Tuesday, February 23, 2010

Ways Spending Habits Have Transformed

(Excerpt from RST, 2/23/10)

Some Changes, It Seems, May Be Permanent

It's a question that has preoccupied marketers ever since the economy went haywire: Will people revert to their free-spending ways once the economy recovers, or has their behavior been permanently transformed?

Some observers insist that people's pre-recession acquisitiveness was rooted in basic human impulses and will largely reassert itself. Others say the long spending spree was an aberration and that human nature doesn't fate us to be obsessive shoppers. A report released late last month by Context-Based Research Group and ad agency Carton Donofrio Partners makes the case that the downturn has indeed wrought a lasting shift in consumers' thinking and not just a transitory change in their bank balances.

Titled "Coming of Age in the Great Recession," the report draws on quantitative survey work fielded last fall as a follow-up to ethnographic research conducted in the aftermath of autumn 2008's financial meltdown. So far, attitudinal changes noted in the earlier study (issued under the title "Grounding the American Dream") have not gone away. Most broadly, the new report says 83 percent of respondents subscribed to the statement, "I have made permanent changes to how I spend and save." Moreover, the survey finds them saying good riddance to their old understanding of the "American Dream" and the buying it entailed: 78 percent endorsed the statement, "The American Dream started as 'the land of opportunity' but became merely the land of opportunity to buy."

Seeing benefit in the downturn
And they haven't necessarily been dragged kicking and screaming to this new consciousness. Rather, a significant number of respondents sound a note of relief that the downturn has rescued them from an unsatisfying cycle of getting and spending. Forty-three percent agreed with the statement, "I feel that my life has been positively affected by the economic changes." That, as much as anything, gives reason to think the changes in behavior will persist even after the economy has recovered.

And it's noteworthy that such thinking isn't confined to people whose finances have been slammed by the recession. "What was interesting to my colleagues and me was that the survey showed people who weren't impacted -- i.e., hadn't experienced job loss, etc. -- were acting as if they were directly affected," says Robbie Blinkoff, principal anthropologist and co-founder of Context-Based Research Group, which brings the discipline of "consumer anthropologists" to the study of consumer behavior.

"Those who were involuntary thrown into dire situations changed quickly, but out of necessity," says Blinkoff. "I'd say 50 percent of the change with this group was voluntary, since the trigger that activated their change wasn't intentional, but the subsequent behavior modifications were by choice. For those who weren't directly impacted, the change is 100 percent voluntary. Once they accepted what was happening to friends and family members, they altered their lifestyle. The great recession prompted us to examine how we live our lives."

Buying and self-image
That element of self-awareness is reflected in one of the survey's findings. Seventy-six percent of the respondents agreed that they've "come to a deeper understanding of how my buying behavior shapes my self-image." And this "deeper understanding" has expressed itself partly in a lower level of expenditure, as 88 percent said they've "taken steps to spend less this year.

"It's not just a matter of spending less, though. The report also indicates people are thinking in a different way about the outlays they continue to make. In that regard, a landslide 93 percent agreed, "I have become more strategic in how I buy things, thinking more about how they fit into my life." Note the latter phrase there, about how purchases "fit into my life." This is plainly more than a matter of getting the most bang for one's buck in a time of straitened resources.

But do we tend to think everyone else was running around overspending in the bad old days -- encouraged by overeager lenders -- while we ourselves were behaving sensibly? Blinkoff thinks not. "The average person is taking part of the blame," he says. "Without a doubt there was a societal problem with the banks and mortgage companies, but people are taking personal responsibility. We're waking up and wondering why we need two refrigerators.

Not giving up 'treats'
That's not to say consumers feel they're now enduring Spartan lives of self-denial: 90 percent agreed that "Regardless of how I spend and save, I still look for ways to give myself and others small treats along the way." Says Blinkoff, "Cutting back didn't have to mean cutting out fun and not enjoying your life. Throughout our research we saw that people were finding ways to experience joy despite the recession. Now that the ice is breaking, we're seeing people shop a bit more, and we expect this trend to continue as the economy gains strength." It won't be a return to the heedless, credit-funded shopping of the pre-recession days, though. "Consumers will spend a little more and treat themselves, but with more thoughtful purchases -- attainable luxuries as opposed to extreme luxuries, those items grounded in peoples' values," he says.

In this environment, how will consumers react to advertising for things they know they don't need? "I don't think they'll readily be pulling out their wallets," Blinkoff remarks. "If consumers see a product they don't need, they aren't going to make the purchase. For advertisers, this means less differentiating on brand alone and focusing on product attributes. The Oxo line of kitchen gadgets seems to be a brand that resonates with the newly grounded consumer. Consumers are willing to purchase cooking tools that will help them with a hobby and ultimately help provide a shared experience of a meal with family and friends. That purchase has a purpose, a deeper meaning."

The emphasis on deriving satisfaction from time spent with family and friends (as opposed to time spent at the mall) is part of what the report refers to as an effort "to maintain a healthy balance between our consumer and non-consumer sense of selves." "Our research shows a significant percentage of respondents are committed to spending more time with friends and family," says Blinkoff. And, when asked specifically whether this might be an instance of people giving a pollster the socially acceptable response, he insists that's not what's going on here. "Our findings indicate that this is more than a knee-jerk reaction or the 'correct' answer," he says. "For example, Super Bowl XLIV was the most-watched television program of all time. In my opinion, that's proof people are getting together. It's less about a football game and more about time with friends and family."

From a 'me' to a 'we' economy
Of course, a pullback from conspicuous consumption doesn't mean an end to the age-old practice of "keeping up with the Joneses." Rather, the display of one's status has evolved in a way Blinkoff sees as durable. "We're seeing people utilize social currency and a relational economy," he says. "We are moving from a 'me' to a 'we' economy. It's not about transactions but rather what you can do for yourself and others."

As a tangible example, he points to Americans' response to the Haiti earthquake. "I think the overwhelming response to this tragedy connects to the fact people are trying to give more of themselves," he says. "Obviously we aren't going to stop buying stuff completely, but we're moving away from identifying ourselves with top-of-the-line automobiles and $3,000 handbags."

(Source: Adweek, 02/22/10)

Monday, February 15, 2010

Sponsorship Spending Expected to Bounce Back in 2010

(Excerpt from RST, 2/15/10)

SPONSORSHIP SPENDING STRUGGLES TO RECOVER

In 2010, things are looking up for sponsorships.

Sponsorship spending by North American companies is expected to grow 3.4% to $17.08 billion, according to the IEG Sponsorship Report.

But as the numbers came in from 2009, for the first time, these companies spent less on sponsorships with expenditures declining 0.6% to $16.51 billion, compared to $16.6 billion in 2008.

“Those unprecedented numbers reflect a marketplace that never recovered from the economy’s free fall towards the end of ’08,” William Chipps, IEG SR’s senior editor, said.

And for some companies that are inexperienced in using sponsorships and never really had a strategy behind it, see it as an expendable item and have cut those sponsorships,” he said.

In addition, two industries that play a large role in sponsorship spending—automotive and financial—have drastically cut spending in the wake of government bailouts and other financial problems.

“These industries have pulled back after haven taken major hits over last couple of years,” Chipps said. “And they have historically been two of the most active sponsorship categories.”

Sports, the largest sponsorship category, saw spending decline 1% from $11.4 billion in ’08 to $11.28 billion in ’09. Two of the other six major property sectors also suffered a drop in revenue: causes slipped a mere 0.3% from $1.52 billion to $1.51 billion, while arts spending fell 0.8% from $848 million to $820 million.

Other sectors managed gains. Spending on entertainment tours and attractions rose 0.8% from $1.63 billion to $1.64 billion; spending on festivals, fairs and annual events increased 0.4% from $753 million to $756 million; and spending on associations and membership organizations rose 2.9% from $482 million to $496 million.

Each of the six sectors continue to earn the same share of the sponsorship pie as they did in ’08, with sports taking 68% of the dollars, followed by entertainment tours and attractions at 10%.

Firms are also looking more closely at return on investment.

“Companies are increasingly asking themselves, ‘are we generating ROI or a return on objective?” Chipps said.

Outside North America, the outlook improves.

Global sponsorship expenditures reached $44 billion in ’09, a 2.1% increase from the $43.1 billion spent in ’08.

Minus activity by U.S. and Canadian companies, spending by the rest of the world hit $27.5 billion in ’09, a 3.8% rise over $26.5 billion in ’08.

For 2010, IEG SR projects 4.5% growth in worldwide sponsorship to $46 billion. The largest gains will come from Africa and South America, in part due to activity and interest surrounding South Africa’s hosting the 2010 FIFA World Cup and a developing sponsorship marketplace in countries such as Argentina and Brazil, the latter of which will host both the 2014 World Cup and 2016 Olympic Games.

Countries based in Central and South America will increase spending by 5.7% to $3.7 billion, while companies from all other countries, including those on the African continent, will grow their spends by the same 5.7% proportion to $2.1 billion.

European companies will boost spending 5% to $12.7 billion and those based in the Asia Pacific region will see a 4% rise to $10.4 billion, IEG said.

Source: Promo Magazine, 01/28/2010

Thursday, February 11, 2010

Marketing to Social Followers

(Excerpt from emarketer, January 22, 2010)

What Social Followers Want
Deals aren’t the only thing

Brand marketers want consumers to follow them to build buzz and engagement, but social media users often desire something in return. What they’ve come to expect is a good deal, but many consumers—including the most active users of social sites—are also interested in deeper engagement.

A December 2009 MarketingSherpa survey indicated that learning about specials and sales was the top motivation of those who friended or followed a brand online, supporting the results of earlier surveys. But looking for savings was followed closely by learning about new products, features or services.

Users described as “max connectors”—those with at least 500 social connections—were less interested than average in getting deals. Instead, they cared about new products and company culture, demonstrating the deeper engagement expected by social media power users.

An earlier study, by Razorfish, also found that exclusive deals and offers were the primary motivation of US Internet users following brands on Twitter.

Respondents who friended a brand on Facebook or MySpace responded similarly, though they were more likely to become a fan because they were a current customer (32.9%) than were users of Twitter.

Sharing interesting content that users care about, along with the deals and discounts they have come to expect, will both keep them engaged and spur them to pass along marketing messages.

Tuesday, February 2, 2010

Pandora Goes Local

Pandora Goes After Local Advertisers
By Douglas Quenqua, ClickZ, Feb 2, 2010

Personalized Internet music provider Pandora is looking to pull more business from local advertisers in 2010 with a new sales team aimed solely at small and mid-size businesses. The company is also partnering with AdReady, a do-it-yourself ad platform that helps smaller advertisers place display ads with publishers.

The move comes in response not to a deflated ad market, said Pandora's VP of performance ad sales Brian Mikalis, but to a swell of inquiries from local advertisers that were taxing Pandora's national sales staff.

"We've been getting a lot of request from small to mid-size businesses, and we had our premium direct sales teams fielding a lot of those calls," said Mikalis, who claimed Pandora had been doubling its business year over year. "We want our premium team focused on the largest Fortune 500 brands, but we didn't want to do nothing with those other requests."

Mikalis has been tasked with managing the new local sales staff, which will be stationed in Pandora's Oakland, CA, headquarters. Mikalis joined Pandora a year ago after leaving his post as director of business development at AdReady.

If MIkalis' comments are any indication, that new staff will be trying to sell Pandora to advertisers as less of a Web site than a radio station.

"One of the differentiators for Pandora from other traditional sites is every single one of our users registers and gives us their zip code, so we can do that local marketing down to the DMA level very easily," he said. "If you're advertising on local markets on radio, you can do the same thing on Pandora."

Pandora, which stems from the music genome project launched in 2000, now claims more than 45 million registered listeners and a database of over 700,000 songs. National advertisers include Nike, Microsoft, Honda and Procter & Gamble.