Recent AdAge Comments

How Too Much Doom and Gloom Dampens Consumer Spending
Lesson From Germany: Firms Are Slashing Budgets -- and That's Not Good
Posted by Gunnar Brune on 02.24.09 @ 06:50 PM

Two months into 2009 we're learning the first things about marketing strategies this year. And while there might be one global reason for a crisis it becomes more and more obvious that what's going on differs a lot from country to country, market to market. In Germany the first statistics on consumer and marketing behavior have been published. What is most striking is that current marketing thinking is not driven by consumer behavior but rather by internal company factors -- and marketers might be unwillingly firing up consumer crisis behavior!
First off, it's clear that the German consumer is still in buying mood. GfK, one of Germany's best-established research companies, just released data for the first weeks of 2009. Guess what? Consumption went up by 2.2%! How is that possible? It is because prices -- especially for energy -- went down. The German consumer hasn't had so much buying power with his income in some time. Opening rounds of layoffs might have happened, but they have not had an overall impact yet. Furthermore, the growing distrust in the financial sector has made the savings level decline -- even against the growing fear for income and job losses in the near future.
This is quite a clear strategic situation: People still have money, buying power and little tendency to save. You would think that marketers would try to make the most of it as long as the German economy has not yet been hit by the possibly growing number of insolvent companies and layoffs.
It's worth noting that the German situation is not typical for Europe. Germans tend to rent flats rather than buy them and are therefore not as hard hit by the housing crisis as people in the U.K. and Spain, who often own flats and have to serve mortgages.
Yet despite this, advertising spend already going is in "tactical" crisis mode. This is a strange example of anticyclical spending: Consumers' moods goes up and advertising spendings go down by 1.6% in January, according to Horizont/Nielsen Media Research. Cinema spending go down by 55% in January, print magazine spend goes down by 11.9% and TV spend goes down by 4.7%.
But there is also a contrary trend. Outdoor spending goes up by 37.9%, newspaper spending increases by 6.4% and radio spending goes up by 5.5%.
Also, it turns out that discounters are investing while brands are being cautious. The discount trade companies reinforce their investments; the food discounters raise their budgets: Penny plus 19.6%, Lidl plus 42.8% and Aldi (mother company of Trader Joe's in the USA) plus 9.4%. Procter & Gamble, on the other hand, reduces spendings (as measured by Nielsen in Germany) by 14.6%.
In sum this means that while consumers still spend, marketing has already anticipated a crisis and unwillingly seems to drive consumers into crisis mode.
Strangely enough the big companies have the strongest urge to reduce marketing investments. In a survey by Handelsblatt, the German business newspaper, it turned out that the bigger the company, the more marketing cuts are planned for 2009. Are the market leaders the ones who let go first?
There is another proof, also from the Handelsblatt study, that some marketing strategies are more driven by internal thought than consumer insight. Big companies in Germany mention the crisis three times more often in their communications than small companies do. Does consumer insight relate to company size? It never has and now is no different. There should be a strong indication that mentioning the crisis is relevant to the consumer. Do not confuse consumer insight with maketers' worries.
2009 will be a very challenging year, whatever happens. But what marketing does should relate to consumer insight and relevance. And at least today there is a great gap. This is a clear chance for every brand that does it right and makes a difference.

Response:

Gunnar knows the culprit, but is unable to do more than cry out - the fear is fear itself. With most markets dominated by consumer spending, fear mongering among companies that are holding back and becoming conservative, only serve to scare off consumer spending. In the great depression, things were really bad, affecting every market.

Hearing all of the car market woes, and needing new wheels, I went off to see what deals were out there. All I saw were inflated car prices with artificial discounts. After visiting several dealers I decided to look in the car ads - it is consumers who are discounting used cars - why? Probably to reduce payments and or debt. The dealers are hoarding their precise cars, hoping for spring demand as usual. It is private party owners who are discounting. Scared consumers.

Usually when these sorts of market changes occur, economists call it a "Market Adjustment" which is an apt description of what is happening now. Inflated prices are coming down, as consumer markets adjust to consumer fear. When the Price is Right, they'll buy. But like me, they are expecting deep discounts, not business as usual.



Peter Arnell Explains Failed Tropicana Package Design
3 Minute Ad Age: Feb. 26, 2009
Produced by Hoag Levins __Published: February 26, 2009

NEW YORK (AdAge.com) -- Pepsico's Tropicana brand is junking the new orange juice package design it only just launched weeks ago. The beverage marketer is switching back to its old design whose centerpiece is an orange skewered by a drinking straw. In this video recorded at a press conference five weeks ago, Arnell Group CEO Peter Arnell vigorously defends his agency's carton design that has now been withdrawn from the market.

Response:

Listening to Arnell defend his new design was priceless. I had an Art Director who became the Director of Package Design at General Mills. I heard him speak about Package Design once and it sounded familiar to Arnell’s schlock speak. The straw in the orange was branding – referring to fresh-squeezed taste. Losing the orange, meant losing the “impulse” as Tropicana quickly found out with an immediate sales and volume hit. Nowhere in the article was that fact. It would have taken a multi-million dollar campaign to promote the new look. While most of Arnell’s work is admirable, this was not