Trend Index
Transcription
Trend Index
Delivering consumer clarity CI home about archive Feb. 2009 - Issue 15 subscribe In this Issue : New Product Innovation in a Recession New Product Innovation in a Recession. While current economic conditions may be causing consumers to trim back, marketers need to resist that impulse on new product development. The key learning is that innovation can succeed during recessionary times if the fundamentals are right... READ MORE Channel Shifting in a Tough Economy Global Economies Adjust Transforming China’s Growth Engine Awards Shows Take Centerstage Channel Shifting in a Tough Economy. Battered by the economy, U.S. consumers are shopping less frequently, demanding value, trading down, buying less, moving to private label and shifting department purchases across channels... READ MORE Global Economies Adjust. Like a house of cards, one slight move and it all comes tumbling down. Around the world, the operative word in today’s economic climate is value. How are manufacturers and retailers coping? What are the biggest opportunities…and surprises for 2009?... READ MORE Trend Index Transforming China’s Growth Engine. No longer able to rely on buyers in the rest of the world to drive its economic growth, China is relying on its own consumers to help stimulate its economy. But what will it take to get them to spend?... READ MORE Movies, TV, Books, Ads, Music, and mo Top 10 Digitally Downloaded Songs January 31, 2009 1. Just Dance 2. Gives You Hell Awards Shows Take Centerstage. 3. Heartless And the winner is…. the retailer. Turns out there’s a very practical reason for performers wishing to win a Grammy or Academy Award—music sales skyrocket!... READ MORE Complete Trend Index contact Delivering consumer clarity Feb.2009 - Issue 15 http://www.nielsen.com/consumer_insight/ci_story1.html New Product Innovation in a Recession: Resist the impulse to pull back By: Mike Asche, Vice President of Client Consulting and Rob Mooth, Vice President of Client Consulting, The Nielsen Company CI SUMMARY: Consumer habits are slow to change and their purchase interest in everyday goods is relatively stable over time regardless of macroeconomic conditions. The same principles that guide new product innovation decisions during normal economic times are relevant during recessionary times too. However, there are important clues on how to think differently about innovation when times are tight. Successfully launching new products is always tricky, but recessionary environments pose their own set of unique challenges and the margin for error declines. Investments receive more scrutiny and priorities shift from more “normal” times. The temptation to view new item innovation as a discretionary expense can be strong. At the same time, much has been written about new product successes that have been birthed during hard economic times and the need to resist the impulse to pull back on new product development. To be sure, some changes in marketing activity are necessary when the economy is slumping. But the rationale for strategic choices during these times should have more to do with a clear view of the fundamentals than with fear of failure and uncertainty. Resist the impulse to pull back on new product development... To test this hypothesis, Nielsen recently mined insights from about 35 new item launches that are being actively monitored across a variety of packaged goods categories in the U.S. The results revealed important clues on how to think about innovation in the current economic downturn. Don’t throw out the playbook The first observation from studying these launches is that most are proceeding as expected. Of the initiatives being tracked, about three in four showed no unusual patterns in sales relative to Nielsen expectations, and little evidence that economic conditions were negatively impacting sales. Since most consumer packaged goods categories are showing small impacts on category turns from the economy and only moderate effects in terms of brand shifting, the idea that new products are largely on track makes good fundamental sense. When it comes to everyday goods, consumer habits are slow to change. This mirrors Nielsen’s finding over years of testing new products in the BASES system—consumer purchase intent and value perceptions are relatively stable over time regardless of macroeconomic conditions. The mantra for these times is this: Guide the ship with a steady hand, but don’t over-steer. If a fundamentally sound innovation process has shown results during “normal” times, then the right principles are likely in place. The same principles that guide innovation decisions during normal economic times are relevant during recessionary times too. Premium items are not dead Many would be surprised to learn how many premium-priced initiatives are active in-market right now—over half of the items that Nielsen is tracking are priced at a premium to their parent brand and/or their respective category. Perhaps even more surprisingly, many of these items are also performing as expected. The key learning is that even higher-priced items can succeed during recessionary times if the fundamentals are right. While purchases of expensive “intermittent” luxuries like vacations or cars might be delayed or cut altogether, everyday affordable indulgences can still play a role in consumers’ lives. Even higher-priced items can succeed during recessionary times if the fundamentals are right... An emerging pattern, however, is revealing that some premium items are more vulnerable during this downturn than others. Stretching into premium territory could be risky A number of brands that are currently underperforming are attempting to stretch into pricing territory that is outside their historical comfort zone with consumers. If the base brand is parity- or valuepriced and doesn’t have a clear differentiating element, this may not be the time to attempt an extension into a more premium space. Brands that are more price-driven may experience better return on investment behind fortifying the base equity rather than attempting to commercialize extensions into higher price tiers. Know your brand’s limits Winning innovation strategies always start with an objective understanding of the competitive landscape and the strength of key brands’ assets. Using new products as a way to mask or overcome brand positioning or equity issues is a risky play under any circumstances. Current new product performance suggests that this principle may be especially relevant during tighter times, particularly as it relates to a brand’s value equation. Clearly state the “why to buy” For premium-priced products, the unique benefits must be clearly positioned with consumers. One of the pitfalls Nielsen is observing with premium products currently struggling in the marketplace is unclear differentiation and a lack of clear consumer rationale for why to buy. When premium initiatives lack a clear reason for their higher price, they struggle to make it off the shelf and into a basket. Marketers can avoid shortfalls in the market by spotting the early warning signals with two key indicators: Using new products as a way to mask or overcome brand positioning is risky... One of the pitfalls is a lack of clear consumer rationale for why to buy... Key indicator #1: Understand consumer “attraction” Nielsen measures consumer interest in new items using an idea called “Attraction” in its consumer adoption framework. Generating strong consumer attraction depends on both an initiative’s perceived consumer relevance and also its competitive differentiation. For premium products, setting the brand apart with high relevance and clear perceived advantages vs. the category are critical factors for success. And in a soft economic climate, this is even more important, as those brands not meeting expectations had clear problems in generating attraction prior to launch. Key indicator #2: Learn about value perceptions relative to experience . Even for premium initiatives, Nielsen typically advises targeting at least “average” perceived value as the consumer success criteria in the BASES system. This is quite evident in current new product launches, as some of the weakest performers demonstrated very low value ratings in testing. Occasionally, a marketer will rationalize why it might be acceptable for a premium item to generate relatively weak value ratings. However, Nielsen advises an extra degree of caution if an initiative is weak on value during these economic conditions. An initiative with this profile should have its positioning, target, and/or price point explored further to see if the value perception can be improved. If not, strong consideration should be given to abandoning the product launch altogether and focusing resources on better opportunities. Proceed with caution Armed with a clear understanding of the competitive landscape and a robust assessment of a new product’s position, marketers can make an educated decision about whether to stay the course or modify a launch. Even during recessionary times, if the fundamental principles are in place, marketers can grow via innovation—being mindful of the warning signals. Nielsen Consumer Insight, February 2008 Delivering consumer clarity Feb.2009 - Issue 15 http://www.nielsen.com/consumer_insight/ci_story2.html Channel Shifting in a Tough Economy: Two major trends unfold: shifting and contraction/expansion By Todd Hale, Senior Vice President, Consumer & Shopper Insights James Russo, Vice President of Marketing Laura Marro, Client Director, The Nielsen Company CI SUMMARY: What do Spam and Ramen noodle sales have in common? Both are leading indicators that it’s crunch time in the aisles of America’s retailers as consumers tighten belts and budgets in response to investment losses and economic uncertainty. The economic signposts are everywhere—an increase in cheap “staycations”, a surge in filling low-cost foods like bulk rice, macaroni & cheese and dry pasta; an uptick in the misery index which hit 7.7% by year-end; a boost in price comparison web site visits; a 30% bump in TV viewing and a decline of 2.5% in all-outlet shopping trip frequency in 2008. Consumers are hunkering down for the long haul, marshalling their resources and using time-proven tactics for stretching their budgets. In good times and bad, American consumers enjoy a rich and diverse portfolio of retail options, and these days, they are making full use of them. An analysis of Nielsen data detected two major trends impacting 2008 unit sales: shifting (shoppers shifting department purchases across channels) and contraction (shoppers buying less in the latest year versus the prior year). An analysis of Nielsen data detected two major trends impacting 2008 unit sales... Winners, losers According to Nielsen, only one channel—supercenters—posted overall unit sales growth, which was a very modest 1% at that. While four channels recorded shifting gains (2.7% drug stores, 4.7% supercenters, 3.3% club stores and 1.7% dollar stores), these gains were more than offset by market contraction, for an overall net loss in unit sales. Grocery gave up sales in the majority of its departments to supercenters, although fresh produce department losses often transferred into warehouse club gains. There were also some bright spots for grocery, which benefited from shifting patterns in the general merchandise, drug and gas departments, where gas promotions linked with in-store spending yielded incremental dollars. Other channel shifting relationships included: drug stores capturing disproportionate shifting gains in dry grocery and non-food departments from grocery and gains from general merchandise, health & beauty and non-food from mass merchandisers, while forfeiting prescription drug sales to both of these retail channels; mass merchandisers forfeiting sales to supercenters; supercenters gaining across the board with the exception of gas sales, which fueled some convenience/gas channel growth; warehouse club stores attracting unit purchases from all channels with edible department shifts originating primarily at grocery; and dollar stores reporting mixed results, pulling from grocery and losing general merchandise and health & beauty aid sales to supercenters. Hunger pains With high gas prices impacting consumer spending patterns for Edible departments the first eight months of the year and the financial crisis in midtook a bite out of the September, consumers switched gears into conservation mode, opting to meet basic vs. discretionary needs. As a competition... result, edible departments took a bite out of the competition, driving the total 4.1% 2008 food/drug/mass merchandiser dollar sales growth. Because of inflationary pricing, however, as not all edible departments recorded unit sales gains. Also telling was the fact that as non-food sales faltered, basic food categories and traditional “coping” categories like canning supplies, wine, vitamins and liquor made the list of the top 15 fastest-growing categories on a unit basis. Global impact A Nielsen analysis across 52 countries determined that eight in ten consumers believe they are in the midst of a recession. Retail fallout from bear market concerns included store closures for banners like Foot Locker, Home Depot, Ann Taylor, Disney Stores, Zales, Pier 1 Imports and Linens ‘N Things. Across the pond, vulnerable businesses like the U.K.’s Woolworths, Zavvi (music), MFI (furniture) and Whittard (tea and coffee) also succumbed to the pressure. Traditionally, grocery has been viewed as recession-resistant, but the channel is not recession-proof. Chains with flawed business models or severe capital constraints may find themselves targets for acquisition-hungry competitors looking to expand their footprint in key markets. Frequency failure The single most important factor in declining U.S. retail sales has been the marked decrease in the number of shopping trips, not transaction size. Trip frequency declined by 1.5% on average in 2008, most notably in apparel, do-it-yourself, toy, office supply and department stores. The single most important factor in declining U.S. retail Instead of driving from store to store, consumers let their fingers do the walking at the keyboard. Nielsen determined from online discussions that 20% of shoppers are proactively managing grocery budgets, which has sparked increased traffic to price comparison web sites. But it’s all about value, not necessarily the absolute lowest price. In a separate Nielsen survey, almost half of all consumers said they preferred larger sizes with lower price per serving over downsized products. sales has been the marked decrease in the number of shopping trips... Private label was also the beneficiary of financial worries, with both unit and dollar sales hitting an all-time high in 2008. Toward year-end, private label dollar sales jumped by about 10% over five consecutive four-week periods, averaging out to 4% dollar and 5% unit sales growth for the year. In the same period, branded offerings underperformed, realizing a 3% dollar sales increase and a 3% decline in unit sales. Silver lining Optimists believe that by the second half of 2009 the recovery will begin—credit markets will loosen, labor markets will strengthen and gas prices will hold at levels 50% off the record-setting July 2008 highs. Perhaps the first glimmer of hope was seen at the 2009 Consumer Electronics Show (CES), where flagging attendance was balanced by a nearly tenfold increase in online buzz. Optimists believe that by the second half of 2009 the recovery will begin... Headline-making categories included super-thin and bendable TV screens, digital cameras and camcorders, supersmart smartphones and tiny yet powerful computers. The whole concept of “convergence” dominated CES. It’s the idea that electronic products are converging to multi-task in multiple areas—phones as music players, handhelds that display TV content and cameras with GPS functionality. Bullet-proof strategies Here are some ideas for weathering the turbulent financial seas. Home-based opportunities abound for sharp marketers with products that appeal or facilitate consumer nesting. Social network sites represent an under-utilized resource for leveraging brand loyalty and word-of-mouth. Ideas for weathering the turbulent financial seas... Consumer trading-down behavior can prompt new product, packaging and promotion ideas. Organic and fair trade products may open the window again for more traditionally-sourced offerings based on a recession-driven value equation. An effort to reduce avoidable losses should enhance the attractiveness of frozen foods, single-serve prepared meals and smaller portions in food service. And a word to those who may be tempted to reduce marketing spending in tough times. Although counterintuitive, now is actually the time to investment spend. During the 1980s, companies that maintained or increased advertising and marketing budgets generated higher revenue gains during the recovery period than companies that cut spending. Perhaps this proves the saying, “pennywise and pound foolish”. Nielsen Consumer Insight, February 2008 Delivering consumer clarity Feb.2009 - Issue 15 http://www.nielsen.com/consumer_insight/ci_story3.html Global Economies Adjust: Interview with Nielsen’s top industry thought leaders By: Todd Hale, Senior Vice President, Consumer & Shopper Insights, Nielsen U.S. Jonathan Banks, Director Retail Insights, Nielsen Europe James Russo, Vice President of Marketing, Nielsen U.S. Jean-Jacques Vandenheede, Director Retail Insights, Nielsen Europe CI SUMMARY: A shift from nice-to-have to need-to-have assortment and retailing is a common thread across the U.S. and abroad. An interview with Nielsen’s top industry thought leaders reveals how shopping patterns across the world have been affected by the economic downturn, how consumer packaged goods manufacturers and retailers are coping and what lies ahead for the rest of 2009 and beyond. In what areas of the world, have you seen the most significant changes? Jonathan Banks (JB): We have already seen a big reduction in shopping trips in European countries since the first quarter of 2008. In Australia, the convenience channel heavily depends on travel to gas stations and there is a strong correlation between gas prices and their store performance. Also Australia saw a faster than expected growth in the discounter channel due to the expansion of ALDI. They succeeded in marketing an offering that consumers perceive to be competitive with the supermarkets on both quality and price. Around the globe, discounter growth was highly correlated with the growth in store numbers, though we now see in some countries (e.g., United Kingdom, Germany and Netherlands) like-for-like growth moving ahead. Jean-Jacques Vandenheede (JJV): While the surrounding conditions in each market are different, everything today has to Everything today has do with value. Consumers are flocking to good deals and they to do with value... are taking advantage of the aggressive sales being offered. However, we have noticed a four to six month delay between the media hype and the resulting consumer behavior. Meaning this: it could get worse before it gets better. Since food is relatively recession resistant, consumers are mainly saving money by cutting back on non-essentials, such as perhaps only taking one holiday instead of two. James Russo (JR): In the U.S., consumers have been preparing for a recession since the fourth quarter of 2007, according to a Nielsen Global Consumer Confidence survey. However, the most dramatic change in behavior aligns with the severe drop in economic and financial conditions that took place in September 2008. While there are areas of the U.S that are more affected than others, this recession—unlike some others in the past—is broad-based across all income groups. Lowerincome households are feeling the pressure of the labor market, housing and credit restraints, and upper-income households are watching their net worth decline, which is most visible in their retirement pensions and housing. Todd Hale (TH): In the U.S. retailing market, the big surprise has been the severity of shifts from nice-to-have to need-to“If you can’t eat it, you have assortment and retailing. In 2008, sales results for don’t need it”... discretionary retailers (those serving both high- and low-end consumers) saw their shopping trips and dollar sales plummet in 2008, and sales results for many food categories and food retailers were obviously much better. As a colleague succinctly put it, “if you can’t eat it, you don’t need it”. What are retailers doing to cope in difficult economies? JJV: Interestingly, retailers are grasping at basic block-and-tackling methods that place emphasis on resisting price increases, making concessions towards quality, focusing on promotion, investing in private label and negotiating with suppliers on margin increases. JB: One of the most newsworthy events in the United Kingdom was the closure of the British icon Woolworths. While the economic pressures are affecting a spectrum of retailers, those poor-performing retailers—before the recession—are the ones struggling most. A development to watch is the utilization of Information Technology (IT). As IT continues to get less expensive and more effective, there will be opportunities for increased collaborative buying and sourcing. There is an A development to watch is the utilization of Information Technology... opportunity to increase savings in times like this, and getting more with what you have is a good investment. Expect to see private label’s share advance more quickly in some categories, in some countries. JR: Retailers are taking steps to address consumers’ strong desire for value, through their merchandising, marketing and advertising programs. There is a renewed focus on driving return on investment, getting more out of what they have and understanding opportunities (consumers, categories) at an increasingly granular level. TH: U.S. retailers are placing a strong emphasis on value and their private label programs. In the past year, Kroger has gone head-to-head with Walmart with matching prices on food basics such as bread, milk, eggs, and bananas. On the heels of Save-A-Lot’s successful “Fuel your family for less” program, other grocers have implemented their own “Feed a family of four for $8.00/$10.00 per meal” programs. With a decline in commodity prices, grocers like Wegmans and Giant Eagle (Pittsburgh) have advertised price cuts across their stores. From the consumer packaged goods executives you have spoken to, what is their level of optimism? JJV: Caution and uncertainty are the operable words to use. Executives are planning for the worst and hoping for the best. Rather than over-reacting to the conditions, they are looking for segments of opportunity wherever they can be found. All the market indicators we are tracking show that the markets are holding. The majority of the categories are showing positive volume growth in Q4 of 2008. JB: Now is not the time to slow down and pull back from brand development. Think about how long it takes to get a new product through the pipeline. From a new product development point of view, marketers should have reduced their efforts two years ago if they wanted to be less dynamic through the downturn. History tells us that really great brands have been launched in the middle of recessions where advertising can cost less. Now is not the time to slow down and pull back from brand development... JR: As we speak to hundreds of manufacturer and retail executives, 2008 was clearly a year of uncertainty. Questions such as; how bad is the recession going to be, how long will it last, and what do we need to know were on the minds of every executive. In 2009, the discussions are starting to turn towards: How do we plan for a recovery? What is our exit strategy to assure growth in an up market? Should we increase our advertising and marketing spending? Positive developments will come as many of these plans will take months to execute. Companies need to stay ahead of the curve. TH: CPG manufacturers have a more pessimistic outlook on 2009 than most retailers I have spoken with. However, many manufacturers do see opportunities to at least hold firm on their marketing spending. While big retailers like Target, Walgreens and Walmart announced plans to reduce store expansion in 2009, they are still expanding and investing in new formats. The same is true for a number of other national and regional grocers as they look for opportunities to test or open new formats and find new locations to expand their footprint. What are the biggest opportunities for consumer packaged goods manufacturers and retailers in 2009? JB: Sustainability remains an extremely important long-term trend as opposed to a fad. Today, ethical companies can use this platform as a differentiator. Within three years, it will be expected and opportunities to promote it will diminish as ‘doing the right thing’ becomes the norm. Sustainability remains an extremely important long-term trend... JJV: Now is the time to plan ahead and develop an exit strategy out of a crisis. Look at all potential pitfalls and determine a plan to turn things around. Not planning for an exit strategy is actually slowing down the recovery. JR: The biggest opportunities will be found by aligning with the deepening consumer behaviors that have been occurring since the beginning of 2008. As the economy slows, these behaviors will intensify. Some of these behaviors include: z z z z greater at-home related opportunities; fulfillment of basic over discretionary needs; pervasive trading down; variety and convenience taking a back seat to value. TH: Consumers have told us how they are staying home more often and consuming more meals at home or at work. This speaks to meal solution opportunities for food manufacturers and retailers. In addition to the “meal deal” promotions many grocers have implemented, there are opportunities for at-work There are opportunities for at-work meals and meals and other meal solutions. One example is ConAgra’s new line of microwave meals. New product opportunities can other meal solutions... come to those manufactures that provide a product that delivers real benefits. Value messaging is another strategy coming out loud and clear, such as Kraft’s TV advertisement that compares the size and price advantage for Velveeta cheese with a block of cheddar cheese. While unit sales of many non-food, health & beauty aids, and general merchandise products fell in 2008, the fact that consumers may be spending more time at home speaks to opportunities in these categories too. Procter & Gamble is a good example of successfully positioning some of their health & beauty brands against higher-prices department store or beauty salon offerings. What is the one development that has surprised you in 2008? JB: What surprised me most was the high level of debt families accumulated. Too many families are living beyond their means. Whilst the credit crunch was predicted by some, a good reminder to us all is that in economics, what should happen, usually does…eventually! JJV: The number of businesses that have been operating beyond their “natural” means—the overuse of incentives, promotions, etc.—has pushed the environment to a limit. Those companies who were healthy before the recession hit will thrive. The ones who were already struggling have been hit harder. Like the athlete who uses prohibited drugs to stretch beyond their physical limits, when corporations operate beyond their means, it is only a matter of time before they will get caught. JR: The potential for a fundamental shift in consumer behavior is most surprising. This recession is not a cyclical decline and The potential for a subsequent recovery back to norms. The fundamentals that fundamental shift in drove consumption for the past 10 years—most notably, the housing and credit markets and the way households consumer behavior is overleveraged themselves—have abated. It is almost as if we are turning back the clock to the 1980s or early 1990s where most surprising... households start to save and become more fiscally responsible in their consumption habits. And while there is long term gain associated with these behaviors, in the short term, we are looking at a slower, very moderate recovery for potentially the back half of 2009 or early 2010. TH: What surprised me most was how escalating gas prices—which rose above four dollars a gallon in the first half of 2008—and the mid-September collapse of financial markets had altered the shopping and spending habits among those with higher incomes. These consumers have led the growth in shopping trips to value retailers such as dollar stores and supercenters. Secondly, the decline in retailer spending and shopping within discretionary retailers, such as apparel, electronics, office supply, department stores, etc., in 2008 has been unprecedented. This trend will continue in 2009, as virtually every major industry (from automotive to housing to restaurants) will continue to experience weak sales in 2009. However, it is hopeful that a U.S. economic stimulus program will be implemented by the second half of 2009, which should drive more consumer spending and make 2010 a better year. Nielsen Consumer Insight, February 2008 Delivering consumer clarity Feb.2009 - Issue 15 http://www.nielsen.com/consumer_insight/ci_story4.html Transforming China’s Growth Engine: Moving from exports to consumer demand By: Susan Whiting, Vice Chair, The Nielsen Company CI SUMMARY: China’s export-driven economy has slowed as a result of the global recession. With a drop in exports and a growing unemployment rate, the Chinese government is urging consumers to spend in order to spur the economy. While various stimulus plans are being investigated, the nation’s success may rely as much on altering cultural dynamics as replacing economic models. When China first announced its massive stimulus plan at the end of 2008, it was largely praised both internally and around the world. The four trillion Yuan ($586 billion) package was designed to expand growth 1% for each of the next two years, and help ensure gross domestic product (GDP) would remain above the 8% threshold Chinese leaders have repeatedly said is needed to maintain economic and social stability. But as its principal trading partners, Europe and the United States, have slipped deeper into recession, China’s export-driven economy continues to slow as well. The nation’s exports in December fell 2.8% from a year earlier, while foreign direct investment—another key economic driver—faded in the final three months of last year. Just as worrisome is the World Bank’s forecast of 7.5% growth in 2009—though still much better than the International Monetary Fund’s current 5% projection. Stimulus plan concerns Since its introduction in November, the plan has come under increased scrutiny. Some observers question the actual amount of the stimulus, noting it includes funds already budgeted in the government’s 2006–2010 plan. Others think it relies too heavily on monies that must be raised by the provinces and private businesses. Most important, however, is the fact that the package includes only a few programs geared toward expanding consumer spending. Yet that is crucial to achieve the government’s expressed goal of transforming China’s growth engine from exports to a model based more on domestic demand. The package includes only a few programs geared toward expanding consumer spending... Consumer spending challenges Efforts to boost domestic consumption face considerable challenges, even in an economy as relatively strong as China’s. At December’s CAIJING Annual Conference in Beijing, hosted by the nation’s leading business and financial magazine—and in which I had the privilege to participate—several prominent economists, academics and government officials shared their perspectives on the issue. According to Cai Fang, Director of the Institute of Population Studies at the Chinese Academy of Social Science, one factor suppressing consumer spending is what he describes as an “income effect,” which is the direct result of declines in both employment and income growth. One factor suppressing consumer spending is declines in both employment and income growth... With the drop in exports, China’s manufacturing also has weakened, forcing thousands of factories to close. Nowhere has this been more evident than in provinces like Guangdong, where export growth plunged from 22.3% in 2007 to just 5.6% in 2008, and where it is expected to remain flat throughout this year. Consequently, it has been reported that close to ten million Chinese migrant laborers are out of work. On top of this, as many as seven million university and college graduates also are seeking employment. Moreover, even consumers willing to spend may find it difficult, since too few can afford to buy the goods their factories produce principally for export. Indeed, earlier this year, China announced it had revised its 2007 GDP growth to 13%, thus surpassing Germany as the world’s third largest economy. Yet China's 1.3 billion residents have a per capita GDP of only about $2,500, compared to the more than $40,000 enjoyed by Germany's 82 million inhabitants. Potential growth drivers To maintain employment levels and sustain income growth, Cai believes China must focus its efforts on various sectors of potential growth. For example, there are opportunities to enhance labor productivity in coastal export businesses—particularly through training and education—while also establishing low-cost manufacturing in parts of Midwest and Western China. Another possibility is to leverage flexible means such as self-employment, incorporation, and other channels beyond traditional state-owned enterprises. Still, encouraging consumers to spend will require more than just augmenting employment, contends Shen Minggagao, Caijing magazine’s chief economist. China must significantly reform its social programs before more people will part with their money. Encouraging consumers to spend will require more than just augmenting employment... Unlike its American counterpart, the average Chinese family saves about 30% of its income, mainly because of China's frail social safety net. Without support systems like social security or health and unemployment insurance, people must rely on their own resources to pay for a hospital stay or a child's education. The way to stimulate consumer demand, notes Shen, is to speed such reforms. In addition, he sees an immediate need to increase Chinese income levels, especially those of low-income groups in both urban and rural areas. Huang Qifan, Vice Mayor of China’s largest municipality, Chongqing, agrees with the concept of lowincome family stipends, along with discounts on purchases of home electrical appliances by rural families. He also thinks changing the personal income tax system could generate aggregate demand among consumers. A tax deduction or refund on individual mortgage spending, for instance, would help restore property market confidence and increase consumption—as would a special tax refund for those whose incomes depend on exports. Possible pitfalls But Zhou Xiaochuan, Governor of the People’s Bank of China, warns that if China only reduces taxes without reducing administrative spending, there will other issues to deal with, including a fiscal deficit. Instead, he recommends a bundled resolution that provides a progressive percentage tax cut supported by a proportionate reduction in government administrative expenditures. So far, the government has taken a number of steps in response to these and other recommendations. In January, it announced it would spend an additional 850 billion Yuan ($124 billion) over the next three years to improve health care coverage. It also has lowered the down payment requirement for home purchases from 30% to 20% of a home’s value. A difficult dichotomy Yet the nation’s success may rely as much on altering cultural dynamics as replacing economic models. China is encouraging its citizens to spend more at a time when consumers in the United States are being admonished to do just the opposite, putting even greater pressure on exports and manufacturing. The nation’s success may rely as much on altering cultural dynamics as replacing economic models... In fact, Chinese and American consumers have ostensibly become mirror images of one another. While Chinese families save nearly a third of their incomes, Americans’ personal savings rate has crept near zero for the past several years. It is not surprising then that household consumption represents more than two-thirds of the U. S. economy, compared to slightly more than 35% in China. Changing that correlation won’t be easy. In 2008, American households accounted for only about 4.5% of the global population, but bought more than $10 trillion worth of the world’s products and services. On the other hand, the four-in-ten people who live in either China or India bought only $3 trillion. Optimistic results Nonetheless, there are signs that Chinese consumers are open to the possibility of spending more of their money. There are signs that According to Nielsen’s most recent Global Consumer Confidence Survey, nearly three-quarters (72%) of Chinese consumers are optimistic that their country is not in a recession. Accordingly, China’s Consumer Confidence Index (CCI) of 96 has remained relatively stable since 2006, and hovers above the CCI of 84 that is the global average. Chinese consumers are open to spending more... More than half (56%) of consumers surveyed are generally optimistic about their personal finances in 2009, though less so (41%) about job prospects. Among those willing to spend their spare cash, most favor leisure-related categories, such as holidays, out-of-home entertainment and new technology—areas in which the government hopes to encourage greater consumption. For its part, the government too is willing to spend more where necessary. Much like its citizens, it has “money in the bank,” with a budget surplus that exceeded one trillion Yuan in the first half of last year. Recently, it announced it will expand the country’s money supply by 17% next year to spur domestic spending. It hopes to grow 2008 bank lending levels by as much as $14 billion. Even so, China’s economy has been unable to avoid the “economic tsunami” that has engulfed much of the rest of the world, and its eventual outcome rests on a host of variables both at home and abroad. So far though, it appears to be in position to effectively weather the global economic storm. Nielsen Consumer Insight, February 2008 Delivering consumer clarity Feb.2009 - Issue 15 http://www.nielsen.com/consumer_insight/ci_story5.html Awards Shows Take Centerstage: Sales from award-winning performers skyrocket By Valentina Nucete, Nielsen Entertainment and Virginia Harvey, Nielsen Monitor-Plus CI SUMMARY: Despite waning viewership numbers—and a male audience that has gone MIA—award shows remain popular with advertisers, and even more so with artists who can see music sales climb as much as 700% one week after the show airs. The Grammy Awards, Academy Awards, MTV Video Music Awards, Emmy Awards and Golden Globe Awards represent the pinnacle of professional achievement in an artistic sense, and serendipitously, in a financial sense as well. Knee-deep in the award season, Nielsen evaluated music sales data for the week prior to and following the Grammy Awards during the 2006-2008 seasons. Nine out of ten artists who won or performed at the Grammys earned the ultimate accolade—an increase in album sales. Threequarters of those artists managed to spin a win into a jump in digital song sales as well. Great performances For the 2008 Grammys, two-thirds of participating artists enjoyed a sales boom of 50% or more. Notably, British warbler Amy Winehouse hit a sales high note. After nabbing five awards, her week-after-airing sales of Back to Black climbed to 4.5 times those of the show week "115,000 vs. 25,000 units". Two-thirds of participating artists enjoyed a sales boom of 50% or more... Similar sales spikes were observed for the 2007 Grammys, with half of musical participants enjoying a sales push of 50% or more during the seven day postshow period. In an unprecedented revival, The Police reunited to cut a track titled Outlandos D’Amour that copped top sales honors with a 120% unit increase. Future focus The nominee list for the 2009 Grammys features a number of familiar faces—including Madonna, the Eagles, John Mayer, Maroon 5 and Rascal Flatts—who have appeared in two of the last three award shows as performers, winners or both. In a rare triple play, 2009 candidates Bruce Springsteen (Best Rock Song) and John Legend (Best Rap/Sung Collaboration) either performed or won Grammys in 2006, 2007 and 2008. Springsteen’s record sales following a Grammy win or appearance enjoyed a bump anywhere from 37% to 200%. Legend’s results were even more impressive, with after-show sales ranging from 77% to 700%. If the past is predictor of future success, expect to see them both at the podium again this year. Movie magic Just earning a nomination in the Academy Awards proved powerful enough to move the song sales dial during the critical post-program week. After winning the 2008 Best Original Song Oscar, digital downloads of the Glen Hansard and Marketa Irglovasong entry Falling Slowly rose some 207% (42,000 vs 14,000 the pre-show week). The movie soundtrack album Once, which featured the song, also saw sales soar from 19,000 to 47,000 copies. Just earning a nomination proved powerful enough to move the song sales dial... In prior years, the Melissa Etheridge entry I Need to Wake Up from the film An Inconvenient Truth and the Houston/Coleman/Beauregard collaboration It’s Hard Out There for a Pimp from the movie Hustle and Flow grew sales by 87% and 275%, respectively. The soundtrack albums for both films increased by 59% and 77%, respectively, and other Academy Award-nominated entries in the Best Original song category followed suit, posting gains in both song and soundtrack album sales. Ads up Who are you wearing? Red carpet coverage has become almost as big a draw as the Oscars. The names of top designers, jewelers, hair stylists and make-up artists trip off the tongue of your average consumer. So, it’s no surprise that a department store like JCPenney holds the number three topspending position among Academy Award advertisers for the past five years courtesy of a 2008 spend of almost $11 million, roughly one-third more than in 2007. The top slot in award show advertising support goes to General Motors: five years running at the Academy Awards and the Grammys, three years at the Emmys, and four years at the Country Music Awards. Worth it L’Oreal lives its classic slogan, apparently believing award show advertising is “worth it”. The company dominated at the 2005 Golden Globes, spending $4.4 million on advertising. Procter & Gamble put its best face forward at the MTV Video Music Awards, reigning as top sponsor every year except 2006. Apple chose to debut its groundbreaking iPhone at the Academy Awards in July 2007, five full months prior to product release, spending a whopping $5 million on three TV spots. Even the government got into the award advertising game, spending its way onto the MTV Video Music Awards’ top10 advertiser list for 2004-2008 thanks to a massive recruitment ad budget. Encore ads Success breeds success, or at least cultivates encore advertisers. Keen observers will note that many advertisers from the February 2008 Grammy Awards also ran schedules during the 2009 Grammy nomination announcements. For example, sponsor P&G slated seven spots for total air time of 2 minutes 30 seconds. Other repeat advertisers included Sprint and Time Warner. A highlight of the announcements was a digital duet featuring Best Buy and the Apple iPod in a 30-second spot. Viewer attrition Despite robust advertiser support, award shows are not the “draw” they used to be. The MTV Video Music Awards now skew to younger females, with a rapidly dwindling male audience. The downward spiral can be seen in Academy Award viewership, the Emmy Awards and the Grammys, with only the Golden Globes managing to hold its audience fairly constant. Award shows are not the “draw” they used to be... As for what’s behind the downturn, there are any number of theories. Some blame a dated format that drags on. Some find the scripts predictable and boring. Some find the talent too old and unrelatable. Some believe the awards themselves are pretty much predetermined by the box office results. Take your pick as to the main motivation, it’s undeniable that consumers are taking a pass. The 2008 Oscar show averaged a 10.7 rating in adults 18-49, down 24% from the 2007 audience and 14% below the previous low, suggesting that all age groups are losing interest. The zenith of Academy Award broadcasts was the 1998 show when Titanic won a record-tying 11 awards, drawing 55 million U.S. viewers. Chicks and flicks On a more upbeat note, the 2007 Oscar numbers were up 3% over the prior year, particularly among women 18-34 and 18-49. Overall, the telecast drew 8% more viewers among adults 18-34, achieving a 12.9 rating that was its best performance among this demographic in five years. Perhaps explaining the attraction of the Oscars to advertisers, Claritas and Spectra drafted a very appetizing profile of the average viewer, describing her as an upper-middle-income to upper-income female, at least 35 years old, college educated and residing in the New England, Mid-Atlantic and Pacific regions. Critics aside, award shows are earning rave reviews from advertisers and the retailers who benefit from a telecast-driven sales lift for winning and performing artist offerings. Nielsen Consumer Insight, February 2008 Delivering consumer clarity Feb.2008 - Issue 15 http://www.nielsen.com/consumer_insight/ci_topline_article_XIV.html Americans Favor Diversity: Trends suggest otherwise By: Doug Anderson, EVP, Research & Development, The Nielsen Company CI SUMMARY: A new Pew Research Center survey suggests that most Americans value diversity and favor living in communities with a variety of income levels, political views and ethnic groups. Data from the U.S. Census Bureau and The Nielsen Company, however, paints a somewhat different picture, which shows that neighborhoods are still largely divided by race— and increasingly—by economics and politics. From almost any perspective, the United States is an incredibly varied and diverse country. There is tremendous range in climate, topography, affluence, degree of urbanization, ethnicity and household composition. According to results of a new survey from the Pew Research Center, released December 2008 (http://pewresearch.org), most Americans value diversity and favor living in communities with a variety of income levels, political views and ethnic groups. Data from the U.S. Census Bureau and The Nielsen Company, however, paints a somewhat different picture of how communities actually live—a portrait of a country still separated by race, ethnicity, political orientation and a wide range of other factors. This dichotomy between what consumers say and what they actually do poses a challenge to marketers. While national advertising and promotion must reach and appeal to a wide range of consumers in a highly diverse marketplace, there is also a need for more locally-targeted advertising and promotion that speaks to the sentiments of varied consumer segments. This dichotomy between what consumers say and what they actually do poses a challenge to marketers... A preference for diversity Seen in aggregate, the United States is an incredibly diverse country. The Ozzie and Harriet majority—the “American family ideal” of the 1950s and early 1960s—has fragmented into countless unique subgroups. In the early 1960s, nearly half of all U.S. households had children under 18, and the majority of those households contained married couples where only the husband worked outside the home. Today, there are more single parent with children households than there are the former “traditional” families. The plurality of family households has both parents working, but only account for 41% of total. Over 70% of women with children work outside the home. The racial and ethnic makeup of the U.S. has been used to define the concept of diversity. Tremendous growth among Hispanics and Asians has changed the ethnic face of the country over the past several decades, and will continue to change it for decades to come. Hispanics make up 15% of the U.S. population today, a level expected to double by 2050. With continuing high levels of immigration, within 16 years, a higher share of the U.S. population will be foreign born than during the prior peak immigration years early in the 20th century. Within 16 years, a higher share of the U.S. population will be foreign born... The Pew survey asked Americans if they like diversity in their communities and found overall that they do. Just over half (51%) of Americans gave pro-diversity responses to at least four of the five survey areas (political, racial, religious, socioeconomic and immigrants). There was however, considerable variation based on political party affiliation, education, race and age as can be seen in the chart below. Results from the study also revealed that: z 65% prefer to live in a community with a mixed racial make-up { { { z 59% prefer to live in a community with many different religious groups { { z 73% of Democrats versus 52% of Republicans 76% of those ages 18-29 versus 47% of those ages 65+ 83% of blacks, 69% of Hispanics, 60% of non-Hispanic white 73% of liberal Democrats versus 44% of conservative Republicans 70% of college graduates versus 52% of those with high school education or less 61% prefer to live in a community with a mix of upper, middle, and lower classes { { 71% of liberal Democrats versus 57% of all Republicans 68% of those with $100k+ in household income versus 55% of those with household income of <$30k Local areas are not so varied Most Americans live in In spite of the surveyed preferences for varied communities— those with a mix of races, religions, and incomes— most neighborhoods that are Americans live in neighborhoods that are much more likely not much more likely not to to have such mixes. Using the latest small area data from Nielsen, it is possible to see how concentrated various ethnic have such mixes... and/or racial groups are in the U.S. Although there is significantly more racial integration at the community and neighborhood levels than there was in 1950 and 1960, by and large the U.S. remains a country separated by race and ethnicity. In 1990, the most concentrated 50% of Hispanics lived in neighborhoods that were at least 48% Hispanic. By 2000, the most concentrated 50% lived in neighborhoods that were at least 51% Hispanic, meaning that Hispanics were more concentrated geographically in 2000 than in 1990. Much of this can be attributed to the rapid growth in the Hispanic population between 1990 and 2000, driven by immigration with many new immigrants moving into Hispanic-dominant neighborhoods. Blacks also live in very concentrated communities. The most concentrated 25% of black households resides in neighborhoods that are at least 77% black. The top half live in areas that are at least 43% black. Over one-third of non-Hispanic white households live in Census tracts in which less than one out of each 100 residents on average are black. Nearly 70% of non-Hispanic white households live in tracts that are less than 5% black. Asians do not live in neighborhoods nearly as ethnically concentrated as blacks and Hispanics, though this varies substantially by country of origin. For example, Japanese immigrants and Americans of Japanese origin are much less concentrated than those from China or India. These differences in geographic concentration are strongly associated with education (and consequently with affluence). College educated ethnic Americans are much less likely to live in dominant ethnic neighborhoods than those with high school educations or less. Data from the U.S Census Bureau in the table below shows the most segregated metropolitan areas in the U.S. for both blacks and Hispanics. The markets are ranked by a Dissimilarity Index. The index measures the percentage of a group’s population that would have to change neighborhoods for all neighborhoods to have the same incidence of the group as in the market as a whole. For example, 85% of the blacks in Detroit would need to move to white-dominated neighborhoods in order for every neighborhood in Detroit to have the same incidence of blacks. Income is a differentiator There is also substantial and growing separation of households by income in the U.S. Prior to World War II, many more Americans lived in smaller towns and cities with a mix of income levels, where factory owners and factory workers; doctors and patients; and store owners and customers lived in the same communities. With the rapid suburbanization of American after the war and the related increase in poverty in cities, households of differing income levels tended to separate. An article in the journal Demography by Fischer, Stockmayer, Stiles, and Hout (volume 41, pages 37-59) finds that between 1970 and 2000 there was a 32% increase in the separation of higher income Americans (the top 20%) from all other Americans. Despite this trend toward the geographic isolation of higher income households—which continues today—blacks and Hispanics are still nearly three times as separated from non-Hispanic whites as affluent Americans are from the bottom 80%. Local targeting at the store level With such broad diversity and concentration of population groups at the local level, locally-targeted advertising and promotion become even more important. Like communities, stores are also very well defined by their makeup along racial, ethnic, or affluence lines, and as such are very targetable. The Nielsen data in the table below summarizes the distribution of sales for the major retail channels based on the distribution of blacks and Hispanics in the individual store’s trading areas. Politics and diversity In the Pew Survey, 63% of respondents said they would prefer Communities have to live in a community made up of people with a mix of political become more views, while less than one-quarter prefer to live in a place where everyone shared their own political views. Political politically homogenous diversity was most valued by Independents (i.e., not Democrats or Republicans), by blacks, and by those with rather than less... incomes over $100,000. However, over the last 35 years, based on analysis of election returns, communities have become more politically homogenous rather than less. In their book, “The Big Sort”, which argues that Americans are clustering into politically similar communities, Bishop and Cushing show this trend toward politically homogenous communities using the latest election data. In the 2008 presidential election, nearly half of all votes were cast in counties that went for a candidate by 20 or more percentage points. In 1976, when Carter defeated Ford, only 27% of voters lived in counties where the margin was more than 20 percentage points. It seems less likely that individuals have made conscious decisions to move into communities based on political trends, but rather that demographics account for much of the difference. Political affiliation is generally tied to certain key demographics that govern decisions about where to live; income and home values, presence or absence of families with children, education, racial or ethnic make-up all influence where people choose to live and also influence political affiliation. Theory versus reality catching up The Pew survey results suggest that Americans are accepting of diversity, even if communities haven’t quite caught up yet. Demographic projections reveal quite clearly that the U.S. will become even more diverse over the decades to come, as the majority of population growth will come from new immigrants entering the country. Seen from the top down, the U.S. is still the melting pot of the world—a nation that is diverse ethnically, politically, economically, and in its beliefs. From the bottom up, however, neighborhoods are still largely divided by race—and increasingly—by economics and politics. Marketers need to find a common ground for their products, varying the scope of advertising and promotional messages by national, regional or local delivery. Accurate targeting, driven by data to keep up with an ever changing country, will be necessary not only to drive growth, but simply to maintain balance. Sources: The Nielsen Company, Claritas & Spectra Pew Research Center – Americans Say They Like Diverse Communities; Election, Census Trends Suggest Otherwise (released December 2, 2008) Nielsen Consumer Insight, February 2009