Turning Shoppers into Buyers
A few months ago, I was wary of switching on the television and being bombarded with ads on where to spend my money, how much to invest and which insurance scheme gave you a bang for your buck. But in recent weeks my fears seem to have been dispelled as most of these ads have gone into hibernation (hopefully until the economy recovers). What one sees now are ads sending out a different message to the consumer.
From buying and spending, the focus of many banking and financial services ads is now savings and secure credit. A number of ads in the US Snow feature debit cards as opposed to credit cards. Bank of America has linked its savings scheme with credit card usage and has been promoting the same by showcasing an old-fashioned cookie jar half-filled with dimes and nickels in its television, print and Web site promotions. The concept is this — every purchase you make with a credit card will be rounded off to the next whole number and the small amount required to achieve this round number would be deposited in your savings account. This way your savings account builds up with every credit card purchase. That notwithstanding, ads featuring the bank’s credit card have dipped and have been replaced with debit cards and the benefits it entails such as tracking your savings and reward points.
MasterCard too has been promoting its Debit MasterCard and will also offer pre-paid options to consumers this year to help them manage expenses. “In 2009, we’re positioning our brand to help consumers responsibly outsmart the times and make life easier,” says Jon Schwartz, spokesperson of the US Markets Communications of MasterCard World Wide.
Speaking to BrandLine, Schwartz says the company would continue to use its 11-year-old ‘Priceless’ marketing platform. “We found that the theme of our campaign — “there are some things in life that money can’t buy ... for everything else there’s MasterCard” — continues to resonate with consumers, especially in this economy,” he adds, which is why it is currently airing a well-loved past TV ad called ‘Icons’. The ad features popular American animated brand mascots such as the Pillsbury Dough Boy, Green Giant of the frozen vegetables brand, Charlie the tuna and Mr. Clean gathering around a dining table for a home-cooked meal. This experience is portrayed as fun and inexpensive and apt for current times.
MasterCard research indicates that about 50 per cent of Americans are re-thinking their wallet strategy. There is a shift from discretionary spending. Drastic changes in the housing market, financial sector and gas prices over the last year have made consumers pragmatic about their purchases. And this has had a significant impact on other sectors too.
The shopping trips per household are downan AC Nielsen reports say. The decline in discretionary expenditure has taken a toll on mid- and high-end department stores such as Kohl’s, Macy’s and Nordstrom. Retailers carrying more “need-to-have” and less “nice-to-have” products have fared better as consumers downscale from premium to mid-tier or value brands, the report says. Bargain shoppers are shifting spending to value channels — making 35 per cent more trips to super centres (supermarkets), 10 per cent more trips to club stores and 9 per cent more trips to dollar stores to stretch their budget.
Despite such a change in consumer behaviour and spending patterns, some brands have managed to register positive sales growth thanks to innovative marketing strategies. Wine posted the greatest unit sales growth of any category over the previous year, purely through innovative strategies like finding new distribution outlets, says another AC Nielsen report. This growth was fuelled by many factors — Wal-Mart expanding the number of stores selling wine by 24 per cent, movie placements and celebrity labels that showed wine as a sophisticated yet healthy alternative to other drinks.
“It is important to understand what consumers want and value in an economic crisis and be receptive to that,” says Ravi Dhar, Professor of Management and Marketing and Director of the Yale Center for Customer Insights, Yale School of Management. For instance, when people are stressed out, they still want to spend on small items say those under $15-$20. Little wonder then that price cuts have lifted sales.
AC Nielsen reports that Supermarket Winn-Dixie’s ‘Good ’Til’ programme reduced prices on over 1,000 items while retail chain Sam’s Club offered a limited membership costing $10 for 10 weeks. Regular memberships cost between $35 and $100. Catering firm Hy-Vee priced a meal for four at $8 a day and KFC recently unveiled a meal for five at $3 each. Meanwhile, soup maker Campbell’s had a ‘10 cans for $10’ offer (a regular can costs about $2).The reason why only a handful of companies have been able to crack this market is because others have not understood the real impact of the economic crisis on consumer psyche. “This recession, we have realised that unlike previous occasions, there is no correlation between job cuts and consumer spending,” Dhar contends. In the past only those who lost their jobs would cut down on their spending. But this time even those with jobs have reduced their expenditure. “They probably feel guilty making purchases. And, therefore, marketers must look at ways of reassuring people that it is ok to spend,” he adds.
‘It’s ok to spend’
He shares the case of the luxury goods industry where many trends saw sales plummeting by as much as 20 per cent last year. Firms such as Gucci, Chanel and Louis Vuitton Moët Hennessy have made their logos less prominent on their products. The bling too has disappeared and products look more functional than dressy. Jewellery brand Tiffany’s and Co. has unveiled an under-$150 Valentine’s Day collection and other gifts for under $100 — price points which would have been difficult to see a couple of years ago. The products meet with Prof Dhar’s observations — silver, white gold, small engravings and simple daily-wear designs. Some of these products are also featured on the company’s online discount store Tiffany Line, which offers items for as less as $30. When contacted, the company did not wish to comment on its marketing strategy or share further information.
Another industry that is getting its act together is real estate. A few years ago people’s chief reasons for buying a home was space and connectivity to work. Now it is value — how much will it sell for in future? Some firms have quickly come up with schemes such as one-year free maintenance, free membership to a nearby gym for a limited time period, reduced broker/real estate agents’ commissions, reduced price per sq.ft. and other freebies, informs Dhar.
But the most interesting example of good marketing is that of Wilmington Trust Direct, an Internet bank that is offering customers a 2.81 per cent interest rate on savings accounts. Regular banks currently offer between 0 and 1 per cent rate of interest on savings. This is smart marketing that directly benefits the customer, Prof Dhar says. “A lot of firms are currently contemplating a cut in their marketing expenses to reflect better bottom lines. This won’t lead to benefits because for the time you stop marketing, the consumer’s mind is occupied with another brand, probably a competitor. And when things look up consumers will continue to favour that brand.”
(The writer is a former Business Line staffer and is currently based in New Jersey, USA.)