Archive for October, 2008
In a low-sales era, what’s a hit? That’s the question posed by NY Daily News music writer Jim Farber.
Granted, the music industry has been suffering steep sales declines long before the current economic meltdown. He points out that
there has been a steady downturn in total sales for the top five albums in each year of this decade, ranging from a high of 22.3 million in 2001 to an ’08 figure that will struggle to reach 10 million.
The rest of the article is his proposal for, as he says, "redefining success in our new age of austerity." To do so, he suggests the following redefinitions:
- "Blockbuster": 2million units & up (equivalent of 5MM+ in 2000)
- "Smash": 1MM + (3MM in 2000)
- "Hit": 500K+ (1MM in 2000)
Jim’s question is specifically focused on the music industry, but I think there’s a worthwhile discussion for those of us in other industries and businesses, as well.
What he’s really saying is that the music industry’s definition of success just got whacked by 50-60+%! What if that were (is) your industry, i.e., packaged goods, consumer electronics, etc.? Clearly, that has serious implications across the board, and numbers may well vary across industries and categories. But if everyone takes this kind of hatchet to their assumptions and predictions, it’s easy to see the nasty (and chilling implications) this has for your business. It goes beyond one marketing campaign or even a set of campaigns. You and your C-suite executives must start (or have probably already started) asking questions like:
- What’s my revenue and profit forecast, and what does that mean for the long-term health and viability of my business?
- Do we have to revisit our assumptions about size of our market? What were our assumptions about the existence of the market in the first place, i.e., is this particular product or service something that would only flourish in good or relatively stable times?
- Does the current economy favor our competition based on their price-to-value proposition?
- How do we continue delivering value? What does "value" really mean for my customers and clients?
I could go on, but you get the idea.
But I’m not trying to be a doomsayer here. The best way to deal with this downturn is to keep it real and honest. So, if we haven’t already, we all need to be doing some serious scenario and contingency planning. It also means that there needs to be some smart, new offerings in the pipeline that meet the direct needs of your customers.
So, marketers, what happens to your businesses when/if you assume your best case is 50-60% less that what you’re used to?
Harvard Business School professor John Quelch warns marketers to beware a new consumer in the final months of 2008: the middle-aged simplifier. He says that this is a consumer who
finds herself surrounded by too much stuff acquired. She is increasingly skeptical in the face of a financial meltdown that it was all worth the effort. Out will go luxury purchases, conspicuous consumption, and a trophy culture. Tomorrow’s consumer will buy more ephemeral, less cluttering stuff: fleeting, but expensive, experiences, not heavy goods for the home.
The four(4) characteristics of simplifiers are:
- They feel that they have more stuff than they need.
- Second, their focus is on experiences, not possessions.
- Third, stuff that used to signify wealth (Range Rovers, for example) embarrasses them.
- Fourth, they have enough wealth that they no longer feel the need to be conspicuous about it.
Here’s what Quelch says that marketers need to understand:
These are well-off people who value quality over quantity and do not buy proportionately more goods as their net worth increases. Their increasing reluctance to consume will dampen expected demand growth in developed economies further and therefore slow economic recovery, requiring consumer-goods multinationals to further focus their efforts on emerging markets where stuff will still be king.
Which reminds me of Kim Rayburn’s suggestion last week that during this downturn, marketers need to not just look at loyal customers, but also figure out how to tap into non-customers.
Read John’s full post here.
On today’s Webinar, BIGresearch’s Kim Rayburn (above) provided nearly 100 participants with some great insights on the current state of consumer attitudes, courtesy of the company’s Consumer Intentions & Attitudes (CIA) September and October reports. Some takeaways included:
- Nearly 60% of consumers are focusing on wants over needs, up more than 10 points year-to-year
- Almost half (48%) are taking fewer shopping trips as a result of fluctuating gas prices
- BIGresearch’s 90 Day Outlook indicates that consumers are increasingly pessimistic about spending heading into the ’08 holiday season
- In fact, 38% say they intend to decrease overall spending, up 10 points from last year. This is the highest recorded reading heading into a holiday season, and not an encouraging sign for retailers
Even though grocery isn’t the only category to feel the economy tighten, Kim spent a good portion of the session on Shopper Marketing insights into the grocery category by focusing on Walmart and Kroger grocery shoppers:
- As you might expect, 86% of Walmart and 82% of Kroger shoppers feel impacted by fluctuating gas prices
- Both are spending less on groceries in the next 90 days and expect to dine out less, too
Key shopping behavior changes in these two groups:
- Taking fewer shopping trips
- Shopping closer to home
- Shopping for more sales
- Buying more private label/generic products
- Using coupons more
BIGresearch also found that these are the top four (4) ways grocery shoppers are influenced:
- In-store promotions
- Word of Mouth
- Retail Advertising Inserts
Data points of note here: When asked about what has the most influence in-store, particularly in terms of getting consumers to buy more groceries and shop other categories, answers included:
- Store loyalty cards
- Product samples in-store
- Shelf coupons
- Reading product labels
- Coupons on register tape
What does this all mean for marketers? Split tactics by asking these questions:
- Who? Do you know who your most loyal customers are? Also, there might be a great opportunity with non-customers, so don’t overlook them
- Where? Where are they loyal, and to whom?
- What is the behavior of customers and non-customers
- Why? Do you know the reasons for current behavior or changes in behavior?
- How are you influencing the purchase, and what can you improve?
Definitely an eye-opening session. Plus, participants left with three post-event documents including the presentation. Now, do you want to get great insights directly from the source? Then you should sign up for next month’s Webinar with Nielsen’s Todd Hale, who will take an in-depth look at his company’s Mid-Year Report, which contains some useful info about the trends impacting CPG retailers.
Our president, Bonnie Carlson, was on Fox Business News this morning with Chain Store Age editor Marianne Wilson to discuss the softening retail marketplace. Promotions and value will be the watch words going forward. Smart retailers will utilize better segmentation in order to focus on their loyal consumers.
Yet another reason to consider signing up for next week’s Webinar.
Given the economy, it’s no secret that consumers are shopping based on price and/or value, and marketers are following their lead downstream. However, to do so, marketers risk giving up margins, even as they move units. So, what’s the best approach?
Next week’s PMA Webinar tackles this subject, when BIGresearch’s Kim Rayburn (above) shares insights from the company’s ongoing work into consumer intentions and attitudes, as well as their current media usage to help marketers figure out ways to drive sales and provide promotional or product value for strapped consumers.
Join us and you’ll walk away with:
- A BIGresearch executive briefing
- 2-page recap of the Webinar + supplemental data
- Actionable takeaways that will help you understand new ways to decrease costs and grow revenue
DATE: Wednesday, October 15
TIME: 2:00PM (EDT)/ 1PM (CDT)/ 12 noon (MDT)/ 11AM (PDT)