Brand loyalty in recessionary times

Brand Loyalty in Recessionary Times

Can We Apply Today‟s Lessons Tomorrow?

Gian Fulgoni
Executive Chairman and Co-Founder, comScore, Inc.

Learning from Recessions

 The Past: Marketing Was Transformed by the Great Depression of
the 1930s

 The Present: Many Preferred Brands Lost Share in the Recession
of 2008 / 2009. But There Were Also Some Big Winners Who
Leveraged Digital Marketing

 The Future: The Role of Digital Marketing in Building and
Maintaining Brand Strength

© comScore, Inc. Proprietary and Confidential. 2

The Past: Marketing was Transformed by the
Great Depression of the 1930s


The Great Depression transformed marketing during the 1930s

 Clients demanded the same level of
Marketing In The Thirties
service from ad agencies even as they
spent less
 There were harder sells
 Value messages became more explicit
and direct
 Price became the most prominent
element
 Contests, promotions and premiums
came to the fore as a means of adding
value to brand purchases

Source: Bob Heyman, Digital Automat


Companies Had To Innovate To Survive
American food brands introduced in the 1930s…

 1930  1935
Birds Eye Frozen Foods Adolph's Meat Tenderizer
Wonder Bread (Sliced) Kit Kat bar
Hostess Twinkies
Mott's Apple Sauce  1936
Snickers candy bars (Mars, Inc.)
Betty Crocker (General Mills)
 1931 Elsie the Cow (Borden)
Spry (Unilever)
Beech-Nut Baby Foods Hungry Jack pancake mix (Pillsbury)
Bisquick (General Mills) Mars Almond Bar
Tootsie Pops
 1937
 1932
Pepperidge Farm Bread
Frito Corn Chips Spam (Hormel)
Skippy Peanut Butter Kraft Macaroni & Cheese Dinner
Heath bar (Candy Bar) Ragu Spaghetti Sauce
 1933  1938
Nestle Toll House Chocolate Chip Cookies Lawry's Seasoned Salt
Campbell's Chicken Noodle and Cream of Mott's Apple Juice
Mushroom soups Nescafe (Instant Coffee)
Kraft Miracle Whip
 1939
 1934
Lay's Potato Chips
Pet Evaporated Milk Cream of Wheat
Ritz Crackers (Nabisco) Dairy Queen (Ice Cream Stores)

New Media thrived in the „30s

 Radio was the “new media” of the „30s
 In the average household, radio was
left on 4 hours a day
 Radio was the top rated amusement
 Soap Operas were invented by P&G
 Bingo became popular in the „30s
 Piano sales plummeted

Source: Bob Heyman, Digital Automat


What Happened to Brand Loyalty During
The Global Recession of 2008 – 2009?

Many Preferred Brands Were Losers


Background & Objectives

 comScore ARS conducted a series of three studies in 2008, 2009, and
2010 in the U.S. to determine if shoppers were willing to “buy down” or
switch brands within certain categories in light of the challenging
economy.
 Each study focused on women who are purchasers in the category.
 Results were analyzed across time in order to identify any emerging
patterns and commonalities in shopping behavior overall.

© comScore, Inc. Proprietary and Confidential. 8 8

Methodology

 The samples for each study included 1,000 Women in the United States.
 Shoppers were given a list of products from the following categories:
 Health & Beauty Aids –Toothpaste, Mouth Rinse, Shampoo
 OTC Medicines – Cough/Cold Allergy Medicine
 Apparel – Jeans
 Food – Soup, Pasta Sauce, Fruit Juice
 Household Products – Laundry Detergent, Facial Tissue, Paper Towels
 Housewares – Small Appliances
 They were asked to indicate how they currently shop for each segment:
 Buy the brand I want most
 Buy a different brand if it‟s on sale
 Convert to less expensive brands to save money

© comScore, Inc. Proprietary and Confidential. 9 9

How has the recession affected the brands shoppers buy?

“I buy the brand I want most”
60%

50%

40%

30%

20%

10%

0%
March 2008 March 2009 March 2010

• As the economic downturn has continued, the percent of shoppers
who typically buy the brands they want most has steadily declined
across the categories examined
• In March 2010, less than 50% of shoppers report purchasing the
brand they want most
“Please indicate by checking the boxes below, how you shop for each type of product listed. I buy the brand I want most”…. (% of “yes” responses)


However, the degree varies by category and segment

March March March
Category Segment
2008 2009 2010
Toothpaste 67% 64% 57%
Health & Beauty
Mouth rinse 61% 59% 44%
Aids
Shampoo 65% 64% 52%
OTC Cough/Cold/Allergy 58% 59% 43%

Apparel Jeans 54% 49% 39%
Soup 56% 51% 52%
Food Pasta sauce 53% 48% 45%
Fruit juice 51% 44% 40%
Laundry detergent 57% 50% 47%
Household
Facial tissue 43% 40% 39%
Products
Paper towels 36% 34% 35%
Housewares Small Appliances 45% 38% 34%


…as does the severity of the decline over the three years

March March March Net shift
Category Segment
2008 2009 2010 2008 to 2010
Toothpaste 67% 64% 57%
Health & Beauty
Mouth rinse 61% 59% 44% -14%
Aids
Shampoo 65% 64% 52%

OTC Cough/Cold/Allergy 58% 59% 43% -15%

Apparel Jeans 54% 49% 39% -15%
Soup 56% 51% 52%
Food Pasta sauce 53% 48% 45% -7%
Fruit juice 51% 44% 40%
Laundry detergent 57% 50% 47%
Household
Facial tissue 43% 40% 39% -5%
Products
Paper towels 36% 34% 35%
Housewares Small Appliances 45% 38% 34% -11%


Some observations on category differences…

• In some categories, particularly CPG household products and housewares,
consumers were already more likely to buy a brand they didn‟t “want most”
at the start of the recession
• Some categories (e.g., paper towels, facial tissue) have not seen increased buying down
from a brand perspective, possibly because such categories have led the way in tiering,
allowing consumers to stick with their preferred brand at a more attractive price point
• As the economic downturn has persisted, this buying down behavior
appears to be spreading to categories previously immune (e.g. HBA, OTC)
• The increases in buying down in these categories have largely occurred in the last year.

• Higher ticket items have seen large increases in buying down possibly due
to larger absolute savings on a single purchase


If not the brand „wanted most‟ than what are they buying?

Net Shift 2008 to 2010
“I sometimes buy a “I buy less expensive
“I buy the brand I
Category different brand if it is brands to save
want most”
on sale” money”
Health & Beauty Aids -14% +7% +7%
OTC -15% +10% +5%
Apparel -15% +3% +12%
Food -7% +4% +3%
Consumables -5% +4% +1%
Housewares -11% +7% +4%

• For most categories, the drop in likelihood to shop for the brand wanted most is not
restricted to buying brands on sale
• Rather, a sizeable percentage of the change in shopping approach is being driven
by a decision to convert to less expensive brands to save money


In a down economy, as consumers begin to shift from buying the
brand “they want most,” we see a direct, positive impact on private
label market share; degree of impact varies by product category

Private Label Market Share (by volume)
Total U.S. Food, Drug, Mass Merchandiser
Source: IRI InfoScan
Net Point Shift in
"Brand Wanted
2008 Latest 52 Weeks Point Change
Most”
from „08 to ‟10
Mouth Rinse -17 26.96 27.39 +0.43
Shampoo -13 3.34 3.50 +0.16
Cough/Cold Allergy -15 39.99 44.20 +4.21
Soup -4 13.95 14.82 +0.87
Pasta -8 27.83 27.90 +0.07
Fruit Juice -11 18.99 20.54 +1.55
Laundry Detergent -10 6.20 6.97 +0.77
Facial Tissues -4 24.49 28.77 +4.28
Paper Towels -1 28.75 30.25 +1.50


What can a brand do to counteract these trends?

 Premium brands should invest in marketing and promotion activities to
maintain buying at “preferred” levels and thus:
– Minimize short-term erosion of share to less expensive brands
– Position the brand for a “bounce-back” when the economy rebounds
 Prior studies on recessions bare this out:
– 1.5 point increase in market share among businesses increasing ad spending
during recessionary periods (Cahners and SPI, 2002)
– 2.5 times increase in market share vs. average of all businesses in post-
recession period for those who aggressively increased media expenditures
during last recession (CARR Report, August 13, 2001)
– 256% relative sales growth for those businesses which maintained or
increased media spend during the 1981/1982 recession over those who did not
(McGraw-Hill research analysis of 600 B2B companies)


How can this be done?

 comScore ARS advertising development and testing solutions have been
proven to increase the business building performance of advertising

 Strong advertising increases brand volume, share and loyalty
– Improving the brand preference building power of advertising by 4 percentage
points translates to a +0.5 share point gain for an average brand

 Focusing upstream on message strategy (before creative) improves the
preference building strength of advertising based on the winning strategy
– Success rates vs. normative levels increase to 70% for brands working from
strong message strategies


What Happened to Brand Loyalty During
the Global Recession of 2008 – 2009?

Some Big Winners


In e-commerce, larger online retailers gained dollar share from
smaller retailers

Time Period: Nov. 1 – Dec. 31 2009 vs. year ago

U.S. Sales 2008 2009 % Change
($ Billions)
Total E-Commerce $27.9 $29.0 4%
Largest 25 Retailers $16.6 $18.5 +11%
All Other Retailers $11.3 $10.5 -7%

Sales Share 2008 2009 Point Change
Total E-Commerce 100.0% 100.0% N/A
Largest 25 Retailers 59.6% 63.8% 4.2 pts
All Other Retailers 40.4% 36.2% -4.2 pts


Combined share for Amazon and Walmart grew significantly;
Amazon‟s share is still substantially higher than that of Walmart‟s

e-Commerce Dollar Share for Walmart and Amazon
Source: comScore e-Commerce Measurement

Nov 1 - Dec 31, 2008 Nov 1 - Dec 31, 2009
Amazon & Walmart All Others Amazon & Walmart All Others
3.2%
7.5% 2.7%
10% 9.5% 13%

89.8%
90% 87.3%
87%

“In late 2009, as consumers showed their sensitivity to low prices, price wars returned to the retail landscape
with Walmart and Amazon engaging in book and DVD price wars which eventually turned into an all out war to
have the cheapest consumer electronics.” – WalletPop.com


Walmart and Amazon aggressively used display and search advertising more
than other top retailers to drive their online businesses. But, Amazon relied
much more on paid search to gain traffic while Walmart leveraged display ads

Total Display Ad Impressions Delivered in Nov. and Dec. 2009
Source: comScore Ad Metrix

Total Display Ad
Total Display Ads Served
Impressions Served
on the Retail Website
Across the Web
Wal-Mart 4.2 Billion 844 Million
Amazon 1.9 Billion 4.8 Billion
Best Buy 1 Billion 85 Million
Yahoo! Shopping 763 Million 130 Million

Total Paid Search Ad Impressions Delivered
on Major Search Engines in Dec 2009
Source: comScore Marketer

No. of Exposures No. People Reached Frequency

Amazon 1.1 Billion 128 million 8.8

Walmart 207 Million 53 Million 3.9

Best Buy 50 Million 20 Million 2.5


The Appeal of Amazon Prime Explained: Free shipping growing in importance, accounting
for an incremental 6 points of all e-commerce transactions in 2009. Average order value 27%
higher with free shipping. 75% of consumers would shift to another retailer at checkout if
shipping not free.

Share of All E-Commerce Transactions that Include Free Shipping
Source: comScore e-Commerce Measurement

60% Average Order Value
27% Higher with Free Shipping
50%
50% 46%
43% 45% 44% 45%
42% 41% 41% 41%
39%
40% 42%
41%
39% 39% 2008
Series1
36% 37% 36% 36%
35%
30% 2009
Series2
31%

20%


Social media is an increasingly important driver of commerce

How Social Media Influenced Purchase % of Holiday
Shoppers
Social media has influenced my holiday purchases 28%
Reading a consumer-generated review about a product online (including personal
13%
blogs) influenced me to purchase it
Reading an expert review about a product online influenced me to purchase it 11%
I have followed a company Fan Page on Facebook to take advantage of special
7%
offers/deals
A friend‟s status update about a product on Facebook influenced me to purchase it 6%
Watching a related video online influenced me to purchase a product 5%
I have followed a company on Twitter to take advantage of special offers/deals 5%
A tweet about a product on Twitter influenced me to purchase it 3%
Other 2%
Source: comScore Survey Time Period: Dec. 4-7, 2009, n=425


Update as of April: 14% of Twitter users follow businesses to find
special deals, promotions or sales. 14% to find product reviews.

Consumer Usage of Twitter
Q. For which have you used Twitter?
Source: comScore Survey April 2010

Reading tweets from users I follow 40%
Posting my own tweets 34%
„Retweeting` other users` tweets 19%
Finding breaking news 18%
Conversations with other users 17%
Following celebrities 16%
Following businesses to find sales/deals/special prices/promotions 14% Combined 23%
Finding product reviews/opinions 14%
Finding political news 13%
Following my favorite sports teams 12%
Asking for help/advice from other users 5%
Other 6%
None of the above 17%

% of Twitter users


What have we learned from the most recent recession?

 A reinforcement of the lessons of the past that brands need to deliver
additional value if they are to maintain market share in recessionary times
 Advertising can be an effective lever to maintaining and growing brand
loyalty and success
 The process of developing advertising – by first focusing on the strategy –
is more important than ever given the economic conditions and given the
confusion of today‟s digital marketing landscape
 Based upon the dislocations created by past recessions, it‟s likely that the
most recent recession has accelerated our entry into a new marketing age:
– E-Commerce as a significant sales channel
– Online display advertising as an effective and efficient brand building strategy
– Search advertising as a powerful “direct response” tactic at the bottom of the
sales funnel
– Social networking as an effective and efficient advertising medium


Brand loyalty in recessionary times

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