SUMMARY: Once on their way to extinction, coupons made a strong resurgence in 2009. While they offer consumers a chance to stretch their dollars further, they also offer real growth opportunities for retailers and manufacturers—if they know exactly who to target and how to leverage established and emerging coupon delivery vehicles.

Back to the Future
People of a certain age may nostalgically recall the sight of mom flipping through the Sunday newspaper to clip coupons from the numerous inserts stuffed in the paper. She may have even had a little envelope or “coupon caddy” organized by product category. This kind of memory tends to be among those of us who are baby boomers or Gen Xers—a quaint recollection from the previous century. Indeed, coupon redemption hit a peak in 1999: 4.6 billion, as reported by Inmar.

Since then, it’s been downhill for the humble coupon. During the three-year period ending 2008, annual manufacturer coupon redemptions leveled off at just 2.6 billion per year.

The “Great Recession” of 2009 changed all of that and marked a sort of renaissance for the coupon. Inmar reports that coupon redemptions grew by 27% as Americans searched for ways to cut household costs and get more for their money. NCH Marketing Services claimed 2009 coupon redemption levels “achieved the second highest year-over-year growth ever recorded.”

Paperless Progress
While newspaper inserts are still the primary method of coupon distribution (89%) and redemption (53%), Internet redemption growth has skyrocketed, rising 263% in 2009.

And while clipping continues to be a primary means of distribution, manufacturers and retailers launched new ways to get coupons into consumers’ hands such as printable coupons on the Internet, in-store kiosks and discounts linked to frequent shopper cards via smartphones and computers, negating the need for a paper coupon at all. In short, it is easier than ever to distribute and use coupons, and this convenience is also a key driver of redemption growth.

Inmar reports that the majority of coupons were redeemed at conventional grocery stores (65%), but all classes of trade—dollar stores, mass merchandisers, convenience stores, military commissaries and drug stores—posted double-digit redemption growth:

Redemption growth outside of traditional food channels is a reflection of a coupon movement that started with food, but quickly turned to non-food in the second half of 2009. Non-food coupon redemption growth escalated from a rate of 9% in the first quarter to 46% in second quarter and continued growing throughout the year—rising 45% in third quarter and 37% in fourth quarter. A total of 1.2 billion non-food coupons were redeemed in 2009, representing one-third all coupons.

80/20 Rule in Play
While the recession drove heavier coupon usage across low to heavy coupon users from 2008 into 2009, all but the heaviest coupon user group experienced negative total unit growth (with and without a coupon). All told, 83% of units purchased with manufacturer coupons in 2009 were done so by just 22% of households. Coupon enthusiasts—the heaviest users—accounted for 65% of manufacturer coupon unit purchases and 18% of all unit purchases in 2009. They drove a disproportionate amount of sales and sales growth—shopping more frequently, making 1.7 more trips than non-users and buying more (a rate 1.8 times greater annually). While some might think that “crazed coupon clippers” are only interested in a good deal, these findings suggests real benefits to manufacturers and retailers deploying coupons in their marketing mix.

More Money = More Coupons
With the value offered by coupons, one might think that the lowest income households would be among the heaviest users. In fact, more affluent households dominate coupon usage: 38% of “super heavy” users and 41% of “enthusiasts” come from households with incomes greater than $70,000. Households with income of $100,000 and up were the primary drivers of coupon growth in 2009. The enthusiast category also attracts a disporportionate number of households with incomes between $50,000 and $69,900.

Trends relating to newspaper readership provide some explanation for this imbalance.  According to Scarborough Research, better educated and higher income households buy and read the newspaper more than others and newspapers remain a key vehicle for delivering coupons. Additionally, promotions are generally targeted in areas with more affluent consumers. In essence, the better educated and more affluent consumers are much better at looking for deals as they recognize the value of money.

Beyond income levels, more than half (51%) of larger households (3+ members) are “enthusiasts”, while roughly one-third of non- and lighter coupon users are single person households. Younger female households use coupons more, while male-only households use them less. Older users (65+) are also important “heavier” and “super” coupon users.

All ethnic groups use coupons, but three-fourths of the average coupon “clipper” is white. Households residing in comfortable country and affluent suburban spreads are more likely to be heavier coupon users, while non-users are more apt to be those households living in rural areas and struggling urban core areas.

Manufacturers and retailers have real opportunities to reach different groups with coupons and promotions, particularly African-American and Hispanic households. While this may require adjustments to existing tactics, the potential pay-off—in terms of volume growth and winning new customer loyalty—can be significant.

Future Look
As the economy improves, will consumers continue to use coupons? With the economic recovery taking hold slowly and without significant employment growth, expect coupon use to continue. As long as Americans feel unsure about their personal finances or confident about their jobs, they are going to continue to look at ways to save and get the most for their money. In addition to expanding the appeal of coupons in general, manufacturers and retailers would do well to target enthusiasts: their shopping behaviors and demographics make them extremely appealing.  With advancements in coupon delivery vehicles that enable both better targeted coupon distribution and redemption, manufacturers and retailers will continue to have real opportunities to use coupons to drive sales for the next few years and beyond.

David Wiesenfeld, VP, Insights and Innovation, The Nielsen Company; Kristin Bush, Consumer & Market Knowledge Senior Manager, Procter & Gamble; and Ronjan Sikdar, Senior Research Analyst, The Nielsen Company

SUMMARY: The emerging practice of listening online allows marketers to observe naturally-occurring conversations between consumers about products, brands and companies. It’s no surprise that a technique anchored in actual conversations captures context and emotion better than traditional methods. What is surprising is that listening can be essential to finding the real story. In such cases, it may be more correct to think of traditional “asking” methods as a complement to listening. The bottom line: both are required to develop an accurate, robust understanding of the marketplace.

Earlier this year, one of the most successful, well-respected packaged goods brands did a remarkable thing. It listened to its consumers. Tropicana—North America’s largest juice brand—rolled out new packaging for its flagship Pure Premium orange juice line. By all accounts, Tropicana did its homework before implementing this change. Using tried and true research techniques, it asked many consumers a host of questions about the new package design. The answers were analyzed, the design revised. More testing likely followed, and at last, the new package found its way to store shelves.

Then something surprising happened. Tropicana’s switchboard lit up, and its in-box filled with complaints from some of its most loyal consumers. They did not like the new design and they were not shy about expressing the intensity of their dislike. Similar comments about the new package were being posted and circulated on the Internet by other Tropicana loyalists.

Armed with quantitative data supporting the new label, Tropicana might have attributed the outcry to a few diehard extremists - and weathered the storm. But instead, they did something extraordinary: They reversed course and reinstated the old label design. The rationale for this decision is noteworthy:

“What we didn’t get was the passion this very loyal small group of consumers have. That wasn’t something that came out in the research.”

Neal Campbell, President, Tropicana North America

This statement has powerful implications for market research. It suggests that Tropicana believes “passion” is an important dimension of consumer opinion; that established research methods did not detect how intensely some consumers felt about the new label; and that only by listening to the spontaneous comments of consumers did Tropicana detect this intensity.

Tropicana is not alone in believing how intensely consumers feel about their views can be just as important as knowing how many consumers hold those views. Nor are they alone when they tacitly suggest surveys and other commonly used research methods may not capture the emotions or depth required to truly understand consumers. A growing number of companies are learning more about their consumers by tuning in to unprompted consumer expression—a practice referred to as “listening.”

Back to the future
The basic notion of “listening” is not new. In fact, when the first professional market researchers sat in consumers’ living rooms and talked with them about their lives and their needs, they were engaging in “listening” as much as they were asking questions. These pioneers were literally the eyes and ears of their organizations. They brought consumers to life in ways that inspired a host of innovations—improving consumers’ lives and their companies’ fortunes in the process.

Market research evolved to become a valued source of information and decision support, even as the connection between researchers and consumers became more distant. In an ironic twist, the social media revolution and 21st century technology afford modern-day practitioners the opportunity to routinely engage in “old school” hands-on research—or at least a form of it—by listening to consumers online.

This emerging capability inspired some industry leaders to take a hard look at how market researchers typically engage consumers. They observed that marketers generally interact with consumers on their terms—

they ask the questions they want to ask, the way they want to ask them, when they want to ask them. This “intrusive” approach is out-of-step with the lives of increasingly time-starved consumers and is not conducive to developing a thorough, accurate understanding of their opinions and needs. They questioned if market research had become so removed from the consumers it sought to understand that it no longer served its fundamental purpose of representing their needs within marketing organizations.

These concerns were famously summed up last fall by Kim Dedeker, then VP of Consumer Market Knowledge at Procter & Gamble, in a simple, provocative statement:

“Without transforming our capabilities into approaches that are more in touch with the lifestyles of the consumers we seek to understand, the consumer research industry as we know it today will be on life support by 2012.”

The promise of listening
Mining online conversations for consumer insights is a seductive proposition. Every day, millions of consumers talk about all aspects of their lives online. This trove of naturally-occurring consumer expression offers the richness of qualitative research, the sample sizes of quantitative studies, and the opportunity to understand consumers on their terms—not ours. By tuning-in to relevant conversations, more can be learned about

consumer attitudes and needs than through traditional “asking” methods alone.

But what’s compelling about “listening” can also be concerning. Valid questions have been raised about listening:

• Do mining online conversations yield the same learning as traditional survey techniques?
• In what ways does the learning differ? Why?
• Can “listening” and traditional methods complement each other, and if so, how?

The Nielsen Company and Procter & Gamble collaborated on a project designed to address these questions by researching six frequently-occurring types of questions using both a traditional survey approach and a listening-based approach. The results from each approach were contrasted to induce a beginning framework for why results differ, and to develop initial guidelines for when and how to utilize the respective methods.

Unexpected findings
The results were surprising and important. While findings from “listening” and “asking” were largely consistent, they were not the same. The two main takeaways were:

1. In every case, “listening” enhanced the story in important ways. In some cases, listening was essential to finding the story;
2. Surveys are still required to determine “how many” consumers held a particular view.

Following are highlights from some of the cases investigated.

Snuggies™—six million purchases and one question: Why?
The Snuggies phenomenon is a great example of the value of listening. Basically, a blanket with sleeves, Snuggies became a fashion sensation, selling more than six million units, and generating online conversation levels equivalent to that of hit TV shows. It seems the critical question is: Why? Knowing why Snuggies became a runaway hit would help brand managers perpetuate Snuggies’ success and apply the winning formula to future new products.

To answer the question, the first area analyzed was the trend of online conversation about Snuggies. The availability of trend data is a useful aspect of online conversation (see chart below).  By overlaying key events with Snuggies’ electronic fossil record, it was apparent that Snuggies’ origins were in its ad campaign, but its evolution was shaped and accelerated by external forces, including YouTube ‘tribute’ videos that went viral, which in turn led to pick-up by mainstream media outlets, including the Today Show, CNN, and Time magazine.

We leveraged the initial scan of online conversation to develop survey attributes that used actual consumer language to describe aspects of the Snuggies product, commercial, and cultural appeal. The survey was then executed and the “listening” analysis was completed.

The results were fascinating, and clearly demonstrate the power of listening to generate marketplace insight. The survey tells the story of a functional product supported by memorable advertising that clearly communicated product benefits (see left side of chart below). That’s a true story. Trouble is, it’s not the main story.

After some digging, a New York Times article was uncovered with the following quote from Scott Boilen, CEO of AllStar Marketing, the maker of Snuggies: “We were definitely in on the joke. Do we expect a family to wear these to a football game? No.” This reference to one of the iconic images of the Snuggies ad indicates a deliberate attempt to go ‘over the top’ to break through. Like the survey, listening detects evidence of a functional product backed by effective advertising (see right side of chart above). But the main story garnered from listening is different.

Listening portrays Snuggies as a product that transcended its functional value to become something of a pop culture icon. Even consumer comments centered on the utility of the product or elements of the commercial often contained tongue-in-cheek remarks. The “pop culture” story simply did not come through in the survey—either in attribute ratings or open-ended responses.

The acid test of good research is how well it guides actions that improve marketplace performance. If the Snuggies brand team used the survey learning and nothing else, they probably would have been invested more behind the commercial. It was noticed and it communicated Snuggie’s functional benefits. If the brand team broke with typical industry practices and conducted a listening analysis instead of a survey, they would have taken a different path. Sure, the commercial campaign would have rightly continued, but more events like the pub crawls, celebrity sightings, and video parodies would have also been encouraged to reinforce the magic mix of quirky, cool, and functional—the secret to Snuggies’ success.

Getting to the bottom of cloth diaper usage
Cloth diapers are a small component of the $7 billion U.S. diaper market. Recent reports point to renewed interest in cloth diapering, so Nielsen and P&G wanted to understand more about why some parents choose cloth-diapering. In this case, learning from surveys and listening complemented each other to produce an accurate, comprehensive understanding of the benefits of cloth-diapering.

The survey told a simple, clear story. Cloth diaper consumers want an environmentally-friendly product that is also cost-effective, in that order. The cloth-diaper listening exercise added important depth to the survey findings. Listening research connected cloth-diapering to underlying parenting beliefs, by highlighting the tendency for “natural parenting” practices like home-birthing, home-schooling, and the use of organic foods to occur disproportionately in cloth-diaper conversation. By placing cloth-diapering in context, “listening” offered a more complete and powerful view of this practice.

On the other hand, the listening exercise could not confidently determine how many consumers chose cloth-diapering for environmental reasons versus cost reasons via “listening” alone. In this case, “asking” and “listening” were each essential to telling the full story behind cloth diapering.

Saving face
Like the cloth diaper example, another case in which asking and listening worked together to tell the story is with Gillette Fusion—the first five-blade razor that promised Gillette’s closest shave ever. Brisk Year One sales confirmed Fusion a winner. So it was a mystery when sales of Fusion refill cartridges started to soften in Year Two.

Survey research determined that consumers had come to believe that other razors were just as good as Fusion and that Fusion was too expensive. In other words, Fusion was a parity product with a premium price. Bad news.

Listening indicated the situation was not quite so simple—or so dire. In conversations comparing Fusion to competitors, most consumers credited Fusion with providing a slightly better shave, just not enough to justify the price difference. Fusion was a superior product, but it was priced too high. Better news.

The survey clearly identified performance and pricing as the two areas that required attention. However, it did not articulate the connection between performance and pricing, nor did it fully dimensionalize either issue.

Nielsen’s parallel studies revealed other instances in which surveys did not surface important connections and nuances. It seems that surveys necessarily deconstruct experiences like watching a commercial or using a product into discrete, measurable bits. Listening, on the other hand, preserves linkages between ideas and captures important subtleties to tell a holistic, textured story. In the case of Fusion, that was critical. Fusion did not need a major overhaul—it needed to remind consumers that it provides a superior shave and it needed to align its pricing with that level of superiority.

The whole story
While surveys and other forms of “asking” research remain essential to understanding questions related to magnitude—questions such as “how many” and “how often.”  However, our parallel studies clearly show that listening is essential to telling the whole story.  Our work further demonstrates that sometimes listening is essential to telling the right story. Listening is spontaneous and open. It captures passion and intensity—dimensions that may be as important as “size,” but are often

overlooked. Listening is holistic and contextual. It can articulate the linkages between different ideas, identify lifestyle connection points and capture important nuances in consumer beliefs.

Adding listening to the mix is like going from an X-ray to a CAT scan. The CAT scan provides a richer, more complete view than the X-ray. And sometimes it reveals something important that could not be detected by the X-ray alone.

Getting started
Adopting new methods and protocols can be daunting on many levels. There are, however, a number of easy, effective ways to gain experience with listening, and to begin reaping the benefits.  Here are five of our favorites:

• Organize a “Listening Lunch” for your brand team. Reserve a conference room with Internet access, order some pizza, and take your team on a virtual “consumer safari”. What are consumers saying about your brand, your advertising, or the latest market trend right now? This is an exercise that is sure to inform, inspire, and instill a connection between the day-to-day decisions of the team and the lives of consumers. Nielsen can help you plan and conduct these sessions.
• Use listening to ask better questions. Prior to executing your next survey or focus group, log onto a social media site, such as Facebook or Twitter, and do a search on your brand or category. What are the hot issues? What is the language consumers use to describe their needs or product features? This is an easy way to inform “asking” content and language, and the benefits can be significant.
• Use listening to provide better answers. The next time you need to clarify or expand on survey results, use a search engine to identify leading blogs or user groups related to your brand, category or target consumer. More often than not, you will identify some relevant posts and threads that may help dimensionalize your survey results.
• Request a summary of recent customer relations activity. A frequently overlooked high-value listening post embedded in many companies is the customer relations organization. Reviewing recent call transcripts and consumer e-mails on your brand can prompt new insights and generate new ideas.  Better yet, sit down and have a conversation with some of these folks. Nobody engages more frequently and more directly with your brand’s consumers than they do. They are worth getting to know.
• Conduct a listening audit to establish a baseline. What are consumers saying about your brand? Where are they saying it? How has this changed over time? How does your brand compare to competitors in terms of the volume and content of conversation? Such audits are surprisingly affordable, and are best conducted with a vendor that has expertise in this domain, such as Nielsen Online-BuzzMetrics.

Tropicana and Tropicana Pure Premium are registered trademarks of Tropicana Products, Inc.  Snuggie is a trademark of ASM.  Gillette and Fusion are registered trademarks of The Gillette Company. BuzzMetrics is a registered trademark of BuzzMetrics, Inc. ]]> http://blog.nielsen.com/nielsenwire/featured-insights/listen-up-online-yields-new-research-pathway/feed/ 0 http://blog.nielsen.com/nielsenwire/consumer/role-reversal-mr-mom-goes-shopping/ http://blog.nielsen.com/nielsenwire/consumer/role-reversal-mr-mom-goes-shopping/#comments Wed, 08 Jul 2009 20:07:10 +0000 admin http://blog.nielsen.com/nielsenwire/?p=15381

Peter Leimbach, V.P., Multimedia Sales Research, ESPN

SUMMARY: Over the past 20 years, the American household has changed and traditional roles have shifted with men now taking on a greater percentage of the household shopping than in the past. Today, almost one-third of men are now the principal shoppers in the home. With more men in the aisles, marketers need to better understand how they impact brand sales and how to reach this growing segment of principal shoppers.

The past two decades has seen a role reversal of sorts taking place: the traditional roles of men and women are being redefined to better reflect today’s social norms. Today’s American households are looking less like Donna Reed—the paradigm for the ideal 1950’s family—and more like Mr. Mom.

Shifting norms
Since 1985 there has been a dramatic shift in the composition of male principal shoppers in the U.S. Several factors are contributing to this trend. First, the traditional family unit has multiple variations today. From two working parents to single parent homes, a younger generation is being exposed to new norms. Second, Americans are waiting longer to get married. According to the U.S. Census Bureau, in 2008, the median age at first marriage was 27.4 for men and 25.6 for women vs. 25.9 for men and 23.6 for women in 1988. Lastly, Americans are living longer and as Baby Boomers retire, the men of that generation are shopping more than their fathers or grandfathers ever did.

Today, almost one-third of men are now the principal shoppers in the household. With more men in store aisles, marketers need to better understand how to reach this growing segment of shoppers.

Increasing presence
Business Week reported in a September 2006 article, “Secrets of The Male Shoppers”, that “men buy, women shop: the sexes have different priorities when walking down the aisles”. This is an important distinction for marketers to consider when targeting male shoppers.

Nielsen data shows that while females dominate shopping trips in all channels except convenience/gas stores, their share of trips has declined in all outlets from 2004 to 2008/2009. On the other hand, men’s share of retail shopping trips has done just the opposite—increased in all outlets. The channels with the greatest relative importance to men include convenience/gas outlets, warehouse clubs and grocery stores.

And while females out spend male shoppers per trip across all retail channels, the average basket size spend differential is not as large as might be expected. The fact that women conduct more “planned” shopping trips than men is one explanation for the higher dollar amount..

Overall, men are substantially increasing their average dollar basket size across all channels—especially in grocery where they have increased spending by 56% over a five year span. Additionally, while their share of spending is growing across all retail outlets, women’s share of spending has declined. In the grocery channel, men’s share of dollars increased from 30% to 38%—a 27% increase versus women’s decline of 11%.

Not just beer and brawn
A shopping report commissioned by ESPN to evaluate Nielsen sales data based on the presence of the male head of house as the primary or secondary shopper on a trip revealed some unexpected findings.

From 2006 to 2008, there has been an upward trend in both the amount of dollars spent by men and their shopping frequency. The occasions when males were the primary or primary/secondary shopper have increased by 4% and 3% during this two-year time period and the total dollars spent has increased by 8% and 7% respectively.

And while a high percentage of dollars spent by men are in fairly predictable categories such as grooming care products and alcoholic beverages: men’s hair coloring (86%); men’s depilatories (84%); gin (83%); scotch (81%); and pre-shave cosmetics (80%), a peek inside their shopping basket reveals they are likely shopping for the family too.

More than half of the principal male’s shopping basket consists of items that indicate they are not just shopping for themselves.  Examples include:

• Men’s External Breathing Aids (61%)
• Canned Seafood (61%)
• Refrigerated Juices, Drinks (61%)
• Prepared Food-Ready-to Serve Stew (59%)
• Herbal Package Tea (57%)
• Prepared Food-Ready-to Serve Lasagna (55%)
• Health Bars & Sticks (54%)
• Non-Sliced Refrigerated Lunch Meat (53%)
• Refrigerated Yogurt and Shakes (52%)
• Dishwasher Rinsing Aids (52%)

Impact on media strategy

Advertisers need to evaluate the importance of men’s purchase volume for their brand and competitive brands and determine whether the current media mix appropriately reaches men purchasers. Traditional media tends to fall into 3 categories:

1. Programming that skew primarily female (network soap operas and female-targeted cable networks like Lifetime and Oxygen)
2. Programming with evenly skews male/female (network prime time, broad-based cable networks like USA Network)
3. Programming that skews male (primarily sports networks)

Nielsen conducted an analysis to determine how well a given media schedule was delivering both male and female brand users for a leading brand in the cold remedy category. The findings revealed that men accounted for 48% of brand users and 48% of brand sales came from shopping trips where the male head of house was the primary/secondary shopper.

And while the advertiser’s schedule included a wide mix of broadcast and cable networks, it focused primarily on targeting women and adults. Sports networks accounted for only 2% of the schedule’s GRPs. This mix resulted in a schedule where only 38% of the brand target impressions fell against men—far less than their share of brand spend.

Continued quest
The male as a principal shopper is not an emerging trend, as marketers have been struggling to understand this segment for over 20 years. But as marketers learn more about where and what this consumer segment buys, they are better able to guide brand positioning and media targeting to capitalize on this target when they are in the aisles.

David Kaplan, SVP Research and Product Development, Nielsen IAG

SUMMARY: Spanish-language ad spending is on the rise—posting gains in just about every major product category in 2008. What is the best strategy to reach an audience whose language proficiencies and preferences range from Spanish-only through various degrees of bilingual skills to English-only? Language holds the key to success as a strong emotional link is forged with the Hispanic consumer when ads are rendered in their native language.

Even as the U.S. gears up for a formal census expected to validate the size and scope of its Hispanic population, advertisers are way ahead of the learning curve. While 2008 national TV advertising grew at a slower rate than prior years, the Spanish-language sector increased by 3%, posting gains across every major product category with the exception of automotive offerings.

Together, advertiser spending within the Top 10 Spanish-language product categories expanded by 8% over prior year results, reaching $2.9 billion in 2008. Leading the way on a dollar basis were pharmaceuticals at $663 million, followed by automotive (factory and dealer associations) at $530 million, wireless telephone services at $315 million, department stores at $307 million and quick service restaurants at $300 million.

The fastest growing segment reflects the rising digitization of the Hispanic population: satellite communication services increased their spend on Spanish-language TV stations by 124%, dwarfing the gains by runners-up auto insurance at 39% and pharmaceuticals at 32%.

And this dollar shift accompanies a rise in audience sizes for the Spanish-language networks in the 2008/09 television season. The two major Hispanic networks, Univision and Telemundo, garnered 11% more viewers overall last season, and reported a 6% increase in the coveted adult 18-49 primetime audience demographic (based on Live+7).

But audience size is only part of the story. As an advertiser trying to reach the burgeoning Latino market, it’s also critical to target Hispanics with a high-quality ad in an environment where they are most engaged and receptive to the commercial message. And to do that successfully, from both a media and creative perspective, all signs point to language.

Bilingual preferences
Nielsen IAG measures the impact of advertising among Hispanics of all acculturation segments across English- and Spanish-speaking primetime television every day. Much recent attention has been placed on the emerging segment of bilingual Hispanics, who can seamlessly switch from English to Spanish and surf from Criminal Minds on CBS to Cuidado con el Angel on Univision without losing much in translation. But as an advertiser, where can you more effectively communicate with this consumer?

Reach and cost considerations aside, research shows that viewer response is significantly stronger in general on the Spanish-language networks. Bilingual consumers report 30% higher recall rates for advertising creative executions and the advertised brand when commercials are seen on Spanish-language programming (on Univision and Telemundo) rather than English-language broadcast networks.

Language advantage
Part of the advertising performance advantage can likely be attributed to the unique characteristics of the Spanish-language networks that offer reduced ad clutter and increased ad exposure frequency, as well as Hispanic media consumption factors like lower DVR penetration.

But that doesn’t account for one of the most powerful points of difference: likeability, a key ad effectiveness measure. Ads on Spanish-language TV rated 62% on the likeability scale on average versus just 41% for spots featuring the same brand on English-language TV among bilingual consumers.

On the recall measure, Spanish-language TV ads achieved a 35% brand recall score versus 27% for English-language ads. In many cases, these substantial gaps were seen even for “translated” spots, where the ad executions mirrored the version airing on general market TV, suggesting that the difference lies in something other than the creative treatment or content.

Emotional connection
The performance differential points to a strong emotional link forged between the consumer and their native language. Spanish-language networks uniquely provide a “language outlet” for bicultural Hispanics—many of whom may be speaking English in their daily professional lives, but prefer Spanish in their private or family lives. The television viewing experience, when delivered in Spanish, allows viewers to connect with their culture, history and identity in a way that may not be readily available elsewhere. The translation for marketers: it appears that the bilingual consumer’s appreciation for in-language experiences results in a more favorable impression of those commercials which deliver them.

And the power of language becomes even more evident when evaluating creative-level differences. Ads created specifically for the Hispanic market on average outperform those that are merely lifted or translated from general market TV spots, earning 16% higher brand recall results and 22% better message recall. The factors behind improved performance appear to be culturally relevant cues embedded in the advertising such as Hispanic characters, music and themes.

Character counts
But more than any other element, the inclusion of a Spanish-speaking character(s) in the ad appears to be the driving critical success factor. Consistently, these types of ads resonate more with viewers, receiving higher brand recall and message communication scores than those without such characters. The finding holds for both Hispanic original spots (+29% higher brand recall) and translation spots (+37% higher brand recall), underscoring the benefit of incorporating more relatable talent who speaks the language in the ad.

Creating a specific spot from scratch for the Hispanic market, which incorporates culturally relevant themes and Spanish-speaking characters, generally results in stronger impact, but may not always be practical given production costs and timing considerations. As an alternative, utilizing bilingual actors in ads that are merely “re-purposed” from the general market appear to have some benefit. In this scenario, the creative content and narrative plays out identically to the English-language version (with cultural adaptations where necessary), but the script is verbalized in Spanish. In other words, in the absence of any other cultural cues, an ad where the characters are at least speaking in one’s native language is more likely to grab the viewer’s attention and drive brand impact—regardless of whether it was designed exclusively for the Hispanic market.

Screen scene
Hispanic consumers have become a force to be reckoned with across screens large and small, fixed and mobile. According to Nielsen May 2009 universe estimates, 82% of Hispanics have cable plus (expanded cable package that does not require a cable box)—a usage level which has risen by 12 percentage points from just four years ago and significantly narrowed the gap with non-Hispanics (89%). One-third of Hispanics have wired digital cable, another 33% have direct broadcast satellite subscriptions, 21% are DVR owners and 88% have DVD players.

Two-thirds of Hispanic households have personal computers, with six in ten also signed up for Internet access at home. Nearly seven in ten of those Hispanic Internet households have high speed broadband access—almost identical to the general population percentage. While all Internet users average 28.5 minutes online per day, Hispanic households log slightly less time at 21 online minutes per day.

Nielsen reports that Latinos who are online are more likely to download music than the general Internet population—32% of Hispanics download music online versus 24% of all Internet users. The same pattern holds true for video downloads, with 17% of online Hispanic households pulling video off the web, versus 14% of all Internet users; 9% of online Hispanics downloading movies versus 6% of the general Internet population; and 8% of Hispanics accessing TV shows online versus 7% of all Internet users.

Wired Hispanics trail the general Internet population when it comes to online shopping. While 70% of Internet users shop online, spending approximately $861 per year, just 62% of Hispanics purchase products on the web and spend $762 annually.

Dialing in
Mobile phones have made tremendous inroads in the Hispanic community, which trails only the African-American segment in number of minutes per month (783 minutes versus 811 minutes respectively). Although Latinos don’t spend as much time on the phone, they receive or make more phone calls per day (14) than any other ethnic group, and have the phone bills to prove it—$94 per month compared to African Americans $89, Asians $82 and Whites $80. Roughly two-thirds of Hispanics used text messaging services in the last 30 days, about one-fourth utilized mobile Internet, and the same percentage sent an email in the past month.

What’s clear is that Hispanics represent a viable and growing segment in the electronic marketplace. Their increasing “three screen” media consumption as well as their favorable predisposition to advertising make them an audience that can be harnessed on new platforms to boost brand impact.

Mike Fridholm, V.P., Client Consulting, The Nielsen Company

SUMMARY: Based on an examination of over 100 client engagements related to cost innovation conducted over the past five years, Nielsen illuminates the right way to navigate this challenge and highlights important principles to adhere to in embracing the risks and rewards of downsizing, upsizing, changing the package material, and making product reformulations.

Manufacturers are feeling the pinch in demand in many categories as a result of consumers’ tightening wallets. As many also face increasing costs in areas such as health care, energy, and materials, some must consider cutting costs in an effort to maintain sales and profitability. These changes include increasing price, revising package size or materials, and changing the product formulation.

If there’s one overarching message for manufacturers, it’s this: Now is not the time to pull back on innovation or marketing support. Indeed, Nielsen research reveals that brands that continued to invest in innovation and provide marketing support during past economic downturns have performed significantly better after the economy recovers than their peers. As manufacturers pursue innovations that involve cost savings, careful attention to consumer reaction is critical for success.

Consumers are extremely savvy—they notice changes to products they care about and are increasingly vocal, particularly on social networks, blogs, and on-line discussion boards. All the attention given these days to the media “groundswell”—and the high-profile nature of products getting lauded or attacked on YouTube, Twitter or other consumer-generated media—ups the ante for manufacturers to link changes to packaging or product to more substantial benefits as they pursue this strategy.

Guiding principles

Based on Nielsen’s examination of over 100 client engagements related to cost innovation conducted over the past five years, four important principles illuminate the way to help manufacturers make wise cost-reduction decisions that will drive successful consumer acceptance in the marketplace.

• Downsizing the Package Size: a somewhat risky change, especially evident to a brand’s heavy users, which can best be mitigated if additional auxiliary benefits are conveyed with the change.
• Upsizing the Package Size: a preferable consumer option, which still has pitfalls if pricing crosses a consumer threshold, or if the consumer has a difficult time perceiving the relevance of the larger package beyond solely “more for the money.”
• Changing the Packaging Materials: a margin-enhancing move that may also be leveraged for positive consumer good-will; yet must not erode functionality, structural integrity, or brand equity.
• Changing the Ingredient Formulation: a high-risk move that must not compromise the consumer experience, perceived quality, or product efficacy.

Downsizing the package size

Based on 40 Nielsen BASES studies of cost savings innovation and 59 packaging studies, Nielsen found that downsizing and downcounting (i.e., moving from a 6-pack to 4-pack) alone can be a risky strategy. Over time, that data shows that even when manufacturers consider adding a smaller size to an existing product line, the resulting increase in purchase frequency of the new smaller size is not enough to offset the negative transaction size impact to the business.

A few exceptions to this trend include when the smaller package added: a) unique, incremental channel distribution, b) new consumers to the franchise, or c) a unique usage occasion that was independent of the prior large package.

The most important success factor to downsizing is to combine it with innovations that yield additional positive consumer benefits or experience with the product. What’s more, these benefits do not necessarily add cost. Examples of successful strategies include adding a resealable benefit to the smaller pack along with new graphics and a different package shape, moving from glass to plastic containers, or combining “new news” with a sleek new convenient and easy-to-transport package. Presumably, these changes add perceived value to the product experience, offsetting a straight package downsizing which likely could have been viewed as negative on its own.

Additionally, Nielsen analyses have shown that downsizing was received better than price increases. Successful downsizing with constant pricing typically works best under the following conditions:

• The manufacturer is a significant market share leader within the category.
• The downsizing includes a large number of SKUs within the category so as not to penalize a small subset of the competitive frame of reference.
• The percentage package size reduction is less than 12%.
• The categories have highly expandable consumption.

Upsizing the package size

Clearly, consumers like large economy packs. And for manufacturers, their appeal lies in economies of scale and more efficient use of plant capacity. Not to mention that consumers buying large quantities can stay out of the competitive shopping cycle for a longer period of time. Economy or bonus packs can be extremely well received, particularly when they add benefits beyond a better price per unit.

There are a few key stumbling blocks to a successful upsizing, including pricing an item too high or offering packaging that is too large to be convenient. In one case, doubling the size of a kitchen/bathroom surface cleaner produced better value perceptions, but no increase in purchase interest. One issue was the dilemma of home storage; the other, a concern that consumers didn’t need so much product. Other examples showed that while a product may have perceived functional advantages, concerns around the absolute price could exceed a cost threshold. Upfront consumer communication can make or break an up/downsizing effort. Manufacturers should consider including quick, simple communication, possibly at the point-of-purchase to reassure consumers of product benefits.

Another consideration is retail shelving. How will the package fit on retail category shelves, and will it be easy to achieve at least a full case pack out on the shelves? Additionally, choosing the right retail channel for distribution is an important factor as warehouse club shoppers, for example, may react less favorably to upsizing ideas since the packaging isn’t much different than the big boxes they already buy. Despite somewhat positive consumer reactions to the broad idea of upsizing, it is not always an easy decision to simply say “go”. Consulting retailers regarding these initiatives in advance may be especially helpful.

Changing the packaging

Innovative packaging changes have the potential to not only create cost savings to the manufacturing process, but also generate positive good-will media buzz. Such innovations can include moving to a less expensive package closure or seal, reducing the amount of package material, or omitting a current element of the packaging. These innovations tend to be novel; so while such initiatives may present less risk to the portfolio, they are also harder to identify.

Similar to shifting away from a more expensive ingredient to a less expensive one, moving to less expensive packaging material will produce a direct increase to margin. However, packaging changes must not diminish brand equity perceptions or the product experience. Some beverage testing has shown that a simple move from glass to plastic, while well-received by consumers, may have a long-term impact to equity. In some cases, the change can accompany a new benefit—but unlike most other cost-savings methods, a package change does not necessarily need to be coupled with “new news” to be successful.

Another avenue of package innovation is reducing the quantity of a particular material in the packaging. For example, Pepsi’s Aquafina brand received considerable favorable press regarding their removal of 20% of the plastic weight from their half-liter bottles. Not only did the consumer-centric focus not impair functionality, but this cost-savings initiative was viewed positively as a clear environmental benefit.

Changing the formulation

With rising costs of goods and pressure to keep prices low, there may be a temptation to cut corners on product quality by decreasing the costs of production. However, when Nielsen asked consumers specifically about what they want manufacturers to do in a struggling economy “produce slightly lower quality products, but keep the price the same” was the absolute last thing they wanted to see happen.

Strong product performance is critical to long-term survival in the marketplace. By changing the product formulation, manufacturers risk impacting consumers’ experience with the product and ultimately their acceptance of it as well. And, while a strong product can yield consumer loyalty and much greater sales over the long-term, making formulation changes as a direct reaction to the economic climate may alienate consumers now, with little chance to win them back in the future without increased investment. As such, this strategy has one of the highest risk profiles of the various cost-saving strategies explored.

This does not mean that product formulation changes should be completely rejected as a potential cost saving strategy. There are manufacturers who have been successful, and there are a number of considerations which can help determine if a given situation merits consideration of a formulation change, such as:

• Will the change meaningfully affect the current consumer experience?
• Does the product have a simple or complex flavor profile?
• Can the product be moved to a higher concentrated formula?
• Can the formula change be framed in a positive way?

First and foremost, know your product. Specifically, know whether consumers find your product taste profile to be simple or complex. Chocolate provides a good example of a simple taste profile, where there is one primary flavor and modifying the formulation would likely change that flavor. A more complex product example is frozen pizza, where lots of flavors work together and changing one element might not have as great an impact on the end consumer experience.

Another reformulation consideration is to move to a higher concentrated formula. Increasing the concentration may allow for less packaging or fewer ingredients, which can lead to cost savings in production and positive consumer efficacy perceptions. The laundry care category has embraced this trend successfully, where the bottles are easier to handle/store, and the detergents provide the same cleaning power as their former counterparts. This strategy is not limited to laundry care. Other household care categories like cleaners and dish soaps, personal care categories like body wash, or even food and beverage categories like powdered drink mixes and sauces are all potential candidates.

Consumers seek value

In the end, it is all about the consumer seeking more value for their currently limited dollar. And value is more than price. It begins with a product satisfying a need and takes into account the alternatives available to satisfy that need. This requires work on the part of the manufacturer to ensure that the product continues to deliver and the brand remains relevant in a changing environment.

Cost-saving product innovations, when done in isolation, tend to lead to declines in perceived value and consumer appeal. Manufacturers need to know their consumers and ensure that cost-saving changes are still providing additional positive auxiliary benefits. In doing so, potential declines in perceived value or appeal will be mitigated, and opportunities for sustained sales or growth will be increased.

Contributing writers to this article include: Mark Leiter, Emma Kronick, Matt Cahill and Jeff Day.

Joe Palermo, V.P. Global Services Product Leadership, The Nielsen Company

SUMMARY: Think it’s impossible to truly harmonize data from multiple countries, given the variations in barcodes, brand names, packages, products and sizes involved? While meeting the challenges of global data differences is daunting, it can be accomplished with a unique combination of local data access, global understanding and a design and implementation plan that delivers action-oriented applications.

Major fast-moving consumer goods manufacturers and retailers are making decisions about their businesses on a global scale, but the data they use to make their decisions is hardly global in nature. In fact, consumer-packaged goods data is often derived from multiple sources of information across as many as 100 countries in local languages with disparate product and category descriptions and even secondary desk-top research data included.

Distilling the differences

So what options exist for a global manufacturer or retailer when faced with the reality that data doesn’t match across countries, divisions, or formats? Technology and applications are components of harmonization, but not the drivers. In light of the fact that global product catalogues are rare, coding within company divisions and across countries varies, and product ownership, manufacturer names and even product uses are not universal, data harmonization is a process that requires experts with local access and global experience to follow seven key steps.

Step One: Establish a detailed set of rules

A major obstacle to global data harmonization is the confusion created by multiple product codes, descriptions, manufacturer names and categorizations. With 85% of the EAN (European Article Number) or UPC (Universal Product Code) codes in local databases unique to their country of origin, it can be next to impossible to report on a product’s sales from market-to-market.

Some brands have different owners in different countries, and manufacturer names can differ across borders. Manufacturers may use terms such as “multi-use” to mean 1- or 2-liter bottles in one market, but 750mL in another, based on the necessities of manufacturing.

Product usage also varies by market, and some markets describe a product as it physically appears—not how it is used. Chocolate sprinkles, for example, are used as a topping for cakes or ice cream in the United States and Belgium, but as a sandwich spread in the Netherlands. Likewise, compote is a dessert in southern European countries and a meal accompaniment in northern Europe. Local coders may miss these distinctions since they do not realize that a product is used differently elsewhere.

The key to overcoming these challenges is establishing a clear set of rules for input coding in order to collect quality information. These rules must be generic and based on what the product actually is allowing for de-culturalization, but also must provide sufficient information to allow flexibility.

Step Two: Avoid ambiguity

The coding structure must be supported with detailed descriptions and definitions—particularly for multi-country coding—in order to eliminate the ambiguity that results from different interpretations. In addition, the coding structure must be in the local language with careful translations that use terminology understood within the local business community. For example, there are three words that could mean “ambient” in Germany: Raumtemperatur, Umgebungstemperatur or Konservierung bei Raum, but the local Nielsen business uses Kamertemperatuur as the best term for what would be identified as ”shelf stable” in the United States.

Step Three: Implement a system

Once the detailed definitions are in place, it’s important to mandate only one way of coding any given item. This enforces the disciplined use of values assigned to product characteristics and ensures the same values are used consistently for the same product characteristics across countries.

Step Four:  Build in quality checking

The coding system must include additional data for enrichment purposes from a variety of sources to address data gaps. Multiple approaches can be used, such as allowing copy facilities from similar products, or enriching centrally by facilitating coding of information which has not been supplied.

Step Five:  Establish a unique product identification

Integral to the success of the global data harmonization system is the ability to distinguish each product using a set of characteristics and a unique numeric number. Barcodes and GTIN (Global Trade Identification Number) numbers have traditionally served this purpose, but for a number of reasons they’re not entirely reliable. Often, the same product is marked with different codes, or is coded the same as a product in an entirely different category. And in some cases, promotional packs are given the same barcode as a regularly-packaged product. For example, the Coca-Cola 330mL regular can has 30 different codes across Belgium, the United Kingdom and France. To truly harmonize data from multiple sources and locations, a unique identification number must be created and adopted.

Step Six: Create a global governance organization

Effective data harmonization requires a separate, central decision team, with a direct link to local teams with experience, product knowledge and cultural understanding. That central governance team should be independent and consistent in order to manage the changes that result from product or category evolution.

When new and unique products enter the market, the governance board determines where they belong. For example, are under-arm absorbency pads deodorants or clothing protectors? What’s the best way to manage products and categories that are unique to one market, such as squash and cordials in the United Kingdom or Cuberdons in Belgium? How should unique packages be handled, such as mayonnaise in plastic bags, offered in Denmark, or pickled eggs in a jar, from the United Kingdom?

Step Seven: Keep it simple and provide centralized support

As databases can quickly fall out of sync without proper maintenance and updates, the data harmonization team must consistently assign global codes for new items in the market and a project manager to perform multiple ongoing tasks, including: ensuring that codes are properly applied and are consistent across countries; supplying new codes when necessary; resolving internal and external issues; clarifying borderlines, communicating results and assessing whether local country changes have impacted the data synchronization as a whole.

Think local, act global

Harmonization is an ongoing process that requires strict governance and constant monitoring. But when the process is in place and is drawing from both local knowledge and global expertise, it provides high-quality information and a solid foundation for an integrated information system.

With extensive, worldwide experience, Nielsen’s global project teams are well versed in the harmonization process and are uniquely qualified to discern the global needs of both manufacturers and retailers, providing consistent views that support individualized client needs. “One size fits all” strategies just don’t work globally. Global harmonization provides the clarity needed to move beyond data differences toward integrated information that drives better decisions on a global scale.

Doug Anderson, SVP, Research & Development, The Nielsen Company

SUMMARY: While the World is struggling with the economic hard times of late, the future poses a new set of challenges that do not stem from arcane financial investments, but from simple demographics. An aging population, a declining birth rate, and growing ethnic diversity will change the face and the spending behavior of consumers in the U.S. Gaining share among population groups that most marketers do not reach today—older and ethnic consumers—will require shifts in focus, tactics, and products.

The recession of 2007–2009 has placed a great deal of strain on marketers and retailers of consumer products. Price and value have become more and more important, challenging marketers to rethink product and distribution. Everyone just wants things to get back to normal, but will they? While discretionary spending will return to moderate levels as markets rebound, the economy of the United States—as well as the rest of the more developed World—is well on the road to longer-term difficult times. The economic hard times to come do not stem from the misuse of arcane investment instruments that can take a degree in calculus to understand, but rather from simple demographics. The emerging marketplace will be very different than today, and filled with wide-ranging challenges.

Tectonic demographic shifts

Since the early 1970s, birth rates in the United States have been at least 40% lower than at the heights of the Baby Boom. When a falling birth rate is combined with a very large generation like the Baby Boom, the effect is a gradual aging of the population. The median age of the population increases as the large group grows older because there aren’t enough babies being added to balance them out. For much of the large group’s life cycle, they are typically a boon to the economy—especially when they reach their prime economic productivity years (usually from the early 40s into the middle 50s). However, as this large group continues to age, they stop being an economic asset and begin to become a burden—as the Baby Boom generation will become over the next several decades.

Aging populations place stress on an economy in two ways. First, if the generation is sufficiently large, retirement can lower the size of the labor force—particularly its most skilled and most experienced component—lowering overall economic productivity. Starting in the next two years until 2030, the number of persons who reach the retirement age of 66 will increase by over 100,000 each year throughout the Baby Boom retirement years. For many of the early years in that period, the number of persons who reach the age of 19 and enter the labor force will actually decline by more than 40,000 per year for the next decade.

The second impact of an aging population is perhaps larger—the costs incurred by society to care for a large number of retirees. Social Security will begin to run at a deficit in about eight years and will deplete its trust fund by 2041 unless changes are made now. At that point, money coming into the program would only cover about 70% of the money paid out each year. Medicare and Medicaid will deplete their trust funds in only about ten years and will be the largest component of all U.S. government spending by 2030.

Additionally, many private pension plans are currently under-funded, and given the current economic difficulties, may not have time to recover adding more people to the public dole. The Baby Boom generation has suffered a disproportionate share of the $11 trillion in lost market equity and $3 trillion in lost real estate value from the current recession and they will find it near impossible to retire and sustain their current standard of living—particularly the 38% who will be eligible to retire in the next ten years.

Future impacts

Nielsen created a set of long-term demographic and economic projections that model the potential impacts of the aging U.S. population. The projections make use of five groups of households (Struggling, Lower Mid, Upper Mid, Affluent and Wealthy), each accounting for 20% of total, using an income-to-poverty ratio.

Households in the Struggling group have incomes that are no more than 1.5 times the poverty threshold. For a single-person household under the age of 65, this equates to having a yearly income less than $15,732. For a six-person family with four children, this means having a yearly income less than $40,407. All together, the Struggling group has a median income of $12,201.

From now until 2020, the projections show that the Struggling and Lower Mid groups will be the only ones to gain share, with the Struggling group growing by over 10%. The lower affluence groups will grow at the expense of all other groups. By 2050, the projections show that the Struggling group will have grown in size by nearly 70%, pulling households from all other affluence groups—particularly those in the middle.

For families with children, the growth in Struggling households will be even stronger. By 2050, nearly one-third of all families are expected to fall within the Struggling group. In the same timeframe, nearly 40% of all households whose household head is over the age of 65 are expected to fall into the Struggling group.

A shrinking pie

As the Baby Boom ages, and birth rates remain low, household sizes will decrease. Many aging Boomers will live alone or with one other person. The number of children per family will get smaller. Add in growth in the most economically-disadvantaged market segments, and pressures on per capita spending will be like nothing the U.S. has experienced in modern times. Between now and 2020, the U.S. will experience very minor growth in per household spending. But after that, spending on consumer products is expected to fall—and will continue to fall throughout the projection period in constant dollars.

Marketers in the U.S. and throughout the World are not accustomed to a shrinking pie, but rather are used to thriving marketplaces with robust spending growth. Broad marketplace growth enabled brands and categories to grow organically without increasing penetration or buying rate. In the near future— and for decades to come—this growth gravy train will be off the tracks. Growth will only come from increasing share against competition. The new consumer marketplace of the U.S. will bring new relevance to the phrase “share wars”.

Opportunity knocks

Over the next four decades, the old U.S. consumer mass marketplace will continue to split into distinct groups with very different product needs. By 2037, nearly one in three households will be headed by a person over the age of 65. Of these households, nearly three-quarters will be non-Hispanic white, nearly half will be single persons, and the majority of persons in the 65+ age range will be women. Despite their economic woes, the Baby Boom will still be a strong consumer market and will provide substantial opportunity for marketers willing to design and market products to an older consumer franchise.

On the other side of the divide will be America’s new families. Because birth rates are low, these new families will be smaller on average than those who have come before. However, their most distinguishing characteristic will be their ethnic and racial makeup. In only a few short years, by at least 2025, over half of all families with children will be multi-cultural. Less than half will be native born non-Hispanic white. Within this multicultural marketplace, Hispanics will be the largest group, but Asians, African and Caribbean blacks, and others will make up significant shares. Though also beset by economic woes, this group will provide substantial opportunity, but only for marketers who can navigate diverse cultures, tastes, and languages.

The future of the U.S. is a challenging one for marketers and retailers of consumer products. Gaining share among population groups that most marketers do not reach today will require shifts in focus, tactics, and products. Successfully reaching new markets like multi-cultural families offers a new set of opportunities. The breakdown of the mass market and the mass media that once served it, combined with certain economic difficulties, will make for challenging new times ahead.

Charlie Buchwalter, SVP Research & Analytics, Nielsen Online

SUMMARY: The longer-term prospects for the global online medium continue to be bright. Led by social media, search, video and the continued online ramp up of the leading marketers, online’s share of total advertising spend will continue its steady upward trend as we emerge from the current recession.

Discussing the trajectory of the online medium in the midst of an historic economic downturn is a perilous business. Assaulted every day with downward-facing red arrows, many of the indicators concerning all things digital veer to the negative:

• Online media’s “favorite child” status (i.e., a long track record of outstripping the growth of every other medium by a wide margin) appears to have diminished over the past few months.
• Online advertising by the Financial Services, Retail and Auto industries has shrunk at a dizzying pace over the past six months.
• Online display advertising’s share of revenue has plateaued at 20% of total online ad spend in the U.S., and no panacea appears to be on the horizon.
• Despite online video’s persistent positive buzz, actual usage is averaging around six minutes per day in the U.S.
• The social media trend is today’s industry darling, but a monetization formula continues to elude the globe’s brightest marketers.

The audience growth and engagement quotient of online video is forcing marketers to positively re-assess the value of the online experience. Adoption of social networking capabilities, by both consumers and corporations, has crossed the chasm in what appears to be the blink of an eye. In the age of Twitter, feedback barriers have all but disappeared, creating a near friction-free environment for playing back brand experience, campaign reactions or brand events.

Search continues to be an indispensable tool for all online denizens and opportunities for additional growth continue to emerge. Search across social media networks is likely to be the next opportunity for search engines. And as consumers increasingly turn to their phones for a wide range of online content—improved network speeds and rising smartphone penetration helped to grow the mobile web in the U.S.—prospects continue to improve.

Bright future
While 2009 will not be a banner year for online advertising revenues, online will once again outperform all other media in terms of growth. China will likely be flat to down, partially due to the global slowdown, but more importantly, because it will be hard to match the Olympics-related surge during 2008. The U.S. and Japan will be flat to slightly up. There will be pockets of significant (+25%) growth, but it will be limited to small-to-mid-sized advertising countries such as Brazil, and throughout Eastern Europe and Southeast Asia.

The longer-term prospects for the global online medium continue to be bright. Led by social media, search, video and the continued online ramp-up of the leading marketers, online’s share of total advertising spend will continue its steady upward trend as we emerge from the current recession. And given the increased focus on all things digital by the leading packaged goods companies, online’s share of commerce will continue to rise as well.

When all is said and done, brands see tremendous opportunity to increasingly exploit the digital environment to maximize brand-favorable media impressions, but they are starting to look at the mix more holistically. Consumer-generated content has gained inclusion into the “earned media” club of marketing preferences, and the big question going forward will be how paid and earned media share the marketing expenditure pie.

Growth leaders
Today, online video and social media lead the way in terms of growth. It is rare to see segments significantly grow from both an audience and an engagement standpoint, but there has been exceptional growth over the past couple of years in both video and social media sites. While Member Communities (i.e., social networking sites) have been garnering impressive audience numbers for the past five years, video audiences have been growing at meteoric rates, surpassing personal e-mail audiences in November 2007. And from a time-spent perspective, Member Communities surpassed personal e-mail for the first time in February 2009.

The growth in social media is the single most significant story in the online media space today. Social networking sites eclipsed personal e-mail in global reach at 68.4% vs. 64.8%, in February 2009. And even more significant—in only the first few months of 2009—the reach of these sites is growing at a brisk pace, faster than any other online sector.

Mobile moves
Of course, any discussion about online audience behavior would be incomplete without understanding the mobile dynamic. In the U.S. today, nearly 50 million mobile subscribers access the Web via mobile devices on a monthly basis. In the U.S., the mobile Internet audience grew 74% between February 2007 and February 2009. Internationally, the U.S. is one of the leading markets for mobile Internet penetration, with more than 18% of subscribers accessing mobile Web. This is the highest penetration of mobile subscribers among the markets for which Nielsen reports mobile Internet adoption, followed by the U.K., where nearly 17% of subscribers used mobile Web in Q1 2008.

There’s an increasingly broad range of content consumed over mobile Web, too. While many initially expected the platform to be dominated by e-mail, news and weather, Nielsen’s latest U.S. mobile Internet research reveals a long tail of content interest. Portals, e-mail, weather and news do garner audiences of more than 20 million unique mobile users each, but categories such as food and dining, travel and health and fitness also attract millions of mobile Internet users each month.

Recessionary impact
From an advertising perspective, it seems funeral dirges for online display advertising were heard throughout 2008, and things went from bad to worse in the fourth quarter, when the bottom fell out of the economy and all forms of advertising were hammered. As the dreary holiday season came to a close and 2008 ended with a whimper, many were wondering if the days of online advertising’s favorite-child status were at an end.

While many other metrics registered all-time worst numbers in 2008, Nielsen reports that online advertising overall did a bit better than the doomsayers thought. Quarter four showed a 4.5% uptick from Q3, and a 2.6% increase from Q4 2007. And for the full year, online ad revenues grew more than 10%. Despite the slightly-better-than-expected year-end performance of online advertising, the true impact of the deep recession will be told in the 2009 numbers.

Global roundup
When scanning the globe, the country-by-country online advertising experience is a true patchwork quilt. The Scandinavian countries, Australia and China are clearly in the fast lane, while the U.K., France, Spain and Japan are moving ahead, but at a slower pace. Germany, Switzerland and Italy are barely growing, and the Benelux countries appear to be moving backwards.

It’s clear that the global economic downturn is having an effect on all markets, and while online ad volumes appear to be brisk in some quarters, online ad rates are under such pressure that many advertisers are finding that rates from publishers are essentially the same rates they’re receiving from ad networks. As many of these international markets are starting from a significantly lower base of online advertising, their growth rates will outstrip the U.S. in many cases as the global economy picks up again.

Todd Hale, SVP, Consumer & Shopper Insights, and George Wishart, Global Managing Director for Nielsen In-Store Services, The Nielsen Company

SUMMARY: Inspector Gadget has taken up residence in retail stores, with coupon-dispensing kiosks, Web TV cooking programs, self-checkout scanners, smart carts picking products based on grocery lists, text reminders of last minute items, and Internet sites that track purchases and analyze nutritional content. Technology is changing the rules at retail.

Reaching consumers is both easier and more complex as outreach options proliferate. With the growth of cable and satellite, TV channel availability has more than tripled since 1990. And while traditional vehicles are still vital, more immediate and ubiquitous media are taking a hold. Online and mobile video viewing is exploding and time-shifted TV is growing.

Market-leading retailers are learning to embrace new media technologies, incorporating them into the promotional arsenal even as paper coupons enjoy a resurgence of interest. Everyone’s feeling the pinch from a volatile economy and looking for ways to conserve. As a result, manufacturer-driven coupon redemption in the U.S. surged nearly 10% in the fourth quarter of 2008, according to Inmar CMS Promotion Services.

For the year ending February 2009, Nielsen determined that more than one-third of dollar sales at food, drug and mass merchandiser stores were sold on promotion in the U.S., accounting for some $133 billion excluding coupons. Inmar determined that, while manufacturer FSI coupons represent roughly 80% of redemptions, manufacturer online coupons comprise the fastest-growing subset.

Web wise
Online merchandising is beginning to make inroads at many retailers, although for some, web pages often mimic the layout and look of printed weekly feature advertisement inserts. However, many manufacturers—especially those in the health and wellness field and discretionary categories like carbonated beverages and candy—are taking full advantage of the web’s highly engaging interactivity by featuring sites with games, e-cards, activities, videos, commercials, recipes, ring tones, personalized planners, and clubs that include special discounts and reminders.

In a recent U.S. study, Nielsen measured more than 200 digital ad campaigns which averaged a 32% sales increase, $1.1million hike in short term incremental retail sales, 157% return on investment, 18% boost in penetration and 14% surge in the buying rate. Impressive results all, signaling the strength and potential of visually-exciting, content-rich, interactive digital media.

Niche players like Dollar General keep their online outreach focus narrow to enhance impact, addressing just three primary areas on their web site: pets, easy meals and store brands. Others take a different tack and adopt the posture of trusted friend and resource like the Walgreens monthly Wellness online newsletter and news service covering everything from drug interactions to seasonal health challenges to caregiver support forums.

Retailers had best hone their electronic marketing chops quickly. Waiting in the wings to take a bite out of brick-and-mortar grocery sales are two companies that excel at marketing online and are hungry to expand into food: Amazon and AOL.

Getting personal
Food Lion’s Bloom format encourages consumer engagement via Breeze kiosks that feature handheld scanners that enable consumers to scan and bag as they shop, see a running total and speed-up checkout. Freestanding Breeze info displays allow shoppers to check prices, retrieve shopping lists, find and print recipes, and even generate bar-coded price stickers for random weight items.

Ahold’s Stop & Shop chain deploys self-scanner and kiosk technology in many of its stores to enhance consumer convenience. Shoppers enter stores, place their deli orders via a kiosk, finish the rest of their shopping and pick-up their custom order at the deli counter, without having to queue in line.

Ukrop’s Super Markets developed the Savings Spot to leverage the value of its frequent shopper program. Valued Customer program members insert their card into the kiosk, and seconds later, it dispenses as many as eight product offers reflecting individual customer preferences based on prior shopping history.

Simply mobile
With the declining performance of traditional media outlets like newspapers, marketers are exploring emerging vehicles which operate on mobile platforms such as social networking, texting, video and tailored promotional codes and coupons. The iPhone opened up a whole new world of more than 25,000 applications covering every interest and need—from budgeting to calculating tips to bill paying to shopping. Skeptics waiting to see if iPhones will catch on should take note of the fact that Apple can boast more than 800 million downloads and counting.

Mixing it up
Not all marketing is created equal or enjoys equal impact on consumer segments. Even within a store environment, different media and positions generate vastly different impressions. Take this recent example from a Nielsen U.S. study, where gross impressions per store for carbonated beverages delivered a high of about 32,000 exposures for an endcap runway display positioned front-of-store, versus a low of barely 5,000 for a household cleaning aisle endcap.

Another look at differences by type of marketing vehicle and store location established that an in-store flyer ad provided a sales lift of 18%, followed by a slat/wall display at 17%, case stacker display at 16%, shelf coupon dispenser at 14%, endcap display at 13%, power wing display at 12%, freestanding display at 8% and shelftalker at 4%. These huge lift differences among the various displays located in different parts of the store indicate that there will potentially be big sales variations as retailers continue to deploy new marketing strategies using emerging technologies.

A word of caution, however, is necessary.  Without coordination among the various technology platforms, there is the potential for adding clutter and potentially conflicting messages.  A plan that has inconsistent ad space coverage on everything from the in-store radio network to the deli/produce and check-out screens may turn out to be a noisy mess.

Paperless future
If media diversification and proliferation continue apace, marketers can expect feature ads as we know them to disappear over the next five years. Coupons will go paperless and coupon delivery will occur in-store and in-aisle—literally at the point of purchase. Shoppers will deploy mobile devices to seek out and “pull down” messages ranging from recipes to promotions as they shop the store.

Consumers hungry for recipe ideas or product recommendations can text or “tweet” friends, and visit “foodie” social media sites and blogs for inspiration as they walk store aisles. Traditional ad formats will yield to the immediacy and brevity of vehicles like Twitter tweets, which enjoy the boost of enhanced credibility from peer group product champions.

Human touch
As the media shakeout continues, marketers will be experimenting with different mixes of media and schedules. Given the wide range of consumer technology savvy and comfort levels, retailers will need to embrace the best of the new and retain the best of the old techniques. Self checkout is a prime example of this hybrid strategy. It’s great for small orders and bar-coded items, but still requires a human intervention for random weight items requiring help with PLU codes or to tweak twitchy scanners.

Even as RFID tags, audio capture, wi-fi, dual sensors, ultrasonic and thermal technology gets integrated into the store setting, employees remain a primary consumer touchpoint. Well-trained, proactive employees serve as the face and voice of a retailer, humanizing the experience as no media can. Human capital remains a significant investment area with unmatched potential for generating shopper loyalty and an impressive ROI.

The automotive industry’s ad spending fell hardest in 2008. The industry slashed its spending by almost $1.8 billion, or 15.5%. Among the Big Three automakers, Chrysler (Cerberus Capital Management) and Ford Motor Co. cut advertising 31% and 29%, respectively. General Motors trimmed its advertising 1%.

Pharmaceuticals also cut back its spending significantly, declining 18% and almost $1 billion compared to 2007. Quick Service Restaurants, however, was the only category in the top 5 to spend more in 2008, with 3.8% more expenditures in 2008.

Cable TV was one of only two media (along with Hispanic Cable TV) whose ad spend showed growth in 2008. Its 7.8% jump in 2008 accounted for almost $2 billion in additional revenue for cable networks. Meanwhile, Network TV ad revenue declined 3.5% in 2008.

Print media continued its anticipated decline in 2008. Local and National Newspaper ad spends declined 10.2% and 9.6%, respectively. National Magazines fell 7.6%, while Local Magazines dropped 3.7%.

Procter & Gamble maintained its perch as the top advertiser this year, despite a 19% decline vs. 2007.

To see the full release from The Nielsen Company, including a media breakout and top advertising companies, click here.