LIVE FROM MARKETPLACE: Fuze adds pomegranate acai berry
ATLANTA While the Coca-Cola Company launched its entire Fuze line of enhanced juices and teas some years ago, at this show they’ve introduced the latest flavor extension in Fuze empower pomegranate acai berry. The pink-friendly product is high in anti-oxidants and represents a new cause marketing initiative on the part of Coca-Cola. In addition to a $650,000 donation made to Susan G. Komen For The Cure, the empower flavor was created to promote efforts in finding a cure for breast cancer.
Study shows brand loyalty dwindles as economy tumbles
NEW YORK Consumers tend to be more fickle than devoted in a failing economy, according to a new study.
In conjunction with the CMO Council, Catalina Marketing analyzed the household consumer shopping behavior of 32 million consumers across 685 leading consumer packaged goods brands and found that only 4-out-of-10 brands retained 50% or more of their highly loyal customers. Less than half of loyal consumers (48%) showed brand loyalty from 2007 to 2008.
“The common belief is that loyalty stays high in an economic downturn. The fact is that loyalty is fleeting and it’s up for grabs,” said Todd Morris, SVP at Catalina Marketing.
For brands, the cost of dwindling loyalty can be high. Tide’s loyal shoppers spent 6% less on the brand, costing Tide 5% of its revenue. If anything, the Catalina study may serve as a wake-up call to marketers to think beyond the quick sale.
Utility displaces quantity as consumers focus on value
There are no easy answers to how to appeal to consumers in the current economy. Retailers are struggling to find ways to attract consumers in a marketplace where value is the new buzzword and thriftiness is top of mind.
“We’ve heard a lot of people talking about value, but not about what value really means,” said Michelle Barry, SVP at The Hartman Group, a Bellevue, Wash.-based research and consulting group. A recent Hartman study found that price matters to consumers, but quantity may not be as important as it once was—especially when it causes waste. “We found that the new paradigm is on utility, and it has displaced the notion of quantity,” Barry said. “Consumers are mindful of wastefulness and the notion of excessive consumption.”
Barry said that means consumers who once bought multipacks at club stores only to throw a third of the flavors away aren’t likely to continue that behavior. “People felt like the price was so good it didn’t matter if they tossed the flavors they didn’t like,” she said. “Now, that’s viewed as wasteful, and it hurts to throw something away. They feel they don’t need to buy as much.”
Consumers still want what they want, and they are unwilling to settle for less. They are willing to shop more channels searching for deals, and they definitely are using more coupons. “Consumers aren’t willing to trade down,” Barry said, “they are just finding different ways to get the products they want.”
Hartman’s recent study on consumer behavior found a channel explosion. “Before, when we asked consumers how many stores they shopped for groceries, they’d say four or five. Now we are hearing eight, nine, 10,” Barry said. “Consumers are treating retailers like commodities, places to find the lowest prices, and the channels are blurring more than ever.” The “thrill of the hunt” is providing consumers with a buzz that’s an antidote to the stress they are feeling from an uncertain economy. “The thrill of finding a really great coupon deal or a 2-for-1 promotion on something is bringing consumers into stores,” Barry said.
Coupon use has risen dramatically, and the use of online coupons is growing even more rapidly. Manufacturers increased the overall number of consumer package goods coupons in the marketplace for the second half of the year, according to NCH Marketing Services, a Chicago-based media and marketing services company. They frequently sweetened their offers by increasing the face value of coupons. The average face value of CPG coupons increased to $1.29, up nearly 5% from 2007, according to NCH.
“In the fourth quarter, redemption of coupons shot up 17%, and in the first quarter of the this year, it’s up 14%,” said Charles Brown, NCH VP marketing. “The numbers are tied to the fact that more coupons were issued, but consumers are definitely more responsive.”
NCH research showed that 94% of consumers said they use coupons, up five share points from the previous year. More than 75% of consumers said they use coupons regularly. In fact, coupon redemption volume is growing by double-digits in such non-traditional supermarket channels as mass merchandisers, dollar stores and drug store chains.
Brown said drug store coupon redemption was up 32%, while mass coupon redemption was ahead 14% and grocery actually was down 7.6%. “In-store promotion in drug stores might have driven that increase,” Brown said. “There were more electronically dispensed coupons that were then available for consumers right there.”
High gas prices also might have been a factor, since consumers were shopping more locally, Brown suggested.
Consumers are getting more coupons from the Internet. Online coupons accounted for only 7% of the total coupons distributed, but that percentage is up 80%, according to Brown. Sunday inserts still account for the lion’s share of coupons. Wherever they are getting their coupons, consumers aren’t likely to stop using them any time soon. “Consumers feel smart when they save money,” Brown said.
“The stigma of using coupons is gone,” said Phil Lempert, a supermarket industry consultant and principal of supermarketguru.com. Lempert said an even bigger consumables trend has been the focus on the dollar as a “magic number. We’re seeing a lot of promotions focusing on 10 items for $10,” he said. “Walmart, as well as traditional supermarket retailers like Albertsons, are running those promotions. The next phase will be what you can get for $1.”
The new economy also has driven sales of private-label products. Private-label grocery sales climbed 10% for the year ended Jan. 24, 2009, according to Nielsen Co., and the category is growing. Walmart recently reintroduced its Great Value line of food with new packaging and more marketing behind the brand. Supermarket retailer Safeway has done so well with its private-label O Organics line that the chain will begin offering the 300-SKU line to other supermarkets. Sales of O-branded products were up 50% in the first quarter of 2008, and Safeway’s chairman Steve Burd told investors in April he expected the line to generate $400 million in sales this year.
The success of private label hasn’t escaped drug retailers. CVS has been promoting its private-label grocery offerings as a good consumer value through in-store signage and promotions on endcaps. “Private label is a big factor because [consumers] don’t see it as trading down. The quality is as good as, and in some cases even superior to, branded consumer package goods,” Barry said.