In this article from "Advertising Age" experts again point to a comeback of the American consumer.While the bottom line of the article points to an increase in advertising efforts, it questions whether it will have an impact or create "noise". The opportunity for business owners here are : 1) Consumers are begining to come back to the store. Is your message meeting them? 2) Contrary to the bottom line of the article, your advertising can be very effective IF it is well thought out to reach the right market, with the right message, in the right media. 3) Although it's work, you can calculate and achieve a good return on your advertising investment. Lastly, even in a down economy work to keep your message out their so when consumers are ready to purchase you are on their mind.
Spring Brings in Rosier Marketing Picture
Despite lingering reasons for gloom, several signs in recent weeks are pointing to springtime in America for consumers, and, by extension, marketers.
Consumers opened their wallets in March, producing the biggest one-month gain since Thomson Reuters began compiling the data a decade ago. U.S. auto sales climbed a whopping 24.3% from a year ago. Consumers have largely stopped trading down in package goods, as private-label shares have stabilized in recent months after a big run-up last year. A nationwide tracking survey by Consumer Edge Research indicates consumers are eating out more, plan to buy more apparel and are less likely to wait for coupons or price promotions to buy cosmetics and toiletries than they were a few months ago.
Some signs point to marketers opening their wallets, too. Zenith Optimedia boosted its global ad-spending forecast last week for the second time in recent months, though it's still calling for a spending decline this year in North America. But one segment, U.S. package-goods marketers who cut spending sharply last year, appears to be following through on vows to spend more this year, according to a new report from Sanford C. Bernstein.
The sudden strength of consumer spending across so many categories is perplexing to some economists who see a false spring in such numbers as March retailer reports. Conference Board economist Ken Goldstein notes that consumer confidence remains at levels typically seen in the depth of recessions, not during recoveries, after hitting its lowest point in 12 postwar recessions. While March confidence numbers rebounded from a big drop in February, they remained lower than in January.
"The question is whether (March retail sales) are a trend or a blip, and my guess is that this is more of a blip," Mr. Goldstein said, citing continued high unemployment and low consumer expectations for job and income growth in the Conference Board survey.
Good news for brands
But a number of other surveys show definite and steady improvement in consumer sentiment. Consumer Edge's survey of 2,500 people, which, while only fielded since last October, has shown continuous improvement in the number of consumers who say they've eaten at quick-service and fine restaurants in the past 30 days and who plan to buy everything from clothes to cars in the next 30 days.
The March edition of the survey had the most optimistic data yet for brands, with the first decline in the percentage of consumers who said they always try to buy private labels or use coupons, along with declines in the percentage of consumers who say they always buy the cheapest brand of electronics and wait to buy cosmetics or toiletries until they're on sale.
Consumer Edge analyst Bill Pecoriello said he felt the survey data was vindicated when scanner data from Nielsen and Symphony IRI came out a few days later showing a decline in private-label market shares in household and personal care products as well as food from the prior month.
RBC Capital Markets, which has its own consumer spending survey that's more detailed than those of the Conference Board or University of Michigan, found the highest level of consumer spending sentiment in its April survey released last week since January of 2008, near the entry point of the current recession. RBC found marked improvement in consumer spending plans on a wide range of areas, including dining out, apparel and automotive spending.
The NPD Group also found cause for hope in the restaurant industry. Its Crest service, which tracks weekly same-store sales at 47 quick-service and mid-level dining chains, finds sales have been positive for five of the past six weeks. "It's the first time we've seen that for 11 months," said NPD restaurant analyst Bonnie Riggs. "We do think things are starting to pick up."
Beating forecasts
It sees, for example, a lift in breakfast sales, which slid 2% last year as unemployed consumers stayed away from drive-thrus in the morning. NPD still expects traffic as a whole to remain negative through the third quarter, but believes it will turn positive by the fourth quarter. And Ms. Riggs doesn't expect the industry to return to pre-recession levels for another 18 months.
For retailers, the data for now is largely on the side of the optimists, though there are caveats. March retail results appeared to borrow both from February, when consumers delayed some purchases because of bad weather, and April, because of an earlier Easter this year. Even so, the numbers beat the forecasts of analysts, who knew both those factors going in.
In all, Kantar Retail found retail same-store sales up 9.2% based on March reports excluding Walmart, which stopped providing monthly sales data last May. That more than made up for a 4.7% decline in the retail numbers excluding Walmart a year ago.
Of course, Walmart, when it was still reporting monthly numbers, turned last year's 4.7% decline into only a 1.9% decline. In recent quarters, however, Walmart's same-store sales have lagged the market. So when the behemoth next releases its quarterly numbers in June, it could pull down industry growth if trends continue.
Package-goods players appear to be following through on vows to spend more on advertising, with household and personal-care players raising spending 6% in January vs. a year ago, when they also had hiked spending before a fairly steep decline for the remainder of the year, according to Kantar Media data from Bernstein. In all, Bernstein analyst Ali Dibadj expects household and personal-care companies he covers to hike ad spending as a share of sales by more than a percentage point this year, undoing last year's decline.
"The question is, as more companies spend more on advertising over the next year or so, does that just create more noise?" he said. "To get the same share of voice, everyone has to spend more, so the ROI just goes down."
(Source: Advertising Age, 04/12/10)
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