Tuesday, August 25, 2009

What Are People Buying Now?

I believe that the last line of this article is the point we should all take to heart right now. Value is in the eye of the beholder. As you are looking at marketing yourself you have to build in percieved value. You don't need to necessarily discount your product or service, but you do need to provide perceived value.

What we're buying -- and not buying -- says a lot about how consumers are feeling these days.

It also says a lot about the American economy, considering that consumer spending accounts for 70 percent of all U.S. economic activity. Every time we go out to lunch, buy a new sweater or pick up a DVD, we're contributing to the retail sector, the biggest sector in the economy.

Last week, companies from Home Depot to Target to Saks reported results for their latest quarters. Some were strong, some were weak. All tell tales of the consumer: thrifty, staying close to home, and focusing on basics.

Here's a look at what people are and aren't buying.

What We're Buying:
People are buying more garden products and paint, especially in areas with high foreclosure rates like California, according to Home Depot. CEO Frank Blake told investors that as homes are sold as part of the foreclosure process, that spurs sales of paint and carpet upgrades, since owners want to improve their new homes.

Lowe's reported that small projects were big winners in the second quarter -- only the paint and nursery categories were doing better than a year earlier. The company said consumers -- with an eye toward boosting the appearance of their homes -- bought a lot of mulches, seed, and patio blocks.

There was also solid demand in faucet repair and for repair parts for outdoor power equipment. Tiller sales were also strong as consumers planted more gardens.

What We're Not:
Home Depot said consumers continued to limit their purchases of bigger items like appliances.

Purchases above $500 fell 16 percent compared to last year for Lowe's, which also noted last year's second quarter included the effects of a federal stimulus package that gave most consumers about $600, prompting sales of big-ticket items.

Sears said its decline in its home business, including appliances, continues to be affected by the state of the housing market.

Target said people limited their purchases of decorative home and garden items, with patio furniture a standout weakness. Target noted it had planned very conservatively for that category this year.

Consumers are staying close to home and they want it to look nice. But they're not committing to big purchases like patio furniture to spruce up their home.

They're tackling more projects themselves, especially smaller ones, and opting to fix a faucet themselves rather than call a plumber. They're also planting gardens, perhaps with an eye toward trimming their food budgets. And forget new appliances -- they're making do with what they have.

What We're Buying:

Target says the items people feel they need the most, like products related to health care, food and beauty, are doing the best. The beauty category benefited from people making those purchases at Target rather than in more expensive department stores.

More people were shopping at stores run by TJX Cos., like T.J. Maxx, Marshalls and HomeGoods. Sales of basics like sheets and towels and clothing were all strong.

Fashionable denim is doing well at Saks Inc. stores, the high-level retailer said, noting that the trendiest brands do the best.

What We're Not:
Clothes and home goods were weak in Target's second quarter, and Kathy Tesija, executive vice president of merchandising, summed up the consumer mindset in one word: "cautious." The number of people coming into the stores has slowed, and people who made purchases spent less money. Frequent shoppers aren't coming in as often and they're cutting their weekend trips even more than their weekday trips.

TJX is seeing more people come into its stores but they're not spending as much, on average.

Limited Brands Inc., which operates Victoria's Secret and Bath and Body Works, said sales of fine fragrances and bras and panties were weak in the quarter. It noted its spring color palette was "muted and serious" and trends improved when it introduced bright colors in July.

Overall sales at Saks continued to slump as fewer people came into the stores. The company's less expensive Off 5th stores continued to outperform Saks' full-price locations.

Shoppers are still tightfisted and cautious. They're looking for bargains -- which is why traffic is up at stores like T.J. Maxx. But they're not yet ready to resume shopping at pre-recession levels -- which is why spending is still down. They're still shopping with an eye toward fashion, though, and want to keep up with trends.

What We're Buying:
Spam, Spam, Spam. Hormel said sales of its meat-in-a-can continued to rise in the quarter, gaining in the low double digits, while sales of other canned items and Hormel chili kept improving. Hormel's party trays, which sell for about $10, continued to be strong, as they have been throughout the recession.

BJ's Wholesale Club, which has been seeing more customers coming in, said sales of cereal, meat and household items made gains in its second quarter.

Heinz reported infant food and ketchup sales were strong.

What We're Not:
Hormel said customers bought fewer of its more expensive items, like microwavable meals, while its food service division, which serves businesses like restaurants and hotels, continued to slump.

Sales of Weight Watchers Smart Ones entrees fell in the quarter, too, Heinz reported. It noted the frozen food category is tied to consumer confidence and has been down for a year.

Heinz and Hormel said they were still competing with store brands and other generic products, which cost less than branded ones. Heinz said the trend was lessening, though, and there are signs that consumers still want brands.

Food prices may be dropping as lower ingredient costs fall for manufacturers, but they're still not low enough for consumers, who are shopping with savings in mind. They keep dropping down to store brands and they're still willing to sacrifice convenient items like frozen foods to pad their food budgets.

But that doesn't mean they're being entirely thrifty. Consumers will pay for things they perceive have value, and that includes name brands.

As Hormel CEO Jeffrey Ettinger told analysts last Thursday, "Value is in the eye of the beholder."
(Source: Associated Press, 08/21/09)

Tuesday, August 18, 2009

Sampling Inspires Repeat Purchases & Has Long-Term Effect

It's no secret that sampling programs can get people to try and occasionally purchase products. However, new research suggests that such giveaways can also help drive long-term sales and increase purchases of other items from the product line.

Whether it is a new product launch, line extension or established brand, sampling programs drove a 475 percent sales lift the day of the event compared to non-sampled households, per the "Report on In-store Sampling Effectiveness" conducted by Knowledge Networks-PDI on behalf of the marketing services company PromoWorks.

Those who sampled an item were 11 percent more likely to purchase it again during the 20-week period that followed. They were also 6 percent more likely to buy another item from the brand franchise.

"It's always been understood to a certain degree that there is a lift during the event. The big 'aha' is the long-term impact and the effect a sampling event has on the franchise overall," said Neal Heffernan, svp, gm at Knowledge Networks-PDI.

Participants were nine times more likely to purchase a line extension on the day of the sampling event. The sales lift continued, up 107 percent after a 20-week period.

For older, established brands, the sales lift the day of the event was 177 percent greater than the control group, which received no samples. It remained up 57 percent after a 20-week period. The sampling event also casts a halo over the entire brand portfolio, said Heffernan.

The parent brand of the product sampled received a 107 percent sales lift the day of the event and a 21 percent sales increase after a 20-week period.
(Source: AdAge.com, 08/04/09)

Friday, August 14, 2009

"Crisis Inspires Breakthroughs"

Steve Clark, a sales trainer that I like, wrote this in his newsletter this morning. I liked and thought I would share.
Have a great weekend!

"Crises Inspires Breakthroughs"
by Steve Clark

"Our greatness lay not so much in being able to remake the world as in being able to remake ourselves" ~ Mahatma Gandhi
"Psychological suffering, anxiety and collapse lead to new emotional, intellectual and spiritual strengths. Confusion and death can lead to new scientific ideas." ~ Dr. Ilya Prigogine
"A personality is born of chaos. Resistance to chaos can only beget more chaos and resistance" ~ Stephen Wolinsky
Failure and adversity are better teachers than success and prosperity because they require us to dig deep and discover new talents and resources not yet recognized or understood. A trip to the bottom is what fuels the trip to the top.
We learn to deal with adversity by dealing with adversity. Therefore, failure is not to be avoided it is to be embraced. This counter intuitive concept is hard for most people to understand and accept because our environment teaches us that failure is bad and should be avoided.
The kid who never falls off a bike seldom becomes the best bike rider. The salesperson who avoids rejection never gets good at selling. The best at anything have all failed thousands of times in their attempt to become good.
When we experience adversity it is hard to think beyond the immediate pain and disappointment. But moving beyond the immediate pain is what we must do if we are to grow and mature emotionally. Instead of pissing and moaning when we experience adversity we should accept it, acknowledge it and then move on by using it as a lesson learned.
In our sales training, we teach taking every failure and rejection and reflecting and debriefing in a written journal what happened, why it happened and then analyzing what we will do differently next time we are faced with that same opportunity. Failure to debrief and to rehearse how we will do it differently next time ensures that we will repeat the same behavior over and over again with the same result.
Walt Disney used his experience of being fired as a cartoonist from a Kansas City newspaper to fuel his desire to create Disney Studios. Oprah Winfrey used her experience of being fired as a news anchor in Baltimore to launch her show. Lance Armstrong used his battle with cancer to propel him to his seven Tour de France wins.
As the bumper sticker says "Shit Happens". And it happens to every one of us. Sooner or later if you live long enough you will experience failure, disappointment, a near death experience, loss of a loved one, a debilitating illness and more. Life is full of disappointment. You cannot escape it. When you are faced with these situations you can use them as stepping stones to become something greater than what you are or you can use them as excuses to self-destruct.
Since you cannot avoid failure and disappointment in this life it only makes sense that you get good at using them to make you something greater than what you are. There really is no other choice except to crawl in a hole, feel sorry for yourself and wither away. That's a miserable way to live.
(source: Steve Clark www.newschoolselling.com)

Thursday, August 13, 2009

Recession Forcing Consumers to Change Where They Shop; Who's Winning?

The recession has significantly changed the shopper mix in virtually all retail channels, according to a new report from WSL Strategic Retail. Supermarkets have regained the No. 1 share of shoppers for the first time in 10 years, ahead of supercenters. And dollar stores are in the right place at the right time with the right brands.

Meanwhile, convenience stores and drug stores are increasing their share of shoppers because they're quick, easy, less tempting and save gas, according to the report. Mass merchandisers, including Wal-Mart and the Internet, are picking up more affluent shoppers. And, with unemployment reaching 10 percent, more men are doing more of the family shopping.

Smart retailers will heed the warnings of the retail-channel shift and adapt their businesses to realize the new opportunities, the report states.

The channel shifting in the recession has had some obvious moves:
* Wal-Mart has been a winner; Target has not.
* Supermarkets and dollar stores are doing well; mall stores are not.

However, beyond the obvious, WSL said many of the shopper shifts open some immediate opportunities for retailers.Beyond that, the WSL "How America Shops PULSE" report, which compares the demographic shift in shoppers by retail channel from the second quarter 2009 vs. the same period 2008, offered these other observations:

* If your retail strategy has been very Wal-Mart-focused, it might be time to take another look at the supermarket channel.

* The obvious reason for the growth of supermarkets is the spending cuts shoppers have made in take-out food and eating out, which means more cooking at home with food purchased at the supermarket.

* 46 percent of shoppers stay out of stores where they are tempted to overspend. When you only need to buy food, the mass merchandiser has too much temptation.

* Dollar stores are in the right place at the right time --with more of the right brands. Over the last five years, dollar stores have moved well beyond their rural Southern roots to open stores in middle class neighborhoods around the country. More manufacturers are realizing the dollar-channel opportunity and selling them more national brands.

* Convenience stores and drug stores are increasing their share of shoppers, which may seem contrary to the frugal shopper mindset, but it makes sense. When shoppers don't stock up, they run out, the report states.

* C-store growth may seem like a contradiction in an era of price-conscious shoppers, but remember how shoppers are cutting back on groceries and not stocking up on sale items. That leads to running out. C-store prices may be higher, but if it's nearby and you save on gas and time, then the trade may be worth it.

* Drug stores are seeing their strongest lift among middle-aged, middle-income shoppers, who, as with c-stores, may need the drug store when they run out of something, or find it a better choice, where a trip to a mass merchandiser to save a few cents turns into overspending on so much more than what was on the list. (It's that temptation again.)

* Internet Shopping is up among the affluent, who are certain they find the best price online. From our last "Online Shopping PULSE" report in April 2008, we know that half of affluent shoppers feel they save money shopping online, and saving money is what they are looking to do more of now.

* Mass merchandisers have an increase in affluent shoppers. For the first time, the share of affluent shoppers in mass merchandisers equals that of lower- and middle-income groups.

* Warehouse Clubs have had a significant decline in younger shoppers who may have discovered that their smaller households were wasting much of what they thought they were saving by buying big club sizes.

* The mall has lost across the board -- men, women, young and old -- but with the biggest losses among middle-income families who just don't need all that temptation.A final note about male shoppers: Unemployment has taken a larger share of adult men than adult women out of the workforce, so it is not surprising that stay-at-home men are taking on more of the family shopping errands.
(Source: Convenience Store/Petroleum News, 08/10/09)