In Tough Times, Cash-Strapped Consumers Shift Brands, as Ads Shift to Cheaper Digital
How can we quantify the impact that this loss of spending power has had on brand choice? Since 2008, comScore has been tracking consumers' response to the question: "Do you buy the brand you want most?" We have examined brands in health & beauty aids, over-the-counter (OTC) medicines, food, household products and housewares.
The results aren't pretty. In 2008, about 54% of consumers said they bought the brand they wanted most. By 2010, this had dropped to 45%, and 43% this year. Declines were observed in every category, with the most severe drop (17 points) in over-the-counter medicines and the lowest in the household category (6 points).
If consumers aren't buying the brand they want most, what are they buying? Often they are switching brands when a "peer" brand is on sale, with 38% in 2011 saying they did this compared to 33% in 2008. But they also turn to a cheaper product. About 19% of consumers switched to private-label products in 2011, up from 14% in 2008.
Marketers are reacting in a variety of ways to this new economic reality. Some are introducing lower-priced brands. P&G, for example, recently announced a bargain price Gain dish soap. It's too early to say how successful it is .
Some manufacturers are introducing smaller product sizes. This can be risky. When comScore asked consumers if a product's downsizing caused them to switch to another brand, 14% said it usually did and 54% said it occasionally did. But when asked which cost-controlling action they would prefer, 62% more consumers chose a smaller size over a price increase. Brand marketers appear to be backed into a "damned if you do, damned if you don't" corner when pursuing a price-increase or downsizing strategy.
One bright spot for marketers is the growing realization that digital advertising can be an effective way to drive top-line growth, at a lower cost. Information Resources has reported an average 8% lift in sales of consumer packaged- goods brands retail sales over the course of a year, as a result of TV advertising. This matches the sales lift comScore has observed from digital advertising over a three-month period. The faster sales lift from digital traces to a greater use of price and promotion messaging when compared to TV, but it is also caused by digital's superior targeting ability, which allows more ad impressions to be delivered against a target audience in a given period of time.
The Interactive Advertising Bureau reports that online advertising grew by 23% during the first half of this year, well ahead of the 3% growth reported for all measured media. Both search (+31%) and display-related (+27%) advertising registered impressive gains. Research by comScore shows that consumer packaged-goods are beginning to use digital as a substitute for print to communicate price and promotion messages.
Most major indicators suggest that the economy will be a challenge for brand marketers for some time. Cash-strapped consumers will be the new normal. We'll continue to see strength in digital-ad spending, but for brand marketers it's is going to be a bumpy ride.