The Effects of Consumer Frugality on Marketing Strategy

The recession that began in 2008 continues to inflict pain on many consumers and businesses even though some economic indicators suggest that it has ended. The effects of the recession will last well beyond the time when economists say the economy is better. A great article in strategy + business by Matthew Egol, Andrew Clyde, and Kasturi Rangan makes the case that buying behavior has been significantly modified among many consumers. The core position of the article is that many consumers will continue their frugal shopping behaviors adopted during the recession, even after the economy returns to greater prosperity.

If the trend predicted in the article holds over time, it will trigger major shifts in marketing strategy. The pre-recession mantra of many marketers was more product benefits = higher prices = greater profits. Those were the good ol’ days! Going forward, marketers must look for opportunities to provide value in ways other than peripheral product benefits or rely on the power of their brand to justify charging price premiums. One point made that I believe is on target is that marketers need to create clear distinctions among products at different price points. In other words, sellers must have a good understanding of customers in order to develop products that serve the needs of a value conscious segment (i.e., low price), a premium customer segment willing to pay a higher price to receive greater benefits, and perhaps a segment of customers that fall in between.

It could be said that the recommendations made by Egol, Clyde, and Rangan are hardly new. The need to understand customers has always been critical to a firm’s success. However, a major, permanent shift in buying behavior has occurred among many consumers. This shift makes it necessary to evaluate how we build relationships with customers. The impact of the new consumer frugality goes beyond the design and pricing of products. It will affect how we communicate with customers, too. Brand messages emphasizing “you deserve it” will be replaced with efforts to build community and encourage socially responsible consumption. In the final analysis, the most important takeaway from this article is a reminder that a marketer’s work is never done!

strategy + business – “The New Consumer Frugality” (requires free site registration)

Your Customers, Your Sales Reps


Wouldn’t it be nice to generate additional revenues without paying salespeople a dime? Simple, recruit customers to sell for you. Clothing retailer Men’s Wearhouse has done just that as it prepares for the busy prom season. The company has created a Prom Reps program in which prom customers are transformed into word-of-mouth marketers. Their job is to promote Men’s Wearhouse as the place to rent tuxes for prom. The payoff? If a rep is responsible for 10 tux rentals, his tux is free. Men’s Wearhouse even provides reps the capability to track their performance online.

This idea is outstanding! Word-of-mouth can be a powerful channel for reaching teenage boys, particularly for a purchase that many of them may have never made before. In the absence of prior experience, prospective renters are likely to place heavy weight on recommendations for tux rental outlets from people whom they know. Can you think of ways to enlist your customers to help promote your company? If you explore this approach, be prepared to answer the question that your customers would almost certainly ask: What’s in it for me? In the case of Men’s Wearhouse, the prom reps are typically going to be high school students who may be thrilled if they are spared the outlay for tux rental.

If one of my sons was attending prom this year, I would strongly encourage him to go to work for Men’s Wearhouse… at least for prom season!

DMNews – Men’s Wearhouse launches tuxedo campaign for prom season –

Direct Marketers Can Survive Five-Day Postal Delivery

The United Postal Service, trying to stem the tide of financial losses, has proposed a 5-day delivery schedule. Elimination of Saturday delivery each week would save between $2 billion and $3.5 billion dollars according to different studies. Opponents of eliminating Saturday delivery cite among their arguments that it would hurt direct marketers that rely on the Postal Service to reach their customers. The reality is that direct marketers have cut back on their use of mail as a communications channel. Direct mail volume dropped by 9 billion pieces in 2009 to 202 billion pieces.

The reduction in direct mail volume has been impacted in the short term by the recession. A long term change is that marketers are using more channels to reach their audiences, namely e-mail and social media. Eliminating one day of mail delivery will do no more harm to direct marketers than the shift to other media has already inflicted. What will be needed is careful planning to time the drop of direct mail pieces, particularly when they are time sensitive such as sale catalogs. As Hamilton Davison, president-executive director of the American Catalog Mailers Association, puts it “It doesn’t do any good to have something delivered two days after the sale is over” (no wonder he is the voice of the catalog industry with insightful logic like that… sorry, I could not resist!).

In the final analysis, if marketing mail volume continues to decrease it would not be because of a switch to a 5-day delivery schedule. And, the proposed move would not put USPS at a competitive disadvantage against UPS and FedEx in serving the B2C e-commerce market.

Response Magazine – “Five-Day Postal Week Doable for DR”

Marketing Metrics Must Be Embraced

A recent article in Advertising Age by Patrick Sarkissian garnered more than 70 comments in the three days following its posting to the Ad Age web site. The title of the article was “Why Metrics Are Killing Creativity in Advertising.” The article title and message created two camps among commentators: 1) creativity is being stifled by an overuse of metrics, and 2) cries of infringement on creativity is really an unwillingness to accept accountability. Strong, passionate arguments were made for both sides of the issue.

The main concern I had after reading some comments from those persons who believed creativity is being stifled by metrics is that there is a belief among some creatives that metrics cannot (or at least should not) be applied to their work. One argument that I buy is that brand relationships are often based on emotional bonds with customers. The development and nurturing of those bonds falls into a difficult area to measure in terms of ROI. Rather than fighting the incorporation of metrics to measure advertising performance, creatives should embrace metrics with an eye toward how a creative effort can be measured during the development stage of a campaign or even a single message.

I see parallels between the views of some creatives on the use of metrics and the views of some academics on using assessment tools to evaluate student learning. Some professors complain that assessment infringes on their academic freedom to teach a subject in the manner in which they deem appropriate. On the contrary, assessment is about setting learning outcomes and measuring whether students learned (i.e., using metrics to determine performance). Investment and implementation without assessment is a scary thought, whether it be in higher education or advertising. The bottom line is accountability, and using metrics is done in the name of making people accountable for decisions and performance. While some comments to Sarkissian’s article correctly point out that metrics used must be valid and measure relevant outcomes, the point that measurement of marketing investments is perhaps more necessary today than ever cannot be dismissed.

Market Forces Make Time Right for Microsponsorships

Sponsorship has grown over the past 15 years as a marketing platform to reach and engage audiences. Sponsorship expenditure growth rate has consistently outpaced growth in media advertising expenditures during that period. While sports receive the lion share of sponsorship support (almost 70% of all sponsorship spending is on sports), cause marketing has been the fastest growing type of sponsorship in recent years. Companies are eager to align their brands with causes that matter to their customers.

As sponsorship in general and cause marketing in particular have grown, the sponsor market has become more crowded. It is more difficult today to differentiate a brand from competitors using sponsorship because many more companies are seeking opportunities to partner with nonprofit organizations or charities. At the same time, a weak economy has put a strain on nonprofits of all sizes, but smaller organizations may be hit particularly hard in terms of less funding and resources to carry out their missions.

The combination of a competitive environment for top-tier sponsorships and funding challenges for small nonprofits has sparked growth in a practice called microsponsorships. For example, Pepsi has created the Pepsi Refresh Project, a program that makes grants to community to organizations. This approach is a departure from looking for one or a few nonprofits to sponsor. Microsponsorships reaches customers where they are- at the community level. Sponsors’ involvement in these types of programs are a way to demonstrate concern and caring at a level at which many people can observe it first-hand. And, microsponsorships are a great fit with social media in that communication of a company’s microsponsorship can be spread by creating online communities around the brand-cause partnership.

Will microsponsorships stick, or is it just a marketing gimmick? Procter & Gamble’s Prilosec brand recently kicked off a microsponsorhip campaign with the tag line “The sponsor of everything.” Clever, but the question with microsponsorships is whether sponsors are perceived as sincere and have a genuine interest in helping the causes they sponsor, or is this viewed as just another tactic to attempt to increase sales? Consumers are too savvy today to be fooled. Here’s hoping that microsponsorships benefit the causes they are intended to help and allow sponsors to do well while doing good.

Advertising Age – “Cause Effect: Brands Rush to Save World One Deed at a Time”

When is Re-Branding a Sports Venue for 5th Time not a Problem?

The Nashville Predators have played in the NHL since 1998 and is the main tenant of an arena in the city’s downtown area. Since the venue opened it has had 5 different identities: Nashville Arena, Gaylord Entertainment Center, Nashville Arena (again), Sommet Center, and Bridgestone Arena. The latest name could show up on signage as early as next week following the announcement yesterday of a 5-year agreement between Bridgestone and the Predators. Congratulations, Bridgestone, you have just bought a rather used marketing asset- now what?

If the naming rights to this facility were a dress in a department store, one might think it would be found on the 75% off clearance rack because of its shop-worn condition. Five names in 12 years would be an unwise approach to branding a product, but the name changes happened, leaving the Predators to make the best of the situation. The team has found an ideal naming rights partner for the venue. A company with a strong local presence (Bridgestone’s North American headquarters is in Nashville) that wants to support professional sports in the market fits the bill for a sports venue naming rights partner. A corporate partner with local ties is even more important in a smaller market like Nashville. The benefits of having a corporate name on the venue in terms of media exposure are not as great as it would be in a major market, so the potential buyers for the venue’s naming rights are fewer in number.

While there are challenges in re-branding a sports venue, the frequent changes in names could actually benefit Bridgestone in this case. The length of time the previous corporate names were on the building were relatively short (7 years for Gaylord, 3 years for Sommet) given that the length of naming rights agreements can be 10 years or more. Bridgestone has developed a strong presence in sports in recent years on a national scale as official sponsor of NFL, NHL, MLB, and the Super Bowl halftime show. The company has now extended that presence to its headquarters city. Bridgestone is an excellent fit as naming rights partner for the venue. A 5-year deal gives the company some flexibility in determining the value of sponsoring the venue, but it would not be surprising to see the Bridgestone name on the building for years to come.

Organic Search Results: It’s Page 1 or You’re Done

I am amused when I hear people say that search engine users do not click beyond the first page or two of results. The amusing aspect of a statement like that is that it is based on personal behavior. Are most people really like that- too time poor or too lazy to go beyond the first page of search results? The answer is no, not everyone, just 95% of everyone. According to digital marketing firm iCrossing, 95% of web site traffic for nonbranded searches generated by the three main search engines (Google, Bing, and Yahoo) come from the first page of results. Only about 3% of traffic due to organic nonbranded search comes from page 2.

Findings from the iCrossing study reinforce the importance of performing well in organic search. When search terms are based on nonbranded keywords such as product category and geographic location, an optimized site is the difference between appearing on page 1 and being invisible… which essentially describes results on Page 3 and beyond. This challenge may be even more significant for small, local businesses. Small businesses do not have the brand awareness that national brands possess. Thus, to be found on search engines it may hinge on turning up high on the list of search results for more general (i.e., nonbranded) keyword searches.

Although it turns out that the “experts” who say no one looks at search results past the first page are correct, thank you iCrossing for confirming that notion… and for reminding us of the importance of search engine optimization.

eMarketer Daily – “Organic Search Still Reigns”

Add Value by Being an Information Resource

Procter & Gamble is a giant in many product categories, but one that it has all but surrendered is food products. The company that once marketed Duncan Hines cake mixes and Jif peanut butter now has Pringles snack foods as its lone food brand. So, why launch a web site that lets visitors acquire recipes, post mobile shopping lists, and get information from expert chefs? That is exactly what P&G has done with its site dinnertool.com. The marketing platform dinnertool.com creates for P&G will be used to promote its products used in the kitchen for cleaning.

It would be simple for a company like P&G to build a site that pushes its own brands. Such a site would be a value-added resource for consumers, but it is all about selling products for the sponsor. Dinnertool.com is about selling products, too, but the approach taken is more subtle. Busy professionals and families can benefit from the information shared on dinnertool.com. And, the site sign-up process allows users to opt-in to receive coupons for products. Given that coupon redemption has increased substantially during the recession, the coupons will add additional value to users’ experience with dinnertool.com.

Are there ways your company can be an information resource for customers like P&G is doing with dinnertool.com? An initiative like this will probably not lead to record sales immediately (or ever). Becoming an information resource for customers is all about engagement and relationship building. Much like a friend would share outstanding recipes and tips for the kitchen, dinnertool.com is P&G’s way of friending consumers online. If you become an information resource for your customers, are you not acting like a friend? And, if your friends need to buy the type of product you sell, they may be inclined to buy from their friend.

“New P&G Site Helps With Dinner – And the Cleanup”

When Is It OK to Give Away Your Product?

Denny’s Grand Slam Breakfast giveaway featured in Super Bowl commercials attracted about 2 million visitors to restaurants across the country. The costs of the promotion include production of commercials, buying air time during the Super Bowl, and of course, the food that was given away. The total costs of such a promotion raise the logical question “Is it worth it?” The answer is “maybe.”

Product giveaway promotions are a good tactic in some cases. Conditions under which this type of promotion is most likely to be effective include:

1. Little brand awareness exists – Sampling is a great way to let a consumer try a product risk-free. If the product is deemed to possess value, consumers may buy it. If not, at least you succeeded in achieving product trial.

2. Entice customers to return to the brand – Customers who have bought previously but for some reason have not made a purchase for a certain period of time may still be good prospects. An offer of a free item may rekindle interest in your brand.

3. The door is opened for future marketing opportunities – Despite all of the hype about Denny’s free breakfast promotion, an even better promotion it is running is a free meal offer (burger and fries) for people who join Denny’s rewards program. More than 300,000 people have taken advantage of the offer already, with a goal of 500,000 by mid-February. Adding this many people to a customer database creates marketing opportunities throughout the year to people who have some level of interest with the brand.

Product giveaway promotions can be costly, and if there are not strategic reasons for such a promotion (e.g., increased brand awareness, greater brand consideration, more customers in database, higher sales) it could be an expensive mistake. If planned with an eye toward future marketing efforts with the target audience, product giveaways can be the inspiration for strengthening relationships with customers.

Selling Sponsorship ROO in an ROI World

Sponsorships are business relationships, and like personal relationships, many of them end in failure. One of the most frequently cited reasons for sponsorship failure is a lack of clearly defined objectives. In other words, if a sponsor does not have a well defined outcome for a sponsorship it would not be surprising for it to flounder. Related to the problem of lack of objectives is the setting unrealistic outcomes tied to sponsorship. Unlike sales promotions that typically have a call to action, sponsorships may be more beneficial in creating impact in terms of greater brand awareness or defining a brand’s personality. These outcomes move a consumer closer to buying, but it is does not make the cash register ring today. Thus, it is unrealistic to apply return on investment measures to a marketing activity that does not have an action-inducing component.

The view being advocated is not to let sponsors off the hook for the dollars they spend. Accountability is needed greatly today to insure marketing efforts contribute to building strong brands. Sponsorship selection must include clearly stated objectives as to the intended gains in brand relevance among a target market. The length of the selling cycle varies greatly among products, so a “buy now” message that works for soft drinks does not work for more expensive, complex products. But, marketers of such products can reap the benefits of sponsorship. The key is to define the outcomes that are to be experienced from their investments as well as measure whether objectives are achieved.

Marketing Daily – “Return on Objective Key in Sports Partnerships”