Top Consumer Goods Spending Trends

Gloom or Boom?

While consumers around the world are more confident about the year ahead, Americans still seem relatively unconvinced there will be drastic improvement. And they have good reason to be leery. The “jobless” recovery—like government bailouts—hasn’t yet touched consumers. Banks remain skittish about extending credit. Home foreclosures will likely hit hard in the first quarter of 2010 as banks work through an incredible backlog. And smaller community banks with exposure to commercial loans will be acquired should they not have the reserves to cover the losses. While economic indicators point to a technical recovery, a fair number of looming issues have yet to be addressed.

With these mixed messages, what will the American consumer do? Nielsen research reveals that consumers’ fundamental spending adjustments are likely to last in the next year. Either by choice or necessity, their new-found thriftiness will continue. Almost one-third of consumers (30%) say that they will use credit less even when conditions improve with 19% saying that they intend to save more money.

Discretionary spending cutbacks continue to change the way consumers shop. Consumers now use coupons with an enthusiasm not seen in many years—for the first three quarters of 2009, Inmar reported that manufacturer coupon redemptions were up 26%. Food departments outperformed non-food, health and beauty and general merchandise departments as Americans returned to cooking and eating at home—boosting grocery channel shopping trips in the process. Store brands grew becoming an acceptable alternative—or even preferred brand—for many. Meanwhile, consumers “traded down” across categories, preferring chicken, turkey and pork to beef and seafood. While value channels such as supercenters, club and dollar stores, as well as online retailers, drove shopping trips to their stores, discretionary retail channels (home improvement, office supply and pet stores) saw declines.

Top Five Consumer Goods Spending Trends in 2010:

1. Restraint remains the new normal.
Americans’ confidence has been slower to rebound compared to other parts of the world. The need to save money, unemployment and other economic issues continue to be top of mind, suggesting that any return to past behavior may take some time—if at all.
2. Value is a top priority.
With no signs of readiness to open wallets, a focus on low prices at the expense of all other variables threatens margins. Value messaging must also include some point of differentiation beyond pricing. Manufacturers and retailers that “drive the recession wave” and take an active role in innovation and ad spending are likely to be the big winners.
3. Store brand growth continues.
Even with year-end 2009 softness in store brand dollar share growth as retailers cut prices across the store to be more competitive, unit share growth continues and retailer focus has never been stronger.
4. Grocery consolidation intensifies.
Local and regional players, unable to drive profits in the soft economy, will become acquisition targets and some larger national and regional grocers will divest unprofitable formats and banners to strengthen investments behind their winning formats and banners.
5. Assortment wars escalate.
Retailer efforts to simplify the consumer shopping experience by eliminating aisle and shelf clutter will cause market share land grabs for small and medium-sized brands in pursuit of elusive revenue growth. Retailers may lose sales as they shift away from in-store merchandising that drove impulse buying and built shopper baskets. Look for brands caught in the trap of greater store brand focus and assortment optimization to forge alliances with key retailers, enter or step-up efforts as store brand suppliers, and/or explore direct-to-consumer sales.

Sweet Harmony for Brands, Musicians

The potential synergies between consumer brands and the music industry have never been more important to explore. With total ad spending down 15 percent in the first half of 2009 compared with the first half of 2008 and ad spending on music down 16 percent in the same period, it makes sense that an increasing number of marketers and musicians are interested in essentially doubling their promotional weight, both on- and offline. (Related: "2009: Trends in Music Branding.")

Here, three campaigns whose clever creative strategies have boosted the profiles of both the brands and artists:

COCA-COLA

For Coca-Cola, happiness is a five-note branding mnemonic turned into a song heard around the world. The effort, a collaboration with Atlantic Records for the cola's "Open happiness" campaign from Wieden + Kennedy, stars a genre-bending mix of artists: Cee-Lo Green; Fall Out Boy's Patrick Stump; Panic at the Disco's Brendon Urie; Gym Class Heroes' Travis McCoy; and Janelle Monae.

Producer Butch Walker and Green co-wrote the nearly four-minute track released in March (the mnemonic was written by Human) via MySpace-where it's been streamed more than 700,000 times -- and iTunes, where it reached No. 27 on the Pop Chart in the U.S. The song was used in ads that aired in 31 markets, with spots including eight customized versions with local artists (such as Leehom Wang in China, whose version reached No. 1 on the Top 100 chart of search engine Baidu.com). In July, a music video -- as stylistically fanciful as the animated "Happiness Factory" spots -- premiered on MTV. And the song is keeping its buzz on: so far, it has inspired more than 100 user-generated versions on YouTube, and this winter it will be heard at various venues at the Olympics in Vancouver.

"One thing [that 'Open happiness'] has proven to us is that music has the power to connect," said Coke's global music marketing manager Umut Ozaydinli at an Adweek and Billboard Music and Advertising Conference earlier this year.

According to Atlantic's svp of brand marketing, Camille Hackney, the collaboration -- orchestrated by companies including Brand Asset Group and Crush Music Media Management -- is helping to keep the artists top of mind as they each prep upcoming releases.

BLACKBERRY

In an eyebrow-raising switch of brand partners, U2 is working with BlackBerry to help promote its latest album, No Line on the Horizon. (For its last album and tour, 2004's How to Dismantle an Atomic Bomb, U2 partnered with Apple and released a special edition iPod and an exclusive historical digital catalog, as well as starred in an iPod/iTunes commercial touting its "Vertigo" single.)

BlackBerry's campaign, which touts the message "BlackBerry loves U2," includes exclusive sponsorship of the band's 360˚ tour and a 60-second spot from Arc that launched in July. Timed to the album's release and the tour's kickoff, the commercial featured a live performance of the band in a shower of glittery sparks playing "I'll Go Crazy if I Don't Go Crazy Tonight." In the fall, the deal's most innovative element was introduced: a BlackBerry app that includes songs, videos, pictures, a link to the U2 mobile shop and a news feed that sends users updates every time a band member posts to the U2 blog. A yet-to-be activated social-networking feature will allow concertgoers to mark their seats on a map of each venue, and locate and communicate with other fans at the shows.

"We're reinventing the album experience for the digital age," said Jeff McDowell, vp, global alliances at BlackBerry maker Research In Motion, at the time of the app's release.

CRYSTAL LIGHT

Atlantic Records' artist Estelle had a very good night at the Grammy's back in February. Not only did a Crystal Light spot launch during the show with an upbeat song she wrote and sang -- one of two spots featuring the song in a campaign from Ogilvy & Mather -- but she later won her first Grammy for the song "American Boy." (You can bet Kraft Foods, owner of Crystal Light, was pleased, too.) In the spot, Estelle belted out the upbeat "Star," which she wrote for the powdered drink mix. The commercial included a URL where visitors could download free copies of a full-length version of the song.

Within the first week on the Web site, said Doug Scott, president of Ogilvy Entertainment, it was downloaded 20,000 times. A month later, it was put up for sale on sites including iTunes and Amazon. Ten months after its debut, Atlantic said the brand-inspired song is being considered for inclusion on Estelle's next release, which is expected in mid-2010. The campaign, said Atlantic's Hackney, "was another platform to help build [Estelle] and her brand. We collaborated and got a fantastic song out of it. ... And you never know, we may make it into a single. We're still having those discussions.

P&G finds worldwide consumers share traits

The Central American jungle country of Belize and the manicured neighborhoods of Loveland are thousands of miles and worlds apart, but not so different in at least one way.

"There's few universals, but cleanliness is one of them," says Andrew Manning, who has spent time in both jungles and kitchens as a cultural anthropologist working for Procter & Gamble, a company with a vested interest in cleanliness.

Manning, a Ph.D. in anthropology who has studied shaman rituals in Belize, now puts his insights into human behavior to use for P&G, figuring out why consumers do what they do. "The same skills I used in San Felipe, Belize, I've used in Loveland, Ohio, watching someone clean a floor," he says.

His anthropological learnings are used by P&G scientists, designers and marketers to make and sell products that consumers will buy. Manning recently summed up his job to a luncheon of the American Marketing Association's Cincinnati chapter: "I listen to consumers, and I use what they say to help create products."

Manning has wandered through the maze-like Hutong, winding, dense, urban neighborhoods in China, to figure out why Tide wasn't selling so well there. He learned that Tide's aggressive up-scale advertising needed a remake to play well in these neighborhoods, where a frugal lifestyle, slow pace and family-oriented social life dominate. The result: an about-face in P&G's Tide marketing in China and a bigger market share.

When P&G launched the Swiffer Wet Jet, the TV campaign featured a mom dancing her way through cleaning the floor with the new appliance and the tag- line, "Stop cleaning, start Swiffering." But when sales hit a plateau, Manning went to work in the kitchens of Madeira and Loveland analyzing housewives at work.

What he unearthed - "cleaning is serious business; we weren't conveying this," he says - led to a product redesign and a new campaign with the tagline, "Swiffer gives cleaning a whole new meaning."

The ad featured a comparison of how clean white socks fared on a mop-cleaned floor versus a Swiffered one. That touch was inspired by a Madeira housewife, who worried about the floor when her white sock-wearing mother came to visit.

"Every bit of that came from consumers," Manning says. "Right down to the socks."