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Recession Trumping Brand Loyalty

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One thing I never understood was the assumption among some marketing mavens I know, that certain types of consumer expenditures were simply never going to be cut. Confidence was particularly high regarding how women spent money. “Oh, lipstick always does well in recessions, it’s a cheap pick-me-up.” “Women don’t cut back on hair color” (meaning not just having their hair colored, and not just going to a salon, but remaining loyal to the particular salon/colorist they were patronizing).

Um, what about “downturn” don’t you understand? The unspoken assumption may have been that past recessions hit blue collar workers harder than the brand-obsessed classes. This one is administering pain to all income strata, and one of the side effects is trading down to cheaper products and cutting back on services.

From the Wall Street Journal:

When Summer Mills visited her local CVS drugstore recently, to save a few dollars she bought the store-brand facial scrub rather than the Olay version she normally uses.

“I thought I’d be able to tell the difference, but I couldn’t — I looked at the ingredients and they seemed almost the same,” says 30-year-old Ms. Mills, a stay-at-home mother of two in Ardmore, Okla. On her next shopping trip, “I’m going to buy the store-brand moisturizer and cleanser — it’s less money.”

Yves here. Moisturizers are one of the many ripoffs foisted on the fairer sex to keep them broke and dependent on male support. Any dermatologist will tell you (unless they are pushing their own product line, of course) that all it does is seal water into your skin, not add “moisture”. The trick is putting something on the skin that will keep the water in after you wash your face. I was told that one derm at a national conference recommended Crisco (clearly to express her dim view of marketing hype). Back to the story:

Many Americans are changing their everyday purchases and abandoning brand loyalty, prompted by the persistent financial pressure of rising food, gasoline and electricity prices. Over the past 24 months, consumer prices have risen 7.8% according to the U.S. Bureau of Labor Statistics. From coloring hair at home instead of at the salon to trying cheaper laundry detergents, new evidence indicates that Americans are modifying even minor household habits to save money.

Kimberly-Clark Corp. CEO Thomas Falk noted that sales of the company’s potty-training pants, once one of the biggest sales-growth products in the baby aisle, have fallen off in recent months. “You’re seeing consumers leaving children in diapers longer…the diaper is less expensive per piece than a training pant,” he said in a recent conference call in which he announced a 9% decline in third-quarter earnings.

Shoppers are even buying toilet paper differently. “When they get to the end of the month, and they’re out of paycheck, they may buy a smaller-count pack,” Mr. Falk said. “You’re seeing that shift in consumer behavior during a pay-period cycle more than we maybe have in the past.”….

…,about 40% of primary household shoppers said they started buying store-brand paper products because “they are cheaper than national brands,” according to a September report by market-research company Mintel International, which interviewed 3,000 consumers. Nearly 25% of respondents reported that it is “really hard to tell the difference” between national brands and store brands of paper products. Store brands on average cost 46% less than name-brand versions, Mintel found….

Though low-income consumers have been cutting back for the past several months, now upper-income shoppers — those with household incomes of $100,000 or more — also are making significant changes, according to a new survey by IRI.

The report, titled “Shopper in Crisis,” found that 41% of upper-income consumers reduced spending on nonessential groceries, and a fourth of these consumers said they gave up favorite brands over six months in 2008. Nearly one-third of high-income shoppers said they bought more private-label products during the second quarter, up from about 20% in the first quarter of this year.

“This isn’t belt-tightening, it’s belt-notching,” says Thom Blischok, president of consulting and innovation for IRI. “These ritual changes are much deeper and happening much faster than we expected.”

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28 comments

  1. Anonymous

    Great topic.

    I have to disagree on the comment about cosmetics marketing being a conspiracy against women. It’s about making a buck, and the collateral damage to women is not considered. If men bought cosmetics, marketers would do the same thing to them.

  2. ajay

    “”You’re seeing consumers leaving children in diapers longer…the diaper is less expensive per piece than a training pant,” he said in a recent conference call in which he announced a 9% decline in third-quarter earnings.”

    A “training pant”? So times are now hard enough that Americans can’t afford to get a pair of pants for their children, but have to make do with a single pant?

  3. Jojo

    Brands are generally over-priced. You can buy a store brand which is generally the same item, made in the same manufacturing plants but just labeled for the store.

    I buy Costco Kirkland brand paper towels instead of Bounty, Walgreens toilet tissue instead of Charmin’/Cottenelle or Scott, store laundry detergent instead of Tide, etc. All are equal in quality to the brand name.

    Brand name consumer companies are probably good short candidates.

  4. jmf

    Moin from Germany,

    our market is dominated (50%) from several discounters ( privatly owned from some of the richest Germans Companies : Alid, Lidl, etc ).

    Their business model is to focus solely or to the majority only on their own “brands” that cost far less than the original

    The open secret is that most of the Aldi labels are also produced from the big players like Unilever etc…..

    The only major brand i know has opposed this move is Nestle….

    These discounters are stealing market share during the past 10 years ( from 30 to over 50%).

    And after the bubble has burst in the UK they are far outperforming their UK peers…

    I assume this trend will spread across the continent…..

    Often the market share has just crossed 10% percent in Western Europe

  5. Bendal

    Marketers are trying to target men to use moisturizers; I’ve seen the ads on TV (but they don’t call the product “moisturizer”, they call it something else).

    However, I’m not going to save money by buying store brand toilet paper. There’s a comfort level involved in that particular item, folks.

    I do our grocery shopping though, and definitely use coupons and look for sales on basic items to save some money. Brand loyalty is a thing of the past, IMO.

  6. Todd

    Inflation this time has been across the board. It has not been limited to a single category like recent past spikes. When cost of living slash raises are 3% or you are now collecting unemployment benefits. You have less money, and have to make decisions

    Brand is only an awareness factor, if your buying something for the first time you may choose based on brand. After that its quality and price. Economic factors determines which comes first. Of course necessity trumps everything.

    Training diapers are a pure marketing ploy. I have gone through 2 cycles of potty training and will start a 3rd next year. I have never used a Training diaper. The allure of training is getting to wear big kids pants, not another diaper.

  7. Anonymous

    I think, when people are looking to save money, the easiest thing to do is cut back in certain non-discretionary areas. People don’t realize how much they needlessly spend at the grocery store every week. I’ve learned in past downturns that I can save a bundle by not buying brand and looking for value. For example, why would I buy Benedryl brand, when the same product (in the same capsules I might add) is a buck cheaper? Paper towels are utility items that you toss away. Why would I spend more? Can anyone really say which laundry detergent is better? Or that Clorox does a better job than the stuff in the Target bottle?

    And this behavior does carry forward. One economic slump and job loss made me change my habits forever. I never buy when something’s not on sale, buy the store brand where possible, and use coupons where possible. You can slash your weekly budget an amazing level just by doing this…or not shopping at some place like Whole Foods where, contrary to what they say, things are egregiously more expensive. So this will be game-changing for those that never went through a severe downturn before.

  8. Anonymous

    My prior experience in the food and drug industry taught me that while some brands and generics are equivalent, some also use lower grade ingredients. If the difference is not noticeable or objectionable, and the cost difference is, then I buy the generic. But I usually accomplish this through trial and error. There are generic paper products that I won’t buy simply because when they get wet, they smell like a wet dog! Allergies to different ingredients are also a concern.

    FWIW, some generics are made by the same manufacturer but there are also exclusively generic manufacturers (particularly for drug products).

    Coupons are also a great savings vehicle for those who have the time to use them. Often I do not and so appreciate the periodic coupons I receive that are simply a discount for spending a certain amount.

  9. Anonymous

    “Moisturizers are one of the many ripoffs foisted on the fairer sex to keep them broke and dependent on male support.”

    It is always reaffirming to hear that the “fairer sex” are incapable of independent thought and analysis.

  10. macndub

    Being Hindu, I’ve been able to cut the toilet paper out entirely.

    Yves, I’d have to agree with you about the cost of moisturizers keeping the Laideez down. At least I can squeeze a month out of a Gillette Mach 3 if I’m careful, but my wife doesn’t really have that option with her cream. The funny thing is, she knows it does no good, but it helps her feel good. So we pay for it.

    Just like my Wii.

  11. Andy

    I cannot shave without Mach3 or Schick Quattro. I used to be able to use the Schick 3blade but now that i’ve upgraded I can’t go back…that is a monopoly right there!

  12. mndean

    I do buy store brand items, but in some instances (toilet paper and some prescription drugs) will not even consider it. Even when I buy brand items, it’s always on sale and with coupons and I get as much as I can and store what I don’t immediately need.

    With prescription drugs, it was due to my mother (a nurse) speaking with an FDA official with the Clinton administration she was caring for. He told her that generics were often less effective and couldn’t always be relied upon. I’ve experienced this with some generics being as good, and others not (same drug, mind you) depending on the manufacturer. So when I need an antibiotic, I will get brand even if it hits my pocketbook. It’s a thankfully rare occurrence.

  13. Anonymous

    This is the same tired old mantra that many people will not cut back on this or that. Well, that’s exactly true. *Most* people won’t cut back on brand names or hair coloring or what-have-you. The problem is that the important consumers are the ones *at the margin*, the ones who *will* cut back on brand names, etc. Prices are set at the margin, people. I get the same stupid argument in LA about the high end of the RE market. Sure, there are still many people who are so rich it doesn’t matter what the price of the home is. Problem is that the price is set at the margin and the “aspirational” buyers cannot afford (or are not being given loans) to buy the more expensive house. I have no special ability to foretell the future, but this is not rocket science.

  14. tompain

    If this were a permanent change in behavior, it would be in the long run a healthy thing for our society and our economy. But it won’t be a permanent change.

  15. kim galibert

    as opus tells us, ‘women who wear too much makeup look ungodly’……

    with the news that moisturizer use has been linked to skin cancer, and that makeup from ‘natural and organic’ companies has been found found to contain all sorts of toxins, i look forward to a happier time when women wise up.

  16. playdumb

    @macndub ‘the Hindu’
    A hindu myself but been using toilet paper for 2 decades now, is this bad karma?! Pray (palms firmly folded together in front of chest) what am i missing?

    Nice topic though, yes brand loyalty is over-rated, case in point, for Orange Juice, yogurts etc. here in UK, we go for whichever is on offer, if none go back to the store brand
    playdumb

  17. Kady

    Moisturizer, body wash, makeup, hair products… never had time for any of it.

    I’ve use one pot of generic moisturizer for the past 5 years.

    Give me a bottle of drugstore shampoo, some face wash, and a bar of soap and I’m good.

  18. Jojo

    To those who opined on store brand toilet paper, I’ll tell you that you are wrong. I recently tried Walgreens house brand and am throughly satisfied with it. It is nice and soft and doesn’t tear. Give it a try.

    btw: If you do buy something new and don’t like it, call the company, complain and ask for a refund.

  19. bg

    “Moisturizers are one of the many ripoffs foisted on the fairer sex to keep them broke and dependent on male support.”

    I think this is an unfair stereotype. I know many impulsive, broke and dependent men too.

  20. Anonymous

    “Moisturizers are one of the many ripoffs foisted on the fairer sex to keep them broke and dependent on male support.”

    I really hope you were laughing when you typed this.

  21. Anonymous

    I have cut back as well.

    Holding off on the platinum (going strictly with white gold) – and never higher rating than VVS2 clarity for the diamonds.

    It’s been tough but I’m getting through it.

    Thanks for your concern!!

  22. ciccocicco

    “Nearly 25% of respondents reported that it is “really hard to tell the difference” between national brands and store brands of paper products.”

    What did the other 75% say?

    Why is this statistics not showing more dramatically in big brand quarterly results?

    Who paid for this research?

  23. Anonymous

    “Moisturizers are one of the many ripoffs foisted on the fairer sex to keep them broke and dependent on male support.”

    I agree with the foisted part and the ripoff part but diagree with the conspiracy theory part. I think the reason many women CHOOSE to be so wrapped up in their looks is because they CHOOSE to use female manipulation to secure their way in the world simply because it’s easier with less uncertainty involved with the process.

    So many men and women both will often choose one way over another because it is the easier way.

    Who was it said, “Thus does our conscience make cowards of us all”?

  24. Anonymous

    It seems worthwhile to state the obvious corollary for investors: the traditional "recession-proof" stocks like Procter & Gamble and Johnson & Johnson… might not be. PG @ $65 is at the same level it was in late January. Short if you dare?

  25. Yves Smith

    Per the moisturizer comment, an exaggeration, yes, since it would be difficult to be forced into subjugation by face creams (well, unless your tastes run to La Prairie (for instance, $135 for 1.7 oz of facial masque, $550 for six treatments of “skin caviar intensive ampoule treatment”).

    My beef comes from the fact that many products targeted to women are considerably more expensive than those of comparable quality for men. Women have to pay simply ridiculous prices to get clothes of similar quality to good/top quality off the rack men’s suits. There are only one or two women’s designers who when I was assembling my wardrobe (I hate the styles now and prefer to shop in my closet, and when things I like start getting too worn out, have them copied by a tailor) who made shoulders as good as what men could easily get. The tailoring for women’s clothes generally stinks. And even then you had to pay 50% or more over what men paid to get comparable quality work.

  26. Dave Raithel

    This whole “neo-thrift” zeitgeist tasks me, as I am too acquainted with people who have always shopped at Dollar General and Aldi’s, who buy Best Choice products, and even buy house brands at Wal-Mart or Target. I get the point is to illustrate what’s happening in the real economy by documenting what’s happening with “consumers”, in the big sense of that term. But still, I have this little mocking voice in my head that says “Oh no, everybody might be as bad off as somebodies have always been ….”

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