the other hand, some of these items may return to their original status as luxury goods, which would mean producing less, but selling for more.

Non-perishable organics like cosmetics and household cleaners are a more complicated question. If the price differences remain high, expect sales of the organics to drop, except in the very high end. But OTA editor Barbara Haumann points out that big companies like P&G are striving to keep their green goods in the same ballpark as their regular line. To me, the Natural Specialty Foods Organization sums up the whole situation:

Organic category sales - not including store brands or bulk sales - were forecast to grow by 14 percent in 2008, compared with increases of 16 percent in 2007, 22 percent in 2006 and 21 percent in 2005, according to market research firm Mintel International. We think the 2008 forecast is probably off by about 4-5%, meaning overall organic category growth is more likely in the 10% range for 2008.

Mintel’s study is more subtle than the headlines would have you believe. Senior analyst Marcia Mogelonsky claims, "Economic struggles will undoubtedly change the way organic food and drink is sold. But we don't expect people to completely stop buying organics… We anticipate more subtle changes, such as the formerly all-organic shopper who returns to traditional cookie brands while sticking with organic produce. These small changes will slow market growth."

Pantry staples remain solid sellers. We still load up the cart with Annie’s Mac and Cheese, some Arrowhead Mills mixes (Hains Celestial is the parent company), and Stonyfield Yogurt, all of which are slightly more expensive but brands with loyal followings, as their steady sales indicate. Stonyfield’s CEO Gary Hirshberg says it all: things may be slowing down, but "Anybody else would be envying our growth" given current economic conditions.”

Maybe not recession-proof, but certainly still kicking.

In Defense of Good Data

Last week in Marketing Daily, Adrian Chedore, CEO of Synovate, made an argument for the more robust use of big data sets along with smaller, in-depth studies of consumer behavior. One of the challenges, he suggested, is being able to make use of the massive amounts of data that we are now able to collect. Putting aside my objection to reducing the full measurable reality of people’s lives via their consumption habits, it’s important to recognize that information is useless without two things: reliability and interpretation.

Reliability means we know the information is good. I know this is a standard social research rant, but every day there’s new reports touting data that proves what people want, who they are, what they buy, based on sample sizes and questionably designed survey techniques. In a frantic attempt to name and claim segmented markets, research firms will prematurely christen fragments of the population with ridiculous nomiclatures. I spend a fair amount of my research and reading time figuring out the design and sampling procedures of studies. Even the good ones tend to generalize too far out from their data. Intepretation means what ideas are being used to make sense of the data. I'm also constantly digging to make sure that the studies cited really do measure what they purport to measure. In the desire to say something new and useful, the data often gets left behind. For a good explanation of how to decide what statistics are good or bad, here's a recent broadcast from noted sociologist Joel Best on Kojo Nnamdi's radio show.

Given that, I’m in agreement with Mr Chedore, but I want to put a plug in for the most important source of data we have: one that is not generated by commercial entities, but by the government. It’s the Census. Recently the New York Times included an editorial supporting the new administration’s concerns about the 2010 census, specifically about finding a director with proven experience. The last eight years have seen reduced funding and administrative upheavals at what was once a very reliable agency.

Indeed, Chedore insists that market research's strength lies in its foundation in academic discipline and commitment to sound, reliable data. He pushes for more coordinated use of data and international comparisons – something that might be more effectively handled with government-generated data rather than across different companies. Case in point, Chedore laments the highly fragmented nature of current market research efforts. Using the Census might be an important corrective.

The census is extremely important to all of us who are interested in the demographic makeup of this country. It’s also necessary as an unbiased benchmark against which we can compare other kinds of data. In January, John Tizzi reminded the business world that the census is the best free market data around, another smart tip in lean times. The public accessibility of the data is one of the most remarkable things about it. (Tizzi’s other suggestions for “marketing on the cheap” are actually some very sound, basic research principles that companies seem to be forgetting in their constant search for something new).

So it may be smart for companies to put in a good word for the new administration's efforts to revitalize the US Census. After all, there's nothing like good data.

Map above is from Google Earth's census mapping program: it is a map of the counties in the United States colorized by median age. Lighter colors are older.

Nielsen's 2009 Outlook: When times get tough, the tough go back-to-basics

Nielsen's Consumer Insight Magazine put out a set of predictions for the retail and advertising landscape next year, and as one might expect they're not too optimistic about experiencing a quick economic turnaround. In summary, they expect:

"a no-frills philosophy to kick into high gear in 2009, reflecting not just a consumer mindset, but one that is paramount to retailers and manufacturers alike, who are looking for growth in a downturn economy. From sustainable manufacturing techniques to innovative national brand offerings, the products and services likely to succeed in 2009 will be those that appeal to the sensible consumer looking for a rational benefit."

They go on to highlight twenty trends across the consumer spending board, a few of which gave me pause. Consider:

Marketers will think "renovation" as much as "innovation"

Nielsen has seen steady growth in testing of established brand restages and re-launches over time, and we expect this trend to continue into commercialization as marketing budgets are tighter. Reinventing established brands can be managed as a lower risk innovation strategy.
However, making this strategy a success requires a delicate balance of providing continuity to current buyers while offering sufficient novelty to attract new triers.

Ad spending will be tight.

Nielsen reported significant ad spending declines in the first half of 2008 by eight of the top 10 advertisers—down roughly 6% during the same period in 2007. As companies continue to downsize and scrutinize spending, expect these declines to continue, especially within the automotive category and with Financial Services companies. However, product categories such Direct Response Product, which increased spending 20.48%, and Credit Card Services (+18.95%), should continue to spend on advertising.

Coupon redemptions will rise.

As consumers look for more deals, expect coupon redemptions to increase. While coupon activity is actually flat versus year ago, this is positive news as it is the first time in many years that redemptions didn’t fall. As more manufacturers and retailers make it easier for consumers to gain access to coupons via email, mobile phones and in-store methods, consumers will take advantage of this cost-cutting strategy.

and

Brand prestige will be driven less by premium price.

Expect to see fewer premium-priced new products introduced into the market in 2009. However, focusing on low price may under-deliver on expectations. Marketers should look to emphasize a brand’s value proposition in new and unique ways by linking the value message to the consumer benefit.

These three, if true, will present some unique challenges and opportunities for in-store marketing experts. Price differentiation, typically considered a form of trade promotion, will probably be king for the time being, especially if the shift from brand-name to lower-priced private label or off-brand continues. But the opportunity to deliver customized marketing and promotions via interactive loyalty terminals or digital signage systems that can beam offers to a shopper's mobile phone could make them more valuable during the recession than previously expected.

Text Me Those Bargains

Like some bad stereotype come to life, I find I have a teenage daughter who can text faster than lightening. She can hold three conversations at once: one with me about something she left at home on her way to school, another with her local friends about what everyone is doing today, and a third with her Massachusetts buddies about what movie they saw last week. She even has mittens with flip top thumbs, so she can text comfortably even when it’s cold outdoors.

While I’m not as fast as she is, I use texting a lot more frequently as a means of communication for shopping. We email grocery lists as text messages, send photo messages to friends to see if the color or style of an item is what they want (before they buy it), and most importantly, check in with other folks to see if a bargain item is still there, on sale, or at another store. Even without barcode scanning capacity (which some phones actually do have), the cell phone is an ideal way of instantly finding out if one store is less expensive than another.

Scarborough Research has done a recent survey of “Texters” and generalizes that most texters are young, active, spend a lot on their cell phone bills and technology in general, and do a fair amount of shopping on line.The study indicates that in cities like El Paso, Salt Lake City, Dallas, and Memphis young consumers use the greatest amount of text messaging. Further, the study suggests that there’s racial diversity among this demographic, which also shapes their consumer tastes. Market researchers are already salivating over the possibilities in “tween” and teen markets (a new study by the University of North Carolina even suggests that the cell phone text message can be used as a motivational device to help monitor teen behavior and increase weight loss!), so the minority-tech savvy market seems almost too good to be true. But Scarborough's findings about the group's interests lack depth. Michael Hastings Black makes a great point about this: if viewed properly, social media can actually illustrate a greater complexity to consumption and identity among people of color, particularly since the content is being created by the individuals rather than for them!

While there is definitely a segment of the consumer market that fits the profile, I’m not convinced market researchers should be encapsulating text message users as a consumer category “texters.” The research identifies a subgroup, one that may prove profitable to manufacturers of certain types of goods (sports events and gear, music and concerts, media-based and technology-driven items, for example). At the same time, my ethnographic observations and other cell phone use surveys suggest that texting is becoming a general part of consumer behavior, more broadly distributed across the population than this study suggests. The Nielson group reported in September that most mobile customers are receiving more text messages than actual phone calls. Indeed, they cite a 450% increase in text messaging since the same time period two years ago!) One group I almost never see texting is people 65 and older (the only exception I noted was in relation to President-Elect Obama’s campaign use of text messaging to let supporters know about such things as his choice of Vice President. One older woman said to me, “I’d never gotten one of those before!”) More than other new technologies, the current platforms for texting favor those with experience using small keys. It’s taken so long for computer screens and keyboards to be adapted for use by older readers who need bigger text, it’s not surprising that the current cell phone designs favor users with small fingers and good eyesight.

While technology marketing tends to fawn over the users described in Scarborough’s study, it would be a mistake to aim ad campaigns more pointedly towards this group rather than expanding the possibilities by paying closer attention to social media. And, lest there be a post without mentioning our current economic state, keep in mind that young consumers are not necessarily the ones who’ll be controlling the household spending as we ride through the recession.

Will convenience stores thrive or fail in the recession?

Recessions can be funny sometimes, rewarding companies that are usually associated with low-touch, high-margin products that are readily available from numerous competing outlets.  Case in point? Convenience stores. C-Store News noted that 2008 was not a particularly great year for c-stores, thanks in large part to very high gas prices that encouraged consumers to spend less time in their cars, and consequently, less time getting the gas that so often leads to a c-store visit. So, while the total number of stores decreased by about 700 this year, and people have been spending less on impulse items like candy and cigarettes, as Inside the Aisle notes, "two facts offer some
encouragement: consumers are driving fewer miles and stopping luxury
spending, focusing on necessary items, and c-stores sell necessities."

Because consumers are traveling less distance, going out fewer times for dedicated shopping trips, and generally finding ways to consolidate their spending, C-stores might actually see profits rise next year thanks to the lousy economic climate.  That, in spite of the fact that they often charge higher prices for staple items like bread and milk than dedicated supermarkets or megastores like Super Walmart or Super Target do.  Interestingly, Inside's blog post also suggests that this might be a time for C-stores to innovate, finding new ways to encourage shoppers to make unexpected, impulse purchases while filling up their tanks and grabbing a gallon of milk. Indeed, stores are experimenting with self-checkout systems (despite some research that these devices can actually decrease impulse purchases, ironically), and other time-saving conveniences to get customers to spend more.

I'm not convinced that the recession is going to be good for anybody just yet, but considering that people will always be willing to pay something for convenience, c-stores may well indeed be poised to profit from these hard times.