Can We Apply Today‟s Lessons Tomorrow?

Brand Loyalty in Recessionary Times

Gian Fulgoni

Executive Chairman and Co-Founder, comScore, Inc.

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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

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The Past: Marketing was Transformed by the

Great Depression of the 1930s

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Marketing In The Thirties Clients demanded the same level of 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

The Great Depression transformed marketing during the 1930s

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

1930

Birds Eye Frozen FoodsWonder Bread (Sliced)Hostess TwinkiesMott's Apple SauceSnickers candy bars (Mars, Inc.)

1931

Beech-Nut Baby FoodsBisquick (General Mills)Tootsie Pops

1932

Frito Corn ChipsSkippy Peanut ButterHeath bar (Candy Bar)

1933

Nestle Toll House Chocolate Chip CookiesCampbell's Chicken Noodle and Cream of Mushroom soupsKraft Miracle Whip

1934

Pet Evaporated MilkRitz Crackers (Nabisco)

1935

Adolph's Meat TenderizerKit Kat bar

1936

Betty Crocker (General Mills)Elsie the Cow (Borden)Spry (Unilever)Hungry Jack pancake mix (Pillsbury)Mars Almond Bar

1937

Pepperidge Farm BreadSpam (Hormel)Kraft Macaroni & Cheese DinnerRagu Spaghetti Sauce

1938

Lawry's Seasoned SaltMott's Apple JuiceNescafe (Instant Coffee)

1939

Lay's Potato ChipsCream of Wheat Dairy Queen (Ice Cream Stores)

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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

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What Happened to Brand Loyalty During

The Global Recession of 2008 – 2009?

Many Preferred Brands Were Losers

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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.

Background & Objectives

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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

Methodology

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0%

10%

20%

30%

40%

50%

60%

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)

“I buy the brand I want most”

How has the recession affected the brands shoppers buy?

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Category SegmentMarch

2008

March

2009

March

2010

Health & Beauty

Aids

Toothpaste 67% 64% 57%

Mouth rinse 61% 59% 44%

Shampoo 65% 64% 52%

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

Apparel Jeans 54% 49% 39%

Food

Soup 56% 51% 52%

Pasta sauce 53% 48% 45%

Fruit juice 51% 44% 40%

Household

Products

Laundry detergent 57% 50% 47%

Facial tissue 43% 40% 39%

Paper towels 36% 34% 35%

Housewares Small Appliances 45% 38% 34%

“I buy the brand I want most”

However, the degree varies by category and segment

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Category SegmentMarch

2008

March

2009

March

2010

Net shift

2008 to 2010

Health & Beauty

Aids

Toothpaste 67% 64% 57%

-14%Mouth rinse 61% 59% 44%

Shampoo 65% 64% 52%

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

Apparel Jeans 54% 49% 39% -15%

Food

Soup 56% 51% 52%

-7%Pasta sauce 53% 48% 45%

Fruit juice 51% 44% 40%

Household

Products

Laundry detergent 57% 50% 47%

-5%Facial tissue 43% 40% 39%

Paper towels 36% 34% 35%

Housewares Small Appliances 45% 38% 34% -11%

“I buy the brand I want most”

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

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• 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

Some observations on category differences…

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Net Shift 2008 to 2010

Category“I buy the brand I

want most”

“I sometimes buy a

different brand if it is

on sale”

“I buy less expensive

brands to save

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

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

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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

Most”

from „08 to ‟10

2008 Latest 52 Weeks Point Change

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

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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)

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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

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What Happened to Brand Loyalty During

the Global Recession of 2008 – 2009?

Some Big Winners

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

smaller retailers

U.S. Sales

($ Billions)

2008 2009 % Change

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

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

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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 AmazonSource: comScore e-Commerce Measurement

89.8%87.3%

7.5%2.7%

9.5%

3.2%

“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

10%

90%

Nov 1 - Dec 31, 2008

Amazon & Walmart All Others

13%

87%

Nov 1 - Dec 31, 2009Amazon & Walmart All Others

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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 Served

Across the Web

Total Display Ads Served

on the Retail Website

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

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

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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 ShippingSource: comScore e-Commerce Measurement

31%

36% 37%36% 35% 36%

39%42%

41%39%

42%39%

43%41% 41%

46%

50%

45% 44% 45%

41%

20%

30%

40%

50%

60%

Series1

Series2

2008

2009

Average Order Value

27% Higher with Free Shipping

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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

blogs) influenced me to purchase it13%

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

offers/deals7%

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

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Consumer Usage of Twitter

Update as of April: 14% of Twitter users follow businesses to find

special deals, promotions or sales. 14% to find product reviews.

40%

34%

19%

18%

17%

16%

14%

14%

13%

12%

5%

6%

17%

Reading tweets from users I follow

Posting my own tweets

„Retweeting` other users` tweets

Finding breaking news

Conversations with other users

Following celebrities

Following businesses to find sales/deals/special prices/promotions

Finding product reviews/opinions

Finding political news

Following my favorite sports teams

Asking for help/advice from other users

Other

None of the above

% of Twitter users

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

Combined 23%

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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

Thank You!