While U.S. consumers continue to take measures to adjust to rising gas prices, these actions are not as drastic as those taken in previous years. Unlike 2008, when the average price for regular gas jumped above $4.00 a gallon, today’s improving job market and strengthening economy are helping consumers cope better than during this recent economic downturn.

In the spring of 2011, consumers have adjusted to a new spending reality, but actions taken to cut down on spending habits, such as eating out less, buying less expensive grocery brands and doing more things at home are less prevalent compared to the summer of 2008 and are similar to the actions taken in the summer of 2010 when prices were well below $3.00 a gallon.

Trip compression, however, continues to dominate as a key strategy for 67 percent of households looking to save on high gas prices. And while this level is down from 2008 levels (78%), it is up four percentage points from last year. Additionally, nearly half of consumers (46%) will continue to seek lower priced gas stations and eat out less (45%) and over one-third (36%) will shop closer to home to offset high prices at the pump. Coupon clipping is also part of the gas-price offset strategy for 36 percent of households in 2011 – up four percentage points from 2008.

Another positive sign that the economy is slowly heading in the right direction is that U.S. automakers reported a solid April, with the big three auto manufacturers posting healthy sales gains – up an average of 22 percent. Small, gas-thrifty vehicles were not necessarily the biggest sellers.

Shop-to-Save Strategies Decline

One in five households (21%) say they are reducing spending to a great degree, which is down from one in four (26%) in 2008. However, with gas prices about $.90 higher per gallon than year a ago, this is an increase from 18 percent of households reducing spending to a great degree in 2010 – indicative of how some households are still feeling considerable pain at the pump.

Also in decline are saving strategies consumers deploy to lower costs: 21 percent say they are shopping more at supercenters, which is down eight and five percentage points from 2008 and 2010, respectively. Currently, 12 percent say they are buying larger economy sizes – down four percentage points compared to 2008/2010 and ten percent say they are shopping at warehouse clubs – down three percentage points from 2008/2010.

More and more savvy shoppers are taking advantage of incentive programs linked to grocery spending to buy gas. 28 percent of consumers say they are using their grocery shopper loyalty cards to save up to 10, 20 and 30 cents on a gallon of gas by redeeming points at participating gas stations. This savings is not only helping to take the pain out of the pump for consumers, but it is also helping to drive traffic for retailers.

What’s Next

With four out of six households saying they are combining errands to reduce their driving and control their gas spending, some retailers and manufacturers will feel more pain than others. Eating out less and continued interest in at-home and value-oriented activities is a sure sign that it is time to turn the volume up on product solutions and merchandising activities to capture sales from at-home consumption.

Manufacturers and retailers should offer consumers meal deals, recipe ideas, at-home entertainment options and tips & tricks for at-home personal care and in-home cleaning products. Retailers with gas saving promotions are in the driver’s seat; those without programs need to pull other levers to offer value – be it convenient location, value proposition or unique offerings, now is the time to tout those benefits.

With recent declining global oil prices and falling demand as U.S. consumers are driving less to cope, gas prices may fall about $.50 cents by Memorial Day, which would be a welcomed change. However, if gas prices remain elevated throughout the summer, chances are that consumers will react with greater severity – just like they did in 2008.

Unlike its U.S. neighbor, where consumers are taking less drastic measures to deal with rising gas prices than in previous years, Canadians continue to feel the pain at the pump. A recent Nielsen study shows that 86 percent of Canadians indicate that rising gas prices are impacting driving and shopping habits – a 31 percent increase since 2010.

Gas prices in Canada have increased 30 percent in the past year, which is costing the average household an additional $73 per month for a monthly outlay of $300. The current average price for regular gasoline is $1.31 per litre, which is 30 percent higher than comparable U.S. prices. When prices exceed $1.75 per litre, the monthly gas bill will actually exceed the grocery bill (average monthly grocery bill is $403).

Gas prices vary by region, from a current average low of $1.22 per litre in New Brunswick to a high of $1.38 in Newfoundland. Consumers in eastern Canada are impacted the most.

No Place Like Home

Rising gas prices mean consumers are likely to opt for more stay-at-home activities. More than half (55%) of Canadians say they plan to do more things at home. One-third of households will consider grocery home delivery (32%), shop close to home (31%), seek out low-priced gas stations (31%), use lower grades of gas (31%) and 14 percent will eat out less often.

Nielsen data shows that with the recent rise at the pumps, overall consumer shopping trips are down. While dollars per trip are slightly up in the first quarter (+2%) compared to fourth quarter results, shopping trips have decreased five percent in the same time period. One coping mechanism to minimize drive time is using a carpool, which is being deployed by 24 percent of households.

Shop-to-Save Strategies

Consumers are taking measures to offset the rising prices at the pump. One in five (21%) plan to buy less expensive brands, 17 percent intend to purchase larger pack sizes, 15 percent will look for savings at warehouse club outlets, 12 percent say they will combine errands/trips, 11 percent aim to stock up the pantry and 4 percent are determined to save by using more coupons.

What’s Next

As household wages are not keeping pace with inflation, consumers are digging deeper into their pockets to pay for ‘everyday’ things. Retailers and manufacturers should look for opportunities to convert a likely decline in out-of-home eating and entertainment spending for more at-home options.

Value messaging continues to be important, but messaging should connect to consumers emotions with themes centered on family fun enjoyment, which in the end, is what matters most anyhow.

The summer of 2008 seems like a distant memory given all that has happened in the past two years. But one thing most Americans are unlikely to forget about that year was the average price of gas reaching $4.11 per gallon. Fortunately, the price level settled back to $1.61 by the end of that year. But just two years later, the average price of gas has crept up to $3.05 per gallon, and some analysts expect the price to continue to rise to near 2008 levels.

With this in mind, how will consumers react to higher gas prices, especially in an economy fraught with uncertainty? During the summer of ’08, U.S. consumers told us how they responded by reducing shopping trips, eating out less, buying for value and using more coupons. And what they told us they were doing aligned perfectly with their behaviors.

It was during that year that the “staycation” came into existence as consumers cut-back on unnecessary travel and did more at home in an effort to save money. We saw a flurry of meal deals from food retailers and manufacturers as they aggressively fought to win trips that restaurants were losing. Will past consumer reactions to gas prices come into play in 2011? We think so, so how are you preparing for another round of opportunities for increased at-home consumption?

A number of the habits consumers formed in response to the high gas prices then have remained in place, and are likely to accelerate if gas prices go much higher, including buying gas linked to spending levels at grocery stores and purchasing gas at outlets offering other incentives.

Retailers and manufacturers should look back at how their core shoppers and buyers responded to past gas price increases in 2008 and begin planning now for 2011. While it’s not yet clear how high gas prices might go, any further rises coupled with elevated levels of unemployment are likely to drive consumers to take additional steps to save money. It’s never too early to have the strategy in place to respond.

“Although gas prices are not as high as they were in mid-2008, they have been edging up for some time and continue to impact how consumers shop and buy,” said Todd Hale, senior vice president, Consumer & Shopper Insights, The Nielsen Company. “Consumers continue to employ money-saving strategies, such as using coupons and gas purchase incentives, as means to deal with gas costs given overall economic concerns.”

Key findings of the survey show that the economy still has consumers looking for cost savings across the board, even as they revert to some pre-recession spending habits.

• 63 percent of consumers said they continue to combat high gas prices by combining errands/trips, 39 percent said they’re doing more at home and 29 percent noted reducing spending to a small degree — moderating from levels seen at the peak of the recession.
• Eating out less (46 percent) and coupon use (38 percent) ranked high as money-saving strategies due to gas costs, elevated from pre-recession times.
• Supercenters are losing some appeal for consumers seeking gas savings; only 26 percent of households say they shop more at supercenters to save on gas compared to 28 percent a year ago.
• Sixteen percent of households say that gas prices have no impact on their driving or spending; double the response in June 2008.
• Some consumers buy gas at locations because of incentives tied to their spending at stores where they shop, such as grocery (24 percent); convenience stores/gas (19 percent); warehouse/club (14 percent) and mass merchandisers (7 percent).

“Consumer packaged goods (CPG) retailers continue to demonstrate good marketing and merchandising tactics by linking in-store spending to gas savings at their pumping sites or with participating petroleum companies,” said Hale. “Some programs have been extended to reward shoppers with gas discounts and in-store savings based on gas spending. Other programs include participation from manufacturer brands. While gas prices are a bargain compared to mid-2008, filling up a 15 gallon tank represents a significant cash outlay and an opportunity for CPG retailers and manufacturers alike to offer saving solutions.”

Results are based on Nielsen online survey responses from nearly 52,000 U.S. households, geographically and demographically representative of the total U.S. population. The survey was conducted in June and July 2010 when regular gas prices averaged between $2.70 and $2.75 per gallon.

But just one year later, gas prices have fallen considerably.  In June and July of 2009, the average price per gallon for regular gas was between $2.50 to $2.62.  According to the seventh update to Nielsen’s gas price impact survey, lower gas prices have loosened up consumers’ behavior, although not to pre-2008 levels.  For example, 71 percent of respondents said that they were still combining errands and trips in an effort to save gas – down from a year ago, but still above the 68 percent who said the same in 2007.  Another 44 percent said that they were doing more things at home, down from 51 percent in 2008 but still higher than the 39 percent in 2007.  One area that consumers have not yet rushed back to is eating out: 52 percent said that they were eating out less, the same as 2008, and well above the 38 percent who said the same in 2007.  Meanwhile, carpooling has dropped, with just 5 percent of respondents indicating that they were sharing rides, a decline of two points from 2008.

While some behavior seems to be returning to pre-2008 patterns, it’s clear that consumers are still adjusting behavior, due in part to gas prices.  One-quarter of U.S. households are buying gas at locations because of incentives tied to spending levels at a grocery store where they shop.  They continue to buy less expensive grocery brands, and shop at supercenters.  As we highlighted previously, the use of coupons is high, with 38 percent of respondents indicating that they are using more coupons.

“Compared to last year, the price of gas was low this summer, making it one less thing consumers had to worry about as they grappled with issues such as job security, retirement, putting kids through college and making mortgage payments.  That said, with economic recovery beginning to take hold, it will be interesting to see if consumer behavior shifts considerably as they feel more confident about their circumstances,” said Todd Hale, Senior Vice President, Consumer & Shopper Insights at The Nielsen Company.

Nielsen started conducting the Gas Impact Survey in July 2005.  This year’s survey had more than 63,000 respondents.

Julie Enzweiler,  Automotive Research Director, The Nielsen Company

SUMMARY: In economic terms, the auto industry was hit by the perfect storm: high gas prices, tight consumer financing, plant closings, brand reductions, dealership pruning, employee layoffs, longer vehicle retention, surplus inventory, manufacturer bankruptcies and waning consumer confidence. Despite a 37% decrease in total auto sales over 2008, bright spots persisted: the redesigned Forester revved up Subaru sales while price leaders Hyundai and Kia gained traction from new models. Online media has changed the rules of the road for auto marketing by placing consumer generated media squarely in the driver’s seat.

Unprecedented. Unbelievable. Unfathomable. The state of the auto nation is shaky at the moment, but all is not lost. Offsetting the unrelentingly negative news are 2009 highlights like a 69% spike in Sorento model sales, a 48% increase in Sedona sales, and the successful launch of the economically-priced Hyundai Genesis and Kia Soul, both targeting younger drivers.

Conversely, luxury vehicles that attract middle-aged consumers managed to outpace the market, although the category experienced a long tail effect, a two to three month delay from shopping to closing the sale. Only one domestic car manufacturer—Lincoln—outperformed the market, even though sales remained in negative territory on a year-to-year basis.

Fueling sales

The Nielsen online panel, comprising 250,000 individuals representing the U.S. online population, detected another hopeful sign for new vehicle sales based on Internet new vehicle shopping patterns. While online new car shopping downshifted by 9%, this represented a mere fraction of the precipitous 37% sales decline, suggesting the existence of pent-up demand. Consumers sought out roadworthy vehicles like the new Ford Fusion, proven gas sippers like the Toyota Prius and Honda Civic, or buttoned up their wallets and opted to maintain their current car or buy used.

Foreign automakers benefited disproportionately from escalating gas prices because of the consumer perception that their vehicles—especially hybrid and diesel models—are more fuel-efficient. German and Korean automakers realized the largest gains in online vehicle shopping activity, posting 1.7 and 2.2 percentage point share increases respectively, while their U.S. counterpart slid 5.5 percentage points. The Volkswagen Jetta and CC models, BMW 1- and 3-series and Mercedes-Benz E class were among the variants driving shopping inquiries.

Model behavior

Sport utility vehicles, with some 61 models available, continue to hold the “most shopped” position and rank number one in the U.S. for share of new vehicle shopping. Although activity waned with rising gas prices, consumers appeared to be hedging their bets, shopping longer in the hopes that gas costs would plummet and justify the purchase. And while the government is putting pressure on automakers to reduce these larger vehicles from their fleet, demand at the moment is not supporting this mandate.

The biggest disappointment among model types proved to be the basic economy vehicle, which peaked with a nearly 30% online shopping share in May 2008 when gas prices were at the highest (around $4.00/gallon), and dropped to half that a year later when gas prices declined to about $2.00/gallon.

Upper middle car models like the Fusion, Camry, Accord and Altima maneuvered into the second most shopped segment by April 2009, with hybrid variants moving the sales needle. Hybrids remain an exciting, but emerging segment, as consumers wrap their heads around the concept and take their time investigating the genre. Luxury entrants cruised along with steady sales, experiencing a boost from the Hyundai Genesis introduction. Luxury models attract aspirational buyers who savor the shopping experience and take their time to consider price before taking the plunge, elongating the buying cycle.

Trading places

Rankings of the Top 25 automakers based on online shopping activity wheeled in some interesting changes, with Kia jumping 11 slots from number 24 last April to number 13 in

April 2009. Volkswagen leapfrogged seven spots from number 15 to number eight courtesy of the CC—their most-searched vehicle on the Internet. The redesigned Forester sparked consumer interest as well and elevated Subaru to the number 22 slot, up from 27.

Saturn fell out of orbit, dropping 13 spots to number 23, followed by Buick’s 12 point decline, GMC’s six point downslide and Pontiac’s five point plunge. A heads-up to Volkswagen, the beneficiary of online buzz over the curvy CC: while initial online interest spikes rapidly, it can quickly taper off. The trick is to sustain interest over time and keep the vehicle top of mind with prospective buyers.

Setting your sites

The auto industry enjoys a relatively unusual electronic landscape, with a host of powerful, established third party shopping sites available to consumers like Yahoo! Autos, Kelleybluebook.com, AutoTrader.com and cars.com to name a few. Manufacturer or OEM web sites need to maintain a polished look and feel with robust content to stay in the game, offering complementary information and highly interactive features like build-a-car customization tools, 360° rotating car views, dealer information, engaging games that keep customers returning to the site, virtual experiences, testimonials and incentives.

While 86% of online shoppers rely on third party sites for price information, OEM sites are the preferred source for visualizing build-outs, researching special offers and obtaining financing information about tax incentives, special offers and government programs. The combined use of both third party and OEM sites actually enhances the consumer shopping experience, providing complementary rather than competing information.

Value of video

Kia Soul, one of the year’s most successful launches, earned kudos for an exciting web site that features techno pop music, robot animation, a personalized video from the chief designer about his “rhino with a backpack”  vision, a floating picture gallery, build-a-soul feature and “Escape from Hamsterdam” game, which leverages the primary advertising visual—hamsters. Of course, the under $14,000 price tag and 31 MPG green angle helped jump start things.

Video streaming is playing out across the computer screens of America, with 124% annual growth overall, and a turbocharged uptake rate of almost 200% for Ford videos. At last count, there were more than 80 million videos available on YouTube, and that video library is growing by some 200,000 clips per day. Nothing engages consumers like real-life clips from owners and test drivers sharing their experiences. In addition to posting videos on OEM sites, manufacturers can enhance both reach and impact by pushing out digital clips to social media outlets like YouTube, Hulu, iTunes, Facebook and others.

Ad impressions

Nielsen data show local magazines, national newspapers and local radio taking the biggest hit with shrinking ad budgets, accounting in large part for the precipitous 31% downtrend in total first quarter auto ad spending from 2008 to 2009. Online ad impressions ramped up during Q1 of 2009, stabilizing at approximately five billion impressions per month during the March to May period, with a correspondingly constant spend rate of $35 million per month.

Following a classic advertising paradigm, exposures may indeed be rekindling demand. Nielsen surveys suggest that “intent to buy” is rebounding from an all-time low in the Spring of 2009 to a more historic level as seen in summer’s past. It seems that consumers have been kicking the tires, but doing so via virtual showrooms.

Listen and learn

“Listening” is the new marketing. To succeed in a multi-media world, automakers will need to engage and interact with shoppers, delivering a complete experience from initial contact through post-purchase. In the process, they’ll need to leverage the power of search and social media, developing a cadre of independent reviewers and product evangelists willing to spread the word about their cars, without filters.

Search engines represent the first point of contact for many shoppers, and carmakers would do well to influence the tone of the conversation and their placement on the page one rotation. Deploy the power of Web 2.0 on OEM sites, incorporating quotes, surveys, reviews, testimonials, buyer videos, interactive games, audio and video feedback loops, special offers and incentives that hook the consumer and give them a reason to keep coming back.

With unemployment reaching 25-year highs, it is no surprise that Americans are nervous about their futures.  Over the last twelve months, confidence has nosedived as consumers worry about keeping their jobs, paying their mortgages and other bills, and their retirements.

Click To Enlarge

We are on the verge of a potential fundamental shift in how consumers shop and buy that could have ramifications long past economic recovery.  They are shopping less and changing the types of products they purchase, such as shifting to store brands and focusing on necessary items such as food and cutting back on luxuries.

At the same time, however, purchasing power is actually increasing for some Americans.  Consider the facts:

• The price of crude oil has declined 71 percent from July 2008 to February 2009 (from $133/bbl to $33/bbl), and retail gas prices have dropped 53 percent.  To fulfill annual driving needs in July 2008, consumers were spending an average of $3,045 at $4.06 a gallon; In February 2009, that figure declined to $1,440 at $1.92 a gallon – a savings of $1,605 per year.  And with the average American household owning two cars, the potential savings are even higher.

• Food inflation has moderated since July 2008 to current levels of 2 percent.

• While a great deal of attention has been focused on those people who had subprime mortgages and are now experiencing foreclosures on their homes, 30-year fixed mortgage rates have declined 1.30 pts during the same period, also resulting in potential savings.

• Tax credits in the stimulus legislation passed by Congress will put an additional $672 in the average worker’s pocket.

Combine these facts with a growing sense that we may be seeing the first signs of a bottoming out and many Americans will be well-positioned to resume their spending.  However, until the fear and uncertainty about the economy dissipates, it is unlikely that they will feel confident enough to exercise their increased purchasing power.  And once they do, there is little doubt that how they spend their money is likely to be very different in how they did so in years past.  Nielsen will continue to closely monitor consumer confidence, shopping trends and other factors to enable our consumer product manufacturing and retail clients to deliver value in the short term and innovate in the long term to help ensure continued growth.

The overall state of the economy has dropped consumer confidence to historically low levels and caused consumers to continue to reduce driving. To deal with gas prices, consumer claims in the areas of combining shopping trips and eating and entertaining at home more often are at level higher than measured when gas prices were at $4 plus.  According to the most recent Nielsen Homescan Gas Impact Study, taken in December 2008, 77 percent of respondents said that they were combining shopping trips and errands to save gas.  57 percent said that they are eating out less, an increase of 5 points since the last survey in June and July of 2008, and 50 percent are staying home more often.  And 64 percent of U.S. consumers are reducing spending, up 1 point since the June/July survey.

To reduce spending, consumers are increasingly looking to use more coupons, switch to private label or less expensive brands, shop more at Supercenters and purchase larger, economy size portions.

“The fact is that even though gas prices have declined to ‘normal’ levels, prices of other goods have increased.  The weak economy – and the nervousness it has caused most Americans – has shifted consumer behavior in ways not seen before.  However, winning manufacturers and retailers will be those who take advantage of the increased time consumers are spending at home and use the right advertising and promotions to capture shopping trips and item purchases,” said Todd Hale, senior vice president of Consumer & Shopper Insights at Nielsen.

To view a PDF of the complete presentation, click here.

The next Nielsen Gas Price Impact Survey will be conducted in June 2009.

A Look Under The Hood

A. Prius discussion spiked in the summer months, driven by its status as the benchmark hybrid in the time of high fuel prices and buzz about the next-gen version.

B. Peak buzz for the Chevy Volt in September was driven by the unveiling of the 2011 production version and publicity events.

C. The Nissan GT-R generated strong buzz throughout 2008, peaking in October when Porsche contested its Nürburgring lap time.

D. Ford Fusion buzz shows an upward trend, driven by consumers discussing updates for the 2010 models, the debut at the L.A. Auto Show and the hybrid version’s surprisingly strong fuel economy.

If you are interested in the complete Monthly Automotive Industry Overview, please contact Larry Black.

An analysis of GM-related online buzz between September 1 and October 24, 2008 found that consumer chatter on Internet message boards and blogs has focused on how Detroit would change if GM and Chrysler joined forces — and which vehicles might survive the merger.

GM’s forthcoming electric car, the Chevy Volt, also drove a significant portion of GM’s online buzz during the last two months — as did discussions of plant closures, the United Autoworkers union, and the company’s 100th anniversary.

View Nielsen’s proprietary Brand Association Map (BAM) for GM, which charts the attributes most closely associated with the company in online discussions.  The BAM analysis provides an unaided, unsolicited, real-time barometer of consumer perceptions of and attitudes toward a topic discussed online.

What are your thoughts on a GM-Chrysler merger?  Submit your comments below.