Todd Hale, Senior Vice President, Consumer and Shopper Insights
For those of you who attended our 2009 Consumer 360 client conference, you heard the opening remarks from John Lewis, President & CEO, Nielsen Consumer North America, on the impact of the economy on our industry. His message was about how our company is “investing considerable resources in the area of thought leadership to mine Nielsen content to understand what will happen tomorrow; where (our economy) will settle; and what will the new paradigm look like?”
When John looks at the economy he sees “consumers under profound pressure in every way and there are so many changes going on” and asked the audience “what is changing versus what isn’t changing so we don’t overlook or miss some obvious opportunities”?
I wanted to share some of John’s messaging and embellish it with some of my own observations. As John mentioned, Nielsen research shows that only 5% of U.S. households are in “panic mode” and doing just about everything they can to modify where they shop, what they buy, and how they consume products to make it through these tough times. The remaining 95% of consumers have modified some of their behaviors too, but these folks have been “very much in the game” for marketers to pursue.
In terms of what isn’t changing, John called out three areas:
- Health & Wellness: U.S. consumers are still looking to lead healthier lives, but economic pressures have led some consumers to alter their prior habits and practices. So sales of many “better-for-you” foods are soft or down and sales of prescription drugs took a hit this past year, but opportunities for growth still exist today and in the future. However, it will take new learning and a lot more marketing muscle than required before this recession, to win or compete in this space. John stated how “it may be less about premium price and more about big innovation, not incremental plays, that puts you into a health & wellness category.” John cited how drug retailers have brought health care solutions to their stores as “big and bold” examples of innovation. Check out Walgreens’ web site and see how their communications on the topic of health and wellness reach well beyond traditional health messaging used in years past.
- Convenience: convenient and easily accessible store locations; convenient and easy-to-find in-store or on-shelf product location; food and non-food solutions that save time from our busy lives “aren’t going to get less important”. John discussed the example of retailers in the Dollar channel who have been expanding their stores in localized areas to bring their value proposition to more consumers. Convenient heat-and-eat food products are more prevalent that ever in our stores and have you seen the 3-in-1 laundry detergent, fabric softener and anti-static sheets recently launched by Purex?
- Demographic Trends: aging population and multi-cultural consumers were target consumer groups for many retailers and manufacturers prior to this recession. With declining population growth in the U.S., future growth will be harder to achieve than in years past. Are you investing more resources and focus against these consumer segments? Shifts in the spending power or wealth in our population has and will likely continue to create a large group of consumers whose ability to spend freely will be challenged for many years to come. This group of consumers will also provide opportunities for those companies who understand them best and respond accordingly.
In terms of what did change, John discussed the near-term trades-offs which have been numerous and different over the past year or more in the areas of:
- Reordering shopping lists or actually going back to using shopping lists and a huge shift back to basics – food and value really matters
- Changes in where and how consumers shop with trip growth in value retail channels and coupon redemptions seeing a renaissance as consumers seek more deals and take advantage of the explosion of online coupon offers
- Consumers opting out of certain categories entirely
- Redefining of discretionary versus essential spending
- Trading across categories
- Trading down on brands
John concluded this discussion with the need to understand the “micro versus the macro-changes” occurring in our industry. He described a “micro-war versus a macro-war” and the need to understand and respond to both. The micro-war is what John referred to as “the typical or traditional competitive set” as defined by a retailer trading area or category where a manufacturer or retailer competes. Today’s successful manufacturers and retailers leverage pricing, assortment, promotion, advertising and analytic insights to collaborate and drive marketplace success. But John talked about how companies can “win the micro-war, but lose the battle” because of the larger macro-wars that transcend category or retailer choices or decisions made by consumers. Examples of these huge macro-trend busters include:
- Away-from-home consumption took a big hit in this recession breaking a 25-year trend where in-home consumption was on the decline. Consumers are now seeing the home as a safe nesting place where success will come to those who understand this shift and seize the opportunity.
- Pampering shift from spas and beauty salons to at-home solutions – most consumers want to look and feel good, but they are looking for better value.
- Savings rates go to black – will this be a short-term or long-term shift and how will this impact your business?
- Store brands are now a viable choice for more consumers as retailers have shifted greater focus and offer brand-quality assortment at a better price or even at a premium price.
John challenged the audience to think about what they are doing to build a sustainable business model by going on the offensive or defensive “to exploit what has changed or what hasn’t changed”. I found John’s presentation to be very insightful and he served up numerous examples of how our clients can win the micro and macro wars and come out of this recession in a strong position – I trust that you did or will too!