As Tesco puts Pampers in its sights, is "product" the battleground of the future?

Tesco's introduction of products from its new "Tesco Loves Baby" brand isn't on the face of it particularly startling news. After all, own brand products have been increasingly favoured by consumers across the board and, even in this particular category, the supermarket has long been active both with its own-brand products and its Tesco Baby Club, now rebranded the Tesco Loves Baby Club. The landscape of nappies is clearly radically changing as the classic choice between Pampers and Huggies is no longer going to be possible. So not only does the addition of the word "loves" mark another stage in Tesco's drive to cosy up to their customers more warmly, but this assertive step into the space left by Huggies could be the start of something bigger. There are suggestions within the media that with this new departure Tesco might be looking to seriously challenge the dominance of P&G's Pampers. However, in this of all categories, Tesco or any other own label may have to find themselves working particularly hard to convince consumers that branded is not (even just a little bit) better. With nappies, consumers may need concrete evidence to switch from a branded product whereas in other categories even within baby – for example, wipes – there may be more willingness to go own label, even if the product were not quite as good, if there is an appreciable cost saving. If this is the case and Tesco were to be successful in turning its own brand nappies into a market leader, will consumers start to seek out own-brand-brands in certain categories, because of their product characteristics and not just their value? With just a hint of poacher turned gamekeeper, own brands will have become the brand. Will this, in turn, mark a shift to consumers focusing more clearly on product intrinsics at the expense of or in spite of brand extrinsics as they "get by" without the expensive surround sound of brand noise. This could just mean that brands need to work harder in the way they communicate and emotionally connect with people (i.e. better extrinsics); but it could also imply that product innovation is more important than ever. If the product is demonstrably superior, then brands will retain their favoured status over "cheaper" own label. At Engage we work extensively in npd and have been using more experiential programmes bringing clients and consumers together to help create highly refined products which will compete assertively with own label competition. If the battleground of the future is product excellence & uniqueness at the premium end and product quality at the value end, the way that products are developed and the co-creative involvement of consumers will be more critical than ever.

Do price promotions put brands on the road to nowhere? It depends on the brand…

In an excellent article entitled “The 13 bad marketing habits to break in 2013”, Marketing magazine includes price promotions at number six. The article quotes Thierry Billot, the managing director of brands at Pernod Ricard, as saying 'If you follow the road of price promotions, you will quickly realise it's a dead end, with no profits'. The article says that price promotion “is not a sustainable marketing strategy” and that brands have sacrificed long-term brand equity at the altar of short-term profits, but is it really as black and white as that? The answer is that some brands, in some categories, have far more leeway than others to hold their price positions and stay out of the price promotion trap. When researching price promotion risk we have found that the most important factor is the degree of substitutability in the category, i.e. how prepared are consumers to switch between brands. This is itself related to the extent to which brands are perceived to be different and to offer different things. An example of a category with very high substitutability is mainstream lager. Consumers are very willing to switch between brands based on the best price deal. We may see differences in brand preference and rating but crucially we see low scores on differentiation and uniqueness. Unsurprisingly, it is a very heavily promoted category. Picking the brand on promotion that week amongst a small number of acceptable brands is the key heuristic shopping behaviour across a lot of categories (shower gel, baby wipes….) On the other hand, brands in categories where the products really offer different things or where the brand has created a stand-out position (whether really different or perceived to different through building brand equity) can avoid promotion or use it more tactically to drive trial short-term. In categories where there is no discernable brand leader or product differentiation, consumers are more likely to simply shop around for the best available offer. Some of the research implications of this are interesting: 1/ One of the reasons that difference / uniqueness is importance for new products is that long-term it enables price points to be maintained which will impact on likely success 2/ When researching in-market pricing strategies (such as via conjoint) it is vital to understand the degree of difference across the choices. This is because in research consumers will claim they are more responsive to price than they actually would be when substitutability is low. On the other hand, in markets that tend towards commodity e.g. mainstream lager, the research response is often very close to observed reality.

True Christmas Spirit Thrives in Recession Battered Brand Britain

Last year we published a qualitative research study that showed how Britons were rejecting traditional consumption and wanted to use Christmas to reconnect with the things and people that mattered most and are closest to them. A year on and the evidence suggests that this remains the case as Britons look more to the simple things that encapsulate the spirit of the season, rather than a more naked, commercial approach to Christmas. It is interesting to see how brands and retailers have been using these insights to inform their product and marketing campaigns. Consumers continue to view this Christmas as a buffer against a painful present, a time to recharge batteries, and to reconnect with matters they view as genuinely important. While they do this, they are perhaps thinking more about practicality, planning and early budgeting than last minute magic and spontaneity, at a time when thrift has become more than merely a lifestyle choice. Such insights are also reflected in Christmas advertising this year as Waitrose presents us with a stripped-back television advertisement, for which Delia Smith and Heston Blumenthal have both waived their appearance fees (instead the cash will be spent on Waitrose’s Community Matters charity scheme). John Lewis’s advert, which follows last year’s epic, features the tag line "Give a little more love this Christmas", features a snowman searching for the perfect present for a mystery recipient whose identity is not revealed until the final scene (whilst the choice of “The Power of Love” for the soundtrack should not be overlooked), and ASDA, which supports the contribution of mothers, with the strapline ‘Christmas doesn’t just happen by magic’. ASDA said that the ad reflected the fact that for mums, despite the pressure, their big reward is looking back at the end of Christmas day, at a happy and smiling family, and thinking ‘I did that’. So the themes of Christmas this year are modesty & homeliness, intimacy & love. In the midst of all this Christmas spirit, consumers are making savvy decisions and feeling good about it. Greater effort will surely be invested this year in finding a bargain or in doubling up vouchers, finding a discount code, collecting and using points across all purchases, really checking deals in order to make hard earned money work harder and go further. Recent research by first direct found that 58% of people are looking to save money on the perfect party outfit over the festive period with women more likely than men to shop for a clothes bargain (60% versus 49%) - and more than three-fifths of them get thrifty when it comes to their party attire compared to half of men. The most common ways of saving money, according to the research, are shopping around more than before (46%), using discount codes or vouchers (31%) and retail reward points (29%). Christmas is still about enjoyment and escape, and a certain degree of excess is traditional but, in keeping with the subdued times, the sense of modesty and restraint reported by our respondents last year remains the order of the season. In spite of the jubilympic summer (or perhaps because of it), Christmas 2012 will be a contained affair in many families and so The conclusions for brands appear to be the same a year on: articulate hope and a positive long term vision as consumers are looking for inspirational light at the end of the tunnel; reflect the way that consumers have, in some ways, temporarily lost faith in materialism and focus on values rather than things; focus on the local, facilitate family, be active in communities and, at very least, continue to overtly support the British economy with products created and built locally. Brands should continue to tap into rituals which offer familiarity, comfort and trust for consumers and create promotions which reward planning and effort, as well as “hard to ignore” deals.

Is government plan really a green light for healthy food?

The government has announced that a ‘consistent’ system of front-of-pack food labelling will be introduced next year. This will be based on a traffic-light system showing consumers a combination of guideline daily amounts, colour coding and "high, medium or low" wording to show how much fat, salt and sugar and how many calories are in each product. The move comes after years of opposition from the multiples to a standardised labelling system. Their argument was that labelling was too simplistic and maybe unfairly critical of some products. However, some, including Asda, Sainsbury's and Waitrose, already had their own versions, which others claimed were causing confusion in the market. The government has said, though, that the new scheme will help people choose healthier food options and make more sensible decisions about what to buy. Their hope is that small changes will help reduce the scourge of obesity and improve the health of the nation. But will it? Traffic light labelling is a small step in a positive direction and there is plenty of data to show that grocery shoppers like this style of labelling and find it helpful. Research published last year by DEFRA showed that 80 per cent of people rated health as the most important factor affecting their buying decisions. Most shoppers – 82% - said they actively sought to buy healthy foods. The figures also indicated, though, that people’s preferences don’t always match what they ultimately buy, with price being a major factor in many people’s buying decisions, especially in the current climate. In practise, though, anecdotally it would seem to be further down our list of priorities. However, too much research focuses on one issue - such as labeling - in isolation, rather than looking at it as a whole. One of my colleagues undertook research some time ago with housewives, where each was asked to compare their last supermarket shop. With all of the produce on the table, they discussed what they had bought and why. They became quite competitive and in their efforts to win their impromptu 'supermum' competition, they became strong advocates for their products and the discussion was highly revealing. Health was rarely part of the argument. Price, offers, quantity, shelf-life, convenience came first. And then even when health is considered, the consumer definition of health is still poorly defined. In recent research we undertook, mum spent far more time than you would think possible trying to decide whether potatoes counted as one of your five a day. Milk - vital for child health - is too often restricted because it is seen as a high fat food (even though full fat milk is still only 4% fat). Most of them end up aiming for a balanced plate and call it a day. It is going to be important to ensure that the consumer is educated to understand the information behind the labelling. A knee-jerk reaction to a product with a red label on it could be counter-productive. The word ‘fat’ on a product could turn off the consumer, even though some fat in a diet is essential. Similarly, most products will contain an element of sugar, but some from natural sources like tomatoes rather than synthetic additives. Brands are going to have to adopt a more holistic approach to health; ingredients may not be enough. Brands and retailers may have to work together to create a well-being experience which may involve the in-store experience - display, promotion, training and product presentation – as well as the brand itself. There is evidence of this in some areas. Many multiples have revamped the way they display fresh produce so that it has a more market-like, natural feel and there has also been a move in the UK to balance the consumer’s desire for prepared meals with "semi ready-to-eat" meals. These products, with fresh ingredients that you can see when you buy them, are ready to take home and cook rather than just warm up. Tesco’s has had success with pre-prepared vegetables and meals in its Finest range as well as its City Kitchen prepared meals. However, Finest, City Kitchen and those like them remain premium brands. So now that we are finally getting a universal and comprehensible labelling system, maybe it's time for brands to look at the wider context of healthy eating and be able to demonstrate to consumers that you can buy and eat healthy products on a budget.

Deck The Malls….It’s October!

Are you in the Yuletide mood yet? Thought not. Christmas decorations and lights have already gone up in Nottingham’s Old Market Square this week and it’s still a good fortnight until Halloween; Christmas Trees have been available in John Lewis since the start of the month, whilst the BBC will film its “Songs of Praise” Christmas special on October 24th. And if you thought that was early, they will film the Easter special the following day. As Loudon Wainwright III sang: “Suddenly it's Christmas, right after Halloween. Forget about Thanksgiving; It's just a buffet in between.” So has Christmas arrived earlier to fill the post-Jubilympic gap? Are retailers trying to keep a low level of celebratory consumption bubbling in the background with crackers & cauldrons competing? Whether Christmas is indeed arriving earlier or not, one thing is for certain. Throughout the recession, talk of an austerity Christmas has never really come to reality as families have saved and stockpiled to ensure they have the best Yuletide season they can. The same will be the case this year. During what has been an undeniably tough few years, many people have clung like limpets to calendar staples like Christmas and Halloween as opportunities for an escape from everyday drudgery. It’s arguably one of the reasons why both the Jubilee and the Olympic Games inspired such overt public enthusiasm and excitement. But if we have clung to such events, so have brands and retailers, placing most of their hopes on a consequent economic bounce. That may be misplaced given that any post Jubilee/Olympic lift seems to have been transitory. Alternatively we may be heading towards an economy that simply bases itself on lurching from one special occasion or set-piece event to the next and just takes the economic benefit of each as they come along. The challenge for brands is to understand who is buying and for whom, what is influencing those purchasing decisions and to be able to respond to changing attitudes and behaviours in a way that enables them exploit whatever potential exists. This is where the use of online research and its ability to deliver insights quickly can assist brands in re-pointing activity fast, rather than having to wait ‘til the following season to implement slower moving research findings. Engage has also been creating more “experiential” qualitative research to transport consumers to a different mindset – useful for “out of season” research. Understanding how, where and why the shopper is buying is should be central to a merry Christmas for brands. The multi-channel shopping environment, of course, could also mean that Christmas may be less evident than when we shopped in a purely bricks and mortar world. Royal Mail reports that 40 million people shop online for Christmas gifts. This, coupled with the efficiency of high street retailers in terms of getting stock into store, also means we seem more comfortable buying later in the year than ever before. The propensity for retailers to start their January sales pre-Christmas means that more and more people are waiting as late as possible in order to bag a bargain. That also means it’s harder and harder for brands to calculate their own Christmas figures, particularly if they are forced into promotional or discounting programmes. Figures from 2009 found that nearly one fifth of Britons left at least part of their Christmas shopping until Christmas Eve, with Selfridges saying that around 80 per cent of its customers on Christmas Eve were men. So in these uncertain times it’s nice to see that some things don’t change.

Is Crowd Clout here to stay?

In the last few months I’ve joined the Groupon crowd. I used the discount voucher site to treat my wife and daughter to a pamper day and sent my son off drift racing at Brands Hatch and all, I’m told, at a fraction of the cost of booking it independently. They were happy and so was I, enjoying the benefits of crowd purchasing or ‘crowd clout’ which delivers compelling offers to consumers on a daily basis. And it’s big business as the rise of rivals Living Social and Wowcher has proven. Even Amazon has now launched its own daily deal website in the UK, beginning with London, where AmazonLocal will email geographically-relevant offers to users every morning, and offer reward points to those using an Amazon credit card. What’s more interesting, though, is whether this is a passing trend or one which will redefine the way we, as consumers, begin to purchase any number of items. In this, though, the signs are not positive. To do so, the benefit has to be as evident to the supplier as it is to the consumer and the intermediary and that is where the jury remains out. We know it’s big business – so far. Sales at Groupon exceeded $750 million in its first two and half years, whilst the company’s activities cross four continents and reach nearly 40 million subscribers. However, after the publication of worse than expected financials recently, an analyst at Citi Investment Research suggested “a rapidly deteriorating core business - ie the daily deals business - and Groupon needs to act fast to fill up this hole with new initiatives”. The company believes that growth may likely come from new services including an instant mobile deal feature; Groupon Goods, for deals with national retailers; and Groupon Getaways, for high-end travel deals, but only time will tell if the model will serve vendors as well as it serves consumers. The interesting thing about daily deal sites is also the extent to which they change not just the products that we buy, but the classic decision making processes we use - does the increase of impulse buying of things that we hadn't previously thought we needed, just because they are a bargain make us more rational and careful in our regular grocery shop, to balance our frivolity; or less so, because we have a taste of bargain spontaneity? What is sure is that now the initial excitement of daily deals has died down, they are going to have to be much smarter to survive. At the moment, they feel a bit like a particularly manic jumble sale, where you have to rummage endlessly though rubbish to come across the odd, only slightly soiled, bargain. And who wants to do that? Classic example of this is the juxtaposition of increasingly unlikely products - I saw cheap wills being offered just above bikini line lasering the other day - that is crazy. And some things should just not be offered on a special deal. Long-term it could impact on the service industries in particular. Services that pre-Groupon were too expensive for the majority have now decreased radically in price, because of the number of Groupon offers available. Daily deals could continue to stimulate consumer spending and help businesses - but they need to start working in a more sophisticated, thought-through way, if they are to do it. But, and it’s a big but, a study by Rice University in Houston, Texas, found that 40% of companies which had used Groupon to promote their goods or services said they would not consider using Groupon again. Presumably, although suppliers pay a significant premium for the service, they would be happy to do so if it were delivering sustainable custom. The findings from the study are interesting. Two thirds of customers won’t buy more goods and services than are offered in the deal; only one in five Groupon users becomes a repeat buyer, and 80% of Groupon users are using the site for the first time. Like me, they are often for sporadic, opportunistic purposes as treats or for gifts and I, like many I suspect, pay little attention to the name and nature of the business I am buying the services from. I pay even less attention to the torrent of emails that rain down on me and others and which actively turn me away from becoming more engaged with the site – more grouped-off than group-on! All this seems to suggest a pattern of short-term relationships between the vendor and the consumer and, consequently, short-term relationships between Groupon and the vendor. And, if the old adage is correct, that it costs five times as much to win a new customer than to retain an existing one, crowdpurchasing sites like Groupon are failing to secure long term relationships with vendors because they are not yet delivering enough sticky, repeat business for them. Increasing and broadening the opportunities for consumers, which would then in turn increase and broaden the benefits for suppliers would likely increase sales and embed crowdpurchasing as a way of moving forward, even for opportunists like me.

Will short term discounting harm brands?

Heavy vouchering and discounting have helped end 18 consecutive months of declining volumes for retailers whilst promotional activity has remained unchanged at 35% of FMCG sales, following continual use of money-off vouchers and coupons. Although this is primarily a retailer initiative what are the implications for brands in being discounted? How can brands maintain perceptions of quality if you're being discounted? What are consumer views? Is this the thin end of the wedge where the only way to sell is going to be heavily promoted or discounted? All of us, of course, have brands that we are likely to buy no matter what; discount or no discount those products will continue to find their way into our baskets. But they are probably in the minority. We are in a phase where brands will need a compelling proposition for not discounting or for remaining at a premium within their category. However whilst discounting may persuade consumers to try something new, it is unlikely to lead to sustainable business unless the products deliver as well as offer a better experience than their competitors. The challenge for brands is to retain those consumers without retaining the price reductions. Discounting, of course, doesn’t need to be quite so overt. There are 'brands' that discount more discretely but equally successfully. The secret hotels on lastminute.com, the 'shopping clubs' or Groupon style offerings can help bridge the gap between getting sales and occupancy up whilst avoiding brand equity erosion that accompanies continual overt promotion. This works online too with sites offering large discounts on higher end fashion brands. To many, this makes premium brands more accessible without feeling like they are compromising on quality. Whilst it doesn't necessarily impact on how they feel about the brand it may elevate how they feel about themselves. This can rub off on the brand by association. There is also, though, a more pragmatic view of discounting. Whilst if you are a premium brand, being constantly discounted might eventually tarnish the premium positioning, this will (in the current climate) be more than balanced by consumers' delight at bagging themselves a bargain. In fact to not be discounted could be perceived as brand arrogance, as if you are out of touch with the problems of your audience. For FMCG brands, premium often equals a touch of affordable luxury, a small treat to brighten your day so frankly the danger of undermining your quality perception through careful promotion is probably quite low. What might be an issue is who the discount is attributed to - as a brand you will be paying for the promotion, but the retailer will probably get the accolades and be seen as the shopper’s friend. So it might be important to communicate to consumers that the brand is responsible for the promotion rather than the retailer. Brands should perhaps take note from politics - it is important to demonstrate to people how you share their pain, rather than telling them we are all in this together and retreating to your ivory tower of price premium.