By now, very few marketing and brand managers even flinch at the discussion of a minor recession in 2001. It’s here and we know it. The question is how we will deal with it.
Consumers have heard the economic pundits and have reacted accordingly. They have been buying less for months, and are looking a bit longer — and harder — for bargains. This last Christmas season saw marketers advertising post-Christmas pricing as early as Dec. 15th.
From where I look (and that’s up and down the aisles of supermarkets), there is little doubt that we have experienced a significant shift in consumer confidence. And that’s the problem. The year 2000 tested consumers with Firestone, PPA, Starlink, and Gore vs. Bush. And in 2001 we have to deal with the below-average results.
As we see even more mega-mergers of retailers and brands, we can expect even more consumer confusion and uneasiness. Most shoppers feel that they will wind up footing the bill for consolidation, either in higher prices or reduced quality.
The year 2001, therefore, must be about branding and value. Reinforcing relationships with consumers, whether you are a CPG or a retailer, should be at the top of your marketing “to do” list.
The value equation has changed little over the years; It is still a balance between price, quality, and service. In times of recession or a slowing economy, price becomes disproportionately important. And in the aisles of supermarkets, that means more sales and more coupons.
NCH NuWorld Marketing wanted to know just how many “more coupons,” and conducted two long-term redemption rate and redemption-GDP studies to see if they supported and maintained the same view on coupon redemption (rates of response and industry volume) and the economy.
The study used 1996 as a base year with a coupon redeeming at two percent. The same coupon is then assumed to have been dropped in each of the preceding years. These coupons are identical in all respects except the year in which they were issued. Redemption rates shown in these years are therefore reflective of yearly economic conditions.
The bottom line is that coupon redemption rates were higher during the recession of 1990-91 than in any other years. Once this period passed and consumers regained confidence, coupon use declined.
As we peer into our crystal ball to forecast what will happen to coupons in the current slowdown, we find two new considerations. The first is that, with the dot-com failures still fresh in our minds, many investors and most consumers are feeling more cautious and will be more active in seeking ways to save money.
The second is that the 76 million Baby Boomers are focused on their retirements beginning in a decade. Concern over the money they will need to retire in the style they are accustomed to is likely to push this generation to follow their parent’s example into heavier coupon usage. And once they become coupon clippers, it is likely that even as the economy regains it’s strength, a good number of them will continue the practice through the next phase of life and into retirement.
NCH’s analysis of coupon trends in 2000 reports that 4.5 billion coupons were redeemed, down 4.2 percent from 1999, due mostly to the consolidation strategies of eight major CPGs. For the consumer, the year brought the average face value of coupons up 5.5 percent to 77 cents. As face value increases, so will the attention of — and presumably redemption by — consumers. In a recent Better Homes & Gardens survey, 88 percent of respondents said they used coupons to save money on regularly used products, with 72 percent using them on their regularly used brand.
In years past, brand marketers would wince at the idea of rewarding loyal customers. But today, as the brand franchise universe is eroding, the most efficient and effective marketing devices must be used to reinforce, protect, and build the brand relationship.
Phil Lempert is a correspondent for NBC’s Today Show, a syndicated newspaper columnist, host of Shopping Smart on the WOR Radio Network, and editor of SupermarketGuru.com. He can be reached at [email protected].
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