To track the evolution of the store circular, one need only follow the smudge. A Nielsen survey of 11,000 shoppers found that roughly 60 percent of consumers look at printed circulars at least once a week, but today’s fingerprints are increasingly likely to be found on tablet and smartphone screens as opposed to the pages of paper circulars.

Retailer e-mails are just as likely to reach consumers as the paper circular, and millenials in particular are increasingly likely to view a store’s website on a PC, and are more likely than other demographics to use a social media website or smartphone as an alternative to the paper circular.

While a full 70 percent of shoppers have expressed a desire to have their circulars delivered digitally in some form – via e-mail or over the web – in total only 18 percent of shoppers have ever used a smartphone to determine what’s available in-store and only 33 percent have accessed that information on a tablet device. In contrast, 90 percent of shoppers still want paper delivery. Thus, the transition to digital circulars is expected to be gradual, a gentle migration that will accelerate in proportion with both shoppers’ and retailers’ level of comfort with electronic platforms.

For more information, download the Evolution of Circulars (Q4 2011) report, and watch the accompanying webinar.

From a demand standpoint, the first generation of ‘digital natives’ are forming households. To these tech-savvy media mavens, online is a way of life for convenient, on-demand and personalized attention. Plus, broadband penetration and mobile adoption rates continue to increase. The “what I want, when I want it and where I want it” trifecta will be complete for the majority.

On the supply side, the economies of scale for retailers are building as the online channel provides a greater awareness and availability of distribution opportunities. For manufacturers, online enables a deeper, more personalized relationship with the shopper – delivering on the full promise of category management.

Five things to know about online grocery shopping:

1. Consumers love online grocery shopping, but it takes time getting used to. You can simply the process by improving the online experience with navigation, search, online help and porting over shopping lists. Deliver a better time-saving experience and consumers will hang on.
2. Online baskets are different than offline baskets. The average transaction size is much larger for food and beverages ($80 online / $30 offline) and health and beauty purchase ($30 online / $10 offline). And online shopping offers a greater mix of pack sizes and categories.
3. Consumer perceptions and purchase behaviors are affected in important ways. The interactions with the online ‘store’ environment are fundamentally different than an in-store experience. The online experience is fueled by a needs-driven experience as a greater variety of options are made available on screen.
4. Online shopping “levels the playing field”. Big brand ‘physical’ advantages do not translate online. With universal distribution and search functionality an inherent bias toward niche players is created. Ultimately, price transparency, connectivity and open content favor a purely ‘rational’ market.
5. Large and small brands can win online by combining marketing savvy with digital capabilities to add value. With interactive websites, smartphone applications and social media connections, expanding your brands in new and innovative directions is virtually limitless.

Online grocery shopping is no longer coming – it has arrived. Now is the time to get in the game and determine how your brand can add value in new ways across consumer touch points. It is not only a shopper’s market, but a marketer’s market. The rate of change is accelerating and so it the rate of opportunity for creative marketers who embrace the digital revolution.

These and other insights were highlighted in a Nielsen webinar held May 24. Click here to download the webinar, Balancing Act: Aligning E-Commerce with Today’s CPG Shopper.

The Nielsen Company recently analyzed the demographics of Brazil, Chile, Colombia, Mexico and Puerto Rico, and estimates that people age 50+ currently make up 19% of the population.  But that number will rise to 26% by 2025 and 38% by 2050.  Households with mature housewives (who drive buying decisions in the home) account for 30% of the region’s populace.  In Puerto Rico, such households make up more than half (54%), while in Chile they represent 40%, in Colombia 35%, in Brazil 29% and 28% in Mexico.

Per Capita Spending Power
These older households – while being 13% smaller than the average home – have higher levels of per capita spending than other age groups:

• Chile: 17% higher
• Brazil: 15%
• Mexico: 15%
• Colombia:13%
• Puerto Rico: 12%

“In the next 10 to 12 years, one of every four consumers will be over age 50, and as in other countries around the world, older Latin Americans are defying the traditional stereotypes.  They are more affluent, spend more money and are open to new brands and products,” said Mary Paz Roman, Consumer Panel Services, Product Leadership Latin America at Nielsen.

Categories that currently attract a greater preference among more mature Latin Americans include hot and cold beverages, sweeteners/sugar, pet food and hair dyes and coloring, and retailers and manufacturers can expect increased popularity in years to come.  But other categories that could benefit – if manufacturers innovate and appeal specifically to this demographic – include a number of health and beauty segments such as shampoo, conditioners and deodorants.

“As competition for a greater share of consumers’ pesos, reals and dollars grows more intense, retailers and manufacturers should re-assess how they view this consumer group if they hope to seize the opportunities this new reality offers,” concluded Roman.

Continued unemployment means more sensitivity to price changes and promotion activities. Even optimistic views of the economy see a shopper impacted by stubbornly high unemployment, which is predicted to remain around 8-9% over the next three years. As consumer packaged goods (CPG) marketers plan for the future, understanding the nuances of price sensitivity and the consumer’s shifting value paradigm will be critical to success.

During the “Great Recession,” we have seen consumers make dramatic changes to their buying habits. In the “new normal,” these changes are expected to stick:

• More dining at home and less dining out
• Shopping for in home meals with shopping lists
• Finding better values by shopping alternative channels
• Trading down across categories and within categories or opting out of categories all together

Trends that started before the recession and are likely to continue include:

• Health & Wellness: U.S. consumers are still looking to lead healthier lives, but economic pressures have led some consumers to alter their prior habits & practices.
• Convenience: convenient & easily accessible store locations; convenient & easy-to-find in-store or on-shelf product location; food & non-food solutions that save time from our busy lives “aren’t going to get less important.”
• Demographic Trends: aging population & multi-cultural consumers were target consumer groups for many retailers & manufacturers prior to this recession.

Given the rise and length of the unemployment situation, unemployment is now another way to segment consumers to target specific price and promotion programs. This group of consumers will also provide opportunities for those companies who understand them best and respond accordingly.

Pricing and promotions are becoming a more defining factor

Stores in higher unemployment areas have a higher frequency of promotion, and the gap in incremental promoted volume between high and low unemployment areas is widening. As such, the amount of volume sold on promotions in high unemployment areas has been increasing at a greater rate than in low unemployment areas.

When looking at consumer response to both everyday price and promotional pricing, we find that consumers in higher unemployment areas are more 6.5% more sensitive than consumers in low unemployment areas to changes in everyday price.

Private Label growth fueled by high employment areas
Private label developed faster and continues to be more developed in stores in high unemployment areas. However in both 2008 and 2009, private label grew significantly in all areas.

Since consumer are looking for low prices both within store (upper left) and between channels (lower left) – especially true for areas with higher unemployment.

Strategies for the “Left Side of the Grid”

• Competition on price is crucial – be competitive across and within stores
• Focus on efficiency of trade dollars
• For retailers, use weekly the circular on the categories to draw consumers to your store
• For manufactures, focus on price to be competitive.

Strategies for the “Right Side of the Grid”

• Use smaller discounts on temporary price reductions especially for categories that see large increases in feature or display responsiveness in high unemployment areas
• There may be opportunities to take price up for profit
• Manufacturers need to highlight quality through advertising focusing on brand building and consumer benefits
• Maintain promotional spending, but there is no need to focus on Price

SUMMARY: The rise of new technologies and increased channel fragmentation makes reaching consumer targets more challenging than ever. More and more consumer packaged goods manufacturers and retailers are finding that micro-targeting strategies—traditionally employed by specialized business—are unleashing new, deeper insights into their customer targets enabling them to grow brands in creative and profitable ways.

Micro-targeting, or the in-depth analysis of a company’s consumers, has traditionally been viewed as a tool for very specialized businesses. Long used by the financial services industry, with its rigorous statistical models and reams of customer data based on direct relationships, micro-targeting plays an important role in effectively communicating with precisely the customers those firms want to reach.

Meanwhile, niche consumer brands with a small customer set and the ability to know exactly where those customers live, work and play have also used this tool to grow their businesses. However, the rise of entirely new technologies and mediums such as Facebook, Twitter and other social media, as well as new consumer research capabilities have made micro-targeting a useful tool for a broader range of industries.

Uncover Demand Potential
As a pioneer in the use of micro-targeting, The Cambridge Group—part of The Nielsen Company—has, for some time, assisted financial services clients in micro-targeting through the development of proprietary predictive models capable of classifying consumers into Demand Segments. More recently, however, the challenging economy and intense market competition has prompted an increasing number of mainstream consumer packaged goods (CPG) companies and retailers to dig deeper into their data to develop an unparalleled understanding of consumers in their categories, specifically who has the profit and what do they demand. The power of these insights are being unleashed through the use of focused media buys, targeted online advertising/ product placements, Facebook, Twitter and other new channels to more effectively reach target customers.

Already, one of the world’s largest CPG companies has shifted its spending from mass media buys to micro-targeting friendly public relations campaigns and Internet buys. With the increased channel fragmentation and blurring, they realize that they must be more precise than ever at targeting their most profitable customers.

Drive Growth
Another example of how the use of micro-targeting has expanded beyond its niche is the case of a refrigerated-meat manufacturer. Leveraging our proprietary approaches, this client was able to develop a fuller, more precise understanding of its true core of profitable customers—teenage boys and their moms. As they discovered, their heaviest users were not summertime backyard grillers, as they’d thought, but households with teenage boys who eat hot dogs for after school snacks (oftentimes as much as 5 pounds in a month!).

The team used its refined understanding of these core buyers and their needs to boost usage among heavy users and build awareness among teens. It shifted its mass media spending and focused more on micro-marketing efforts such as sponsoring online Major League Gaming—one of the key places these teens could be found—as a way of boosting its awareness among youths. The revised marketing actions combined with targeted product/packaging optimization drove annual growth of 15-20% for several years in a row, enabling the brand to achieve the number one position in the category while simultaneously growing its household penetration three points, a major victory.

In another case, we worked with a consumer durables client that had suffered almost five years of flat to declining growth. Our micro-targeting approach increased sales 8% in year one and an additional 9% in year two. These results were achieved by re-allocating existing spend into more precise micro-targeting efforts rather than adding spend.

Road Map to Success
So how do CPG companies get started with micro-targeting? The Cambridge Group recommends five key steps:

1. Determine what your objectives are. Gain agreement as to how the micro-targeting effort will be evaluated. Is it aimed at increasing awareness, trial, sales or some other goal?
2. Build a detailed fact base about your target segment(s). You must be very clear on who you want to reach. Typically we are trying to engage the most profitable segments of consumers for our clients. But in some cases the effort might be to reach lapsed users, competitive users or some other group.
3. Create a compelling message for the target. Once you’ve successfully reached your target you have to have something of interest for them to engage in or you risk losing them despite all of the work to reach them.
4. Determine where best to reach the target. Where will they be most interested and receptive to your message?
5. Measure results and improve. Track your results and take corrective actions or drive improvements based on findings and results.

To be truly successful, micro-targeting requires an unparalleled understanding of a company’s target and turning these insights into actionable strategies. But done correctly, it is one tool that really can enable companies to “do more with less” and grow brands in new, creative ways.

SUMMARY: Purchasing decisions in 2010 will be affected by factors such as brand innovation, retailer assortment, proliferation of store brands, and healthy eating preferences. Walmart’s “Project Impact” strategy and other similar retailer initiatives will test consumer preferences for clean aisles and lower prices vs. broader product selection. In the first few months of 2010, sales of healthier eating alternatives should be a good indicator of consumer confidence. As 2009 brought an increase in coupon activity, CPG manufacturers will look for more efficient and effective ways to reach consumers vs. traditional trade spending. Time will tell if new product innovation will be enough to drive shoppers back to traditional brands.

Throughout the recession, retailers and manufacturers have stepped up efforts to bring about innovation that seize the moment and “drive the recession wave” rather than “ride the recession wave”. Winners in 2010 will continue to innovate in the form of new formats, service offerings and differentiated products—a list of best bets for 2010 is described below.

Winning Brands Will Innovate and Differentiate
Sales of store brands have grown by $12 billion (up 17%) vs. two years ago as shoppers focus on value. As the economy improves, value is still important, but smart marketers are differentiating brands through innovation—with new products, new flavors, new packaging and with marketing/media campaigns with a heavy emphasis on social media to build rapid awareness and product trial. Brands that fail to innovate may also fail to win buyers back from store brands.

Product Assortment is a Point of Differentiation
Some retailers have followed the lead of Walmart’s “Project Impact” with cleaner aisles and limited assortment. Others have an opportunity to set themselves apart with a wider selection of products. Supermarkets that struggle to compete with Walmart’s prices will find an advantage with shoppers looking for variety. The trick is finding which categories require the broadest selection.

Healthy Eating Is a Solid Measure of Consumer Confidence
As the economy improves, consumers will focus on health and wellness priorities. An increase in sales of foods labeled “organic”, “natural” and “high fiber” as well as diet aids and reduced calorie/fat frozen dinners and entrees will be an indicator that consumer confidence is growing. Look for the first signs after the holidays, when consumers tend to start those New Year diets.

Manufacturers Get Stingy with Trade Promotion Spending
A whopping 50 million products each year—43% of supermarket purchases—are sold with a feature ad, display or price reduction funded primarily by manufacturers. An increase in coupon activity and new advertising opportunities such as cell phone apps and in-store TV networks will stretch promotion budgets. Retailers need to demonstrate sales performance to get their fair share of trade funds.

Direct to Consumer Options Thrive
Online price wars and the squeeze on in-store assortment will fuel large and small manufacturers to give consumers options to buy direct from manufacturers or from online services from the likes of Amazon, Drugstore.com and Alice.com.

2010 U.S. Outlook

Part 1: Cross Media

• Big Screen, Smart Screen, Small Screen: Top 5 Cross-Media Trends
• You Can Take It With You: Future Trends In Media

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Part 2: Consumer

• Winner Winner Chicken Dinner – Top 5 Consumer Goods Spending Trends
• Innovation Creates Opportunities for CPG Growth
• Aging Puts a Wrinkle in U.S. Marketplace

---

Part 3: Advertising

• Talking Back – Top Five Advertising Trends
• Get Ready for the Audience-Centric Web
• What Would John Wanamaker Say Today?

---

Part 4: Entertainment

• There’s No Business Like Show Business – Top Five Entertainment Trends
• Game On – The World is Watching More Than Ever
• Video Games in Play

Todd Hale, SVP Consumer & Shopper Insights, The Nielsen Company

Gloom or Boom?
While consumers around the world are more confident about the year ahead, Americans still seem relatively unconvinced there will be drastic improvement. And they have good reason to be leery. The “jobless” recovery—like government bailouts—hasn’t yet touched consumers. Banks remain skittish about extending credit. Home foreclosures will likely hit hard in the first quarter of 2010 as banks work through an incredible backlog. And smaller community banks with exposure to commercial loans will be acquired should they not have the reserves to cover the losses. While economic indicators point to a technical recovery, a fair number of looming issues have yet to be addressed.

With these mixed messages, what will the American consumer do? Nielsen research reveals that consumers’ fundamental spending adjustments are likely to last in the next year. Either by choice or necessity, their new-found thriftiness will continue. Almost one-third of consumers (30%) say that they will use credit less even when conditions improve with 19% saying that they intend to save more money.

Discretionary spending cutbacks continue to change the way consumers shop. Consumers now use coupons with an enthusiasm not seen in many years—for the first three quarters of 2009, Inmar reported that manufacturer coupon redemptions were up 26%. Food departments outperformed non-food, health and beauty and general merchandise departments as Americans returned to cooking and eating at home—boosting grocery channel shopping trips in the process. Store brands grew becoming an acceptable alternative—or even preferred brand—for many. Meanwhile, consumers “traded down” across categories, preferring chicken, turkey and pork to beef and seafood. While value channels such as supercenters, club and dollar stores, as well as online retailers, drove shopping trips to their stores, discretionary retail channels (home improvement, office supply and pet stores) saw declines.

Top Five Consumer Goods Spending Trends in 2010:

1. Restraint remains the new normal
   Americans’ confidence has been slower to rebound compared to other parts of the world. The need to save money, unemployment and other economic issues continue to be top of mind, suggesting that any return to past behavior may take some time—if at all.
2. Value is a top priority
   With no signs of readiness to open wallets, a focus on low prices at the expense of all other variables threatens margins. Value messaging must also include some point of differentiation beyond pricing. Manufacturers and retailers that “drive the recession wave” and take an active role in innovation and ad spending are likely to be the big winners.
3. Store brand growth continues
   Even with year-end 2009 softness in store brand dollar share growth as retailers cut prices across the store to be more competitive, unit share growth continues and retailer focus has never been stronger.
4. Grocery consolidation intensifies
   Local and regional players, unable to drive profits in the soft economy, will become acquisition targets and some larger national and regional grocers will divest unprofitable formats and banners to strengthen investments behind their winning formats and banners.
5. Assortment wars escalate
   Retailer efforts to simplify the consumer shopping experience by eliminating aisle and shelf clutter will cause market share land grabs for small and medium-sized brands in pursuit of elusive revenue growth. Retailers may lose sales as they shift away from in-store merchandising that drove impulse buying and built shopper baskets. Look for brands caught in the trap of greater store brand focus and assortment optimization to forge alliances with key retailers, enter or step-up efforts as store brand suppliers, and/or explore direct-to-consumer sales.

2010 U.S. Outlook

Part 1: Cross Media

• Big Screen, Smart Screen, Small Screen: Top 5 Cross-Media Trends
• You Can Take It With You: Future Trends In Media

---

Part 2: Consumer

• Winner Winner Chicken Dinner – Top 5 Consumer Goods Spending Trends
• Innovation Creates Opportunities for CPG Growth
• Aging Puts a Wrinkle in U.S. Marketplace

---

Part 3: Advertising

• Talking Back – Top Five Advertising Trends
• Get Ready for the Audience-Centric Web
• What Would John Wanamaker Say Today?

---

Part 4: Entertainment

• There’s No Business Like Show Business – Top Five Entertainment Trends
• Game On – The World is Watching More Than Ever
• Video Games in Play

The way consumers shop for everyday products continues its transformation towards the Web. In 2008, online retail accounted for approximately 7% of total retail sales in the U.S, with 1.5% of consumer packaged goods (CPG) spending done on the Web.

In the future, your children will likely conduct the majority of their shopping online. While online shopping accounts for a modest percentage of today’s sales, it is growing rapidly – Nielsen estimates that online CPG sales alone increased 25-30% between 2004 and 2008. And there are compelling reasons to believe that growth will continue, as overall online sales are projected to increase almost 200 percent between 2008 and 2012.

Shopping Evolution Centers on Convenience, Choice and Value

Shopping has evolved along three dimensions, with each new phase increasing consumer convenience, choice and value – the three main reasons consumers shop online today. Online shopping redefines convenience and choice and equips consumers with unprecedented way to seek value.

Convenience – online is a simpler, faster, more hassle-free way to shop for frequently purchased products.

Choice – online offers more variety, which services like Peapod’s “endless aisles” clearly demonstrates.

Value – while value isn’t the primary reason most consumers shop for “everyday” products online today, it will become increasingly important as e-commerce becomes more mainstream. Tools to rapidly compare product prices already exist and online coupon sites have become the rage in the down economy.

Smaller, Niche Retailers Can Reap the Benefits of an Online Presence

Whether searching for solutions to a specific need, directly accessing retailer Web sites or deciding to click on an advertisement or link, consumers have far more control over what they are or are not exposed to online than offline. This offers smaller brands the opportunity to generate an online presence that is effectively larger than their big brand counterparts are, while serving up compelling messages and undercutting leading brand prices – all at the point of purchase.

Take the beauty care category as an example. Boutique retailers with fewer stores and lighter foot traffic than the large offline chains are as readily accessible on the Web as a Walmart or Target, which sometimes do not carry the leading offline beauty care brands on their Web sites.

What is interesting to note though, is that the online commercial challenge for leading consumer brands has less to do with the “long tail” than with the collapse of physical structures that literally help distance leading brands from smaller brands offline. It is not the number of brands available online that matters, but that there is less separation between them, which levels the playing fields, creating a flatter, broader marketplace for everyday brands.

To learn more about digital opportunities for leading brands, download Building Great Brands in the Digital Age: Guidelines for Developing winning Strategies.

I recently shared some thoughts on how CPG manufacturers can protect their brands from private label expansion. Of course, it didn’t take long to hear back from retailers asking for tips on growing their own brands so here are a few private label ideas for our retailer friends.

1. Study the category consumer before going upscale. Consumer understanding is the common thread among top-selling brands. It’s not enough for a retailer to roll out a quality product in premium packaging.
2. Disguise your premium store brands. Many consumers still associate private label with cheap knockoffs. There – I said it. But what if they don’t know it’s a store brand? Look to position premium store brands as exclusive products like Choxie at Target and Canopy at Walmart.
3. Get your pricing right. The price gap between store brands and national brands varies significantly across categories. The same shopper who chooses private label bottled water for a 3% discount may require at least 20% savings for private label barbecue sauce.
4. Offer multiple brands in multiple tiers. Although Costco may be the exception, most retailers are finding growth with multiple store brands. No one brand can stand for value and gourmet and healthy eating.
5. Eliminate weak links. One bad product experience can hurt the entire store brand, not to mention the retail banner itself. Product quality needs to be consistent across each store brand. Your brand’s perceived quality is only as good as its weakest SKU.
6. Drive trial. If your store brand is really as good as the national brand (or better), let your shoppers try it. Offer a free package with a $50 purchase. Consider a trial size or in-store product demos.
7. Promote your store brands. There’s a wide range of feature ad support for private label. Using ECRM’s Marketgate data, we found that private label’s percent of feature ads ranged from 45% at Wegmans to 25% at HEB to only 10% of ads at Publix.
8. Don’t be too quick to drive out value brands. Some value brands can drive lower price and higher margins than retailers can achieve through private label. The shampoo category is an excellent example with some well-known brands at very low prices.
9. Embrace a cause. Use package labeling to show how your store brand supports local suppliers, promotes health & wellness, saves the environment, or funds local charities. You’ll find that many of these causes attract similar consumers. Regardless of sales performance, taking the high road can help to build a retailer’s image.
10. Understand the difference between strong sales vs. strong brand equity. Walmart’s Great Value brand claims to be the #1 food brand across categories, but would shoppers ever choose Great Value over a national brand at the same price point?

Bonus: (It’s one better than a top 10 list) Sell your store brand in someone else’s stores. Safeway is taking the lead by selling its “Eating Right” and “O” brand at other retailers in non-competing markets. Opportunities exist for retailers to sell their store brands not just in new markets, but in new channels (convenience, hardware, toy stores) in their own. Share your tips, stories, feedback in the comments below.

Our consumer packaged goods (CPG) world is one where technology is rapidly evolving and transforming how consumers receive, seek and use information to impact buying and shopping decisions. This makes our jobs exciting and challenging at the same time as it is harder than ever to manage the ever-changing technology landscape and almost impossible to control.

Consumers are time-starved and diverse. Case in point: The number of TV channels in the U.S. has more than tripled since 1990, giving consumers a wide variety of channel choices. The majority of all ages and income groups are connected to the Internet. Retailers have relied on newspapers – a medium declining in its present form — to deliver a major portion of their advertising. These are just some of the examples in our world today that make it harder for advertisers to reach target consumers or push us to look for alternative forms of communication vehicles.

Your future success as a retailer or manufacturer requires new approaches. With rapid adoption of new technology (iPhone anyone?) consumers have clearly demonstrated a great willingness to engage in multiple media vehicles. Your survival may require sweeping changes in how and what you communicate to your brand buyers and retail shoppers.

I hope you can join me in this morning’s General Session at Consumer 360 as we explore this brave new world . . .one in which technology is making it easier for consumers to talk to retailers and manufacturers. . . any time and in real time. We’ll explore what manufacturers and retailers like Kroger, BJ’s, Safeway, Food Lion, Stop & Shop, Walgreens and Ukrop’s are doing now with new communication approaches and technology to engage their customers. I’ll also share my predictions on how CPG media and communications will change.

If you aren’t able to join us in Orlando today, please visit Consumer 360 again on Friday to view the on-demand session video.