Notes and Thoughts on Grocery 2.0

Consumers depend on the internet for information. That is a fact. If they didn’t, Google wouldn’t be processing over 3 billion searches per day. The Web provides businesses and brands with cheap, unlimited space to provide what their consumers want and need, which includes information. But while many have embraced the web and all it offers, far too many businesses underestimate the power of the internet to connect with consumers.

“The reason Google is so valuable is because it’s the linchpin of the expansive, information-driven age. It links seekers of information to providers of information in the most accurate and efficient way. It proves that there’s a marketplace for information unlike any we have ever known. And modern brands must compete in that marketplace,” says Barry Wacksman of AdWeek.

Websites, at the very least, should be loyalty driving vehicles, where goal oriented consumers can connect with brands, make purchasing decisions and seek product related information. In addition, consumer dependence on the internet provides great potential for Internet-based directional advertising, for both retailers and brands.

A recent OMD study that tested consumer perceptions about advertising found that 81% of consumers said advertisers need to continue to communicate about their products, especially during a recession. Consumers said they would be more receptive to cost-savings messages and products that are positioned as investments. For low involvement products, marketers need to communicate brand benefits.

“The task for marketers therefore is to explore more efficient ways to connect and listen to their consumers in order to reduce costs, while still maintaining a presence in the marketplace and connection to their consumers,” says Joe Marchese, President of Socialvibe. “It’s possible that this economy will force marketers to innovate, and finally begin the shift of massive, high-waste, traditional media budgets into more engaging, measurable interactive marketing initiatives.”

When your consumers go online, will you be there?

Rachel

According to a new study by JupiterResearch, in an uncertain economy, people may cut back on movies and cable television, but they are not likely to give up their internet access.

The study, which examines how an economic downturn could affect entertainment spending, found that almost one-third of participants would go to the movies less, while 12% would cut costs by cancelling premium cable services like HBO and Showtime.

In contrast to the likely cuts in television and movie theater viewership, only 2% of survey respondents said they would cut their broadband service. “It is noteworthy that broadband has reached this core status, joining the list of utility services along with electricity, phone and cable that consumers consider vital to the household,” says Jupiter analyst Bobby Tulsiani.

When deciding where to justify spending, just as consumers choose internet service over television as the one necessity that cannot be sacrificed, advertisers and retailers should choose internet over television as the one marketing effort than cannot be sacrificed.

Rachel

Economic downturn?

Not for several large consumer packaged goods companies, who have recently posted better-than-expected sales results across many major brands. Executives have credited cost-cutting as the reason many consumers are eating home more often, bringing lunch to work, and relying on convenient, easy to prepare meals in lieu of take-out.

Last quarter, General Mills saw a 14% increase in revenue. Betty Crocker dessert mixes, Gold Medal flour, Yoplait yogurt, Nature Valley and Fiber One snacks, and cereal and soup sales all grew by double digits. Campbell Soup’s sales increased by 13% while Kellogg Co.’s and Kraft Food’s sales rose 11% and 21%, respectively. “The fact that people are eating at home more is certainly a positive,” Kraft Foods CEO Irene Rosenfeld said.

FMI President Tim Hammonds said, “Consumers are eating at home more but are not showing a renewed interest in cooking, which is why a lot of products seeing the biggest bump are the easiest to prepare: cereal, sandwiches, ramen, and macaroni and cheese.” Kraft Macaroni & Cheese sales grew 20% last quarter and, according to Rosenfeld, Oscar Mayer deli meats “are on fire.”

Pasta maker Ronzoni focused on convenience when it introduced a Bistro line of microwaveable pasta. “We’ve [introduced] the idea of pasta as being consumed in an out-of-home setting,” said Kevin Blacker, brand manager at New World Pasta, which owns Ronzoni. Timing is everything as pasta sales tend to increase in a down economy, said Blacker. “You can buy a one- or two-pound box of pasta and have a meal for four people at one of the cheapest prices you can find anywhere.”

General Mills capitalized on the cost-cutting and convenience trends by boosting ad spending 22% for the first two quarters of 2008. “People are eating more meals at home today, and cereal is a quick, convenient option for them,” said Jeff Harmening, President of General Mills’ Big G Cereal.

In addition to General Mills, The Associated Press reports that, “many major food makers are promising boosts to their advertising in the new fiscal year or reporting their spending is up in the most recent one. Their ads seem to be hitting a variety of outlets…and the Internet - which marketers say helps them hone in on consumers and get the most bang for their advertising buck.”

H.J. Heinz Co. recently pledged to increase consumer marketing by 8 percent to 12 percent in its new fiscal year as part of a two-year growth plan. Hormel Foods Corporation is planning on boosting advertising spending and expanding the number of brands currently being advertised, said President and Chief Executive Jeffrey M. Ettinger.

Sara Lee is hoping a multi-million dollar campaign linking the Soft & Smooth bread brand with Disney’s popular “High School Musical” enterprise will reach a more targeted demographic, said Vice President of Sara Lee Fresh Bakery Tim Zimmer. The campaign features characters’ “favorite recipes” such as Taylor’s “Sweet as Honey” peanut butter sandwich that consumers can look up on the Internet.

Sara Lee’s approach is smart, said Domenick Celentano, Adjunct Business Professor at Fairleigh Dickinson University. “Mass marketing is sort of dead and really what companies are looking at very heavily is using the Internet to get to the narrower-focused consumer,” he said.

To view additional statistics, visit Advertising Age and BrandWeek.

Rachel

In a move that parallels General Motors’ decision earlier this year, Chrysler Chief Marketing Officer Deborah Meyer said yesterday that the auto manufacturer has dedicated 30% of its advertising budget to digital advertising.

While speaking at the Interactive Advertising Bureau’s Mixx conference in New York, she cited the auto industry’s economic woes as one of the reasons for the shift.

“Every dollar has to work 10 times as hard as it used to do,” Meyer said. “This is why [the shift to digital] is moving at an incredibly rapid pace. There’s no fat left in the system.”

The auto industry is not the only industry where economic concerns have forced advertisers to re-think ad spend. As the Wall Street Journal reported earlier this month, “Spending on Internet advertising is climbing at a healthy clip — rising 20% in the U.S. in the second quarter.” But while some companies have gone online as a conservative move to maximize ad spend, others are using the medium to capitalize on consumer concerns in an uncertain economy.

Folgers recently announced a new campaign focusing on coffee aficionados who have turned to brewing at home in an effort to cut costs. “Given the economy, there is an opportunity to underscore what Folgers offers with people who may have been going out more frequently than they do today,” said Marnie Kain-Cacossa, Executive Vice President and Global Equity Director at Saatchi & Saatchi New York.

In additional to traditional media, web ads will focus on Folgers’ rich taste, enhanced by a new roasting process where the beans are fully dried before roasting. “People may be willing to forgo the high end but don’t want to have a bad cup of coffee either,” said coffee industry analyst and consultant Judy Ganes. “When people are trying to watch their wallets, they may be willing to give this a try.”

Consumers aren’t the only cost-conscious spenders looking to cut spending. As corporations like Chrysler shift budgets online, look for more in all industries to follow.

Rachel

According to recent forecasts by companies such as Carat and eMarketer, online advertising will continue to grow despite a decline in overall advertising expenditure.

Leading media communications agency Carat revised previous forecasts issued in March, which predicted 2008 growth in advertising expenditure to reach 6%. Now the agency is predicting 2008 figures to increase by only 4.9%. Jerry Buhlmann, CEO of Aegis Media, said, “It is clear that the worldwide economic issues affecting businesses are having an impact on where and how advertisers spend their money…Similarly, while TV’s share of spend has stabilized, internet advertising is continuing to drive spending ahead of other sectors in nearly every region. Internet is set to overtake radio this year to become the world’s third most popular medium, behind TV and print.”

“But changes in consumer behavior aren’t the only reason for this,” Buhlmnn continued. “With search now central to the planning and execution of any campaign, online media brings a greater level of accountability not just to itself but to TV, print and other forms of advertising. This is why we are predicting further strong growth for internet, even when advertisers are cautious in many of the other sectors.”

Earlier this summer Advertising Age reported that although Procter & Gamble had cut costs by closing a manufacturing facility and eliminating hundreds of jobs at Gillette’s South Boston headquarters, its advertising budget would remain steady at around 10.4 percent of the company’s annual sales. Instead of spending as much on traditional media, the company would devote more to alternative channels.

A recent LA Times article summed up the current trend in total online spending as significant. In the article, eMarketer analyst David Hallerman said, “Complaining about an online-ad slowdown is like griping about a slugger who is on pace for 40 home runs after hitting 50 last year.” eMarketer expects online ad spending to grow to $25.9 billion this year and $30 billion in 2009, from $21.1 billion last year.

Online advertising’s resistance to the economic woes plaguing other media is a tribute to the medium itself. As Buhlmann stated, interactive marketing is now, more so than ever, the cornerstone of today’s successful media mix. Most campaigns integrate online spending at least at some level. Amid diminishing budgets, advertisers cannot afford to miss out on less costly, targeted opportunities to reach their online audience. So, the growth continues.

Rachel

To see all of Carat’s forecasted figures, click here.
To visit Advertising Age, click here.
To read the Los Angeles Times article, click here.