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Millennials and Private Label – a Blossoming Problem for National Brands?

January 12th, 2018 Comments off

It has been well reported and documented that private label brands are surging in the US. Whether it is due to their optimal mix of great value and experience or other reasons, they have forced name brands to re-think strategies. It is also well-known that Millennials are contributing to this trend as they are prioritizing experience over attainment.

In this short blog entry, we aim to show just how important this generational dynamic is to the future of private label brand purchasing. In addition, we will also highlight solutions MSW-ARS has for helping name brands both measure and address concerns in this area.

First, it is important to note just how much of a generational difference there is with regard to purchasing name brands “wanted most” in the table below comprised of thousands of responses across 60+ categories. The difference between Millennials and Baby Boomers is far greater than any other standard demographic. This suggests that age is one of, if not the most important socioeconomic indicator in determining one’s propensity to buying brands they most desire. It is not that Millennials do not desire name brands, they are just choosing not to purchase them at the same rate as previous generations.

 

Not surprisingly given “wanted most” trends, Millennials are also the most likely to purchase cheaper/generic brands. In the table below, Millennials are well over twice as likely to buy generics/less expensive brands versus Baby Boomers.

 

What does this mean for some of the individual categories we track? Here are a couple of tables showing the differences between Millennial and Baby Boomer purchasing in 2017.

First, those purchasing the brand they wanted most:

 

In addition, here is a table showing those purchasing a less expensive/generic brand:

 

The previous data can lead to many different hypotheses, including the following:

  • Is this just a life stage phenomenon?  Will Millennials’ purchase patterns more resemble Gen X and eventually Baby Boomers once they become older?
    • While it is possible Millennials will more resemble previous generations as they age, we are not confident that they will. When compared to previous generations, Millennials have lower income, which in turn would suggest why they are turning more toward generics/lower priced brands as opposed to brands they truly want. However, in the tables above, the three income tiers do not differ much with “most want” and “less expensive/generic” purchasing, especially when compared to the generational tiers. So, unless another Millennial age-dependent characteristic is currently driving their added tendency toward purchasing generics/less expensive brands, and will eventually go away (perhaps something like high student loan debt, which was not tracked), then we believe the generational data is more of a change in attitudes toward generics/name brands than any special constraint unique to any younger generation.
    • In addition, the previous tables show very different trends in purchasing behavior simply based on different categories. Millennials have similar buying trends to Baby Boomers with categories such as Athletic Shoes, Energy Drinks, and some Electronics, while they are MUCH more likely not to buy what they most want when purchasing a Sedan, Analgesics, or Bathroom Tissue. To us, this further suggests Millennials are not just defaulting to generics/less expensive brands everywhere, they are simply realigning what is worth paying more for.
  • If current trends hold, then what does this mean for the generations after Millennials once they become a large portion of the consumer base? Those born in the year 2000 and later are entering the market for many different goods and services now that they are turning 18 and becoming adults.
    • To answer this, certain assumptions have to be made in order to make any type of prediction. These three scenarios immediately come to mind:
      • Scenario 1 – Continuing Trend: If current trends hold, then we could very reasonably expect the next generation after Millennials (Generation Z) to be even more likely to purchase generics/less expensive brands and less likely to purchase the brands they truly want.
      • Scenario 2 – Millennials Become Like Gen X: If Millennials actually do go on to more resemble earlier generations as they age, then we can reasonably see a situation where the generations simply “replace” one another. Generation Z would have purchasing behavior close to that of today’s Millennials, while Millennials become more like today’s Gen X, and Gen X becomes more like today’s Baby Boomers.
      • Scenario 3 – Current Trends Are Just The Tip Of The Iceberg: A lot of trends begin with younger people, then eventually spread to the older population (see social media). If this happens with generic/less expensive brand purchasing, then it’s possible that ALL of the current generations could eventually see an increase – even Baby Boomers. This would likely be one of the worst developments for name brands that may be at a price premium.

We also should not fail to mention another scenario, which is…no one really knows as of right now. Unlike the previous three scenarios, this is the only one we can currently believe with high confidence. That may sound discomforting, but there are action steps you can take in order to be fully prepared for what comes next on this front as well as future decisions for your brand.

We at MSW-ARS offer custom, cost-efficient solutions to both diagnose and address potential brand and category decisions that may arise via the rise of generics/less expensive brands or others elsewhere.

To diagnose category and brand opportunities, we offer custom tracking that can be as streamlined or in-depth as you prefer. In fact, the data used in this blog post is from our syndicated Brand Strength Monitor platform (TBSM), which includes our choice metric that is the ONLY validated measure of brand value – and at a low cost. For example, with that particular data, you will be able to diagnose where your category stands in this generational battle, and be able to see the impact for your specific brand relative to other brands (not shown in this blog, but is very easy to do).

To help address these opportunities, we offer our strongly validated copy testing products that can help determine which route is the best for your brand to take in order to make the best decision for overcoming the rise of generics/less expensive brands, as well as others. With the rise in popularity of generics/less expensive brands, we have made improvements to our copy testing methodology to help directly address this area.  Our approach aims to identify the consumer journey, and how brands can make themselves relevant to consumers’ growing desire for experience.

Please do not hesitate to reach out if you would like additional information regarding this blog post or what our custom products can do for you.

Thank you for reading!

The Challenges of a New Brand Name – 5 Empirically Supported Tactics to Improve Your Results

March 31st, 2017 Comments off

It’s common for new products to leverage existing brand names.  This could be line-extension – a new variety of an existing brand in the same category; or a brand-extension – a new product in a new category using an existing brand name.  In either case, the new product can take advantage of the brand’s existing equity which will typically lessen barriers to trial among consumers and improve the chance of gaining distribution among retailers, among other potential benefits.

It is much less common for new products to be released under a completely new brand name.  It happens when manufacturers enter completely new categories unrelated to existing brands; or when leveraging existing brand equities is inappropriate for the product’s proposition.  We examined the MSW●ARS advertising database to provide an estimate of how common this is.  The fact is, it is comparatively rare, with only between six and seven-percent of new product advertising tests being conducted for products with completely new brand names.

That being said, there are a huge number of new products introduced each year and so that six to seven percent actually represents a very large number of new brand introductions annually.  This is illustrated in the following chart, which shows the trend in U.S. new product introductions among consumer packaged goods between 1998 and 2016.  The chart also shows a strong uptick in new product introductions in 2016, as brands try to take advantage of a strengthening economy and the associated phenomenon of consumers being more willing to try new things.  In this environment, completely new brands are not only more likely to be tried by manufacturers, but they’re also more likely to be tried by consumers.

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Source: Mintel’s Global New Product Database

While there are many challenges for a new product before launch, once it is in the market it is imperative that the product gain awareness and sufficient trial to earn continued support among retailers in order to maintain distribution and shelf space.  For a new product with a completely new brand name this can be challenging.  We examined the MSW●ARS database and looked at new product advertising and compared Related Recall levels for ads for completely new brands versus those for line- and brand-extensions.  Note that the Related Recall measure is designed to capture the efficiency of creative to breakthrough and create a memorable impression of the advertising and this metric has been strongly linked to movements in awareness.

We found that, on average, Related Recall levels for ads for completely new brands are only 64% of those for other new brand ads.

 

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Source: MSW●ARS Analytical Database

Clearly ads for brands with completely new names struggle to create a strong branded impression in the minds of viewers.  Established brand names already have associations in the minds of consumers which ads for a line- or brand-extension can tie into and more easily leave a lasting impression.  Ads for a product with a new brand name are starting from scratch – a much more daunting task.

To further illustrate the challenge, we used the MSW●ARS new brand awareness model to compare average ads for completely new brands versus those for other new products.  We found that in order to gain the same level of brand awareness as an average ad for a line- or brand-extension at 1000 GRPs, an average ad for a completely new brand would require about 1450 – a substantially larger media investment.

Taking steps to improve an ad’s ability to break through will not only help build awareness with a lower media spend, it will also help nudge viewers toward trial.  There is a significant relationship between an ad’s Related Recall level and its level of persuasiveness (as measured by the MSW●ARS CCPersuasion measure, which has been shown to be strongly correlated to new product trial level and is predictive of the magnitude of market share gain for established products).  And in fact this is especially true for completely new brands.

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Source: MSW●ARS Analytical Database

So how can a completely new brand improve its communications and make it more likely that the brand name registers and persuades consumers to try the brand?  Here are 5 empirically supported methods which can help new brands do just that.

1.  Ensure sufficient branding:

Analysis of the MSW●ARS copy-testing database indicates that sufficient branding is beneficial for all product types, but for completely new brands it is vital.  Two proven measures of branding are the number of times the brand name is spoken and how long the brand name or logo is shown on-screen.  As can be seen in the following chart, completely new brand 30-second ads incorporating these branding elements realize a boost in Related Recall about five times greater than that realized by other new product ads.

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Source:  MSW●ARS Analytical Database

2.  Avoid Short Ad Lengths:

The use of shorter ad lengths can be especially challenging for completely new brands.  While the number of 15-second ads for completely new brand names in the MSW●ARS database is relatively small (reflecting the fact the few even attempt this), it appears that Related Recall levels for these ads versus other new product 15-second ads are at a ratio even lower than the 64% level seen across all ad lengths.

3.  Consider a Meaningful Brand Name:

One driver of stronger CCPersuasion levels is a brand name which reinforces a product benefit.  While this may not be easily actionable for established brand names, it is obviously something a completely new brand can benefit from – and as the following chart shows, the benefit they receive from utilizing a meaningful brand name is substantial.  So invest in your name.

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Source:  MSW●ARS Analytical Database

4.  Avoid Gimmicks to Gain Attention:

There are certain attention-grabbing executional elements which tend to increase Related Recall levels while being neutral towards an ad’s persuasiveness.  However, data for two such elements that we looked at suggest employing such gimmicks for completely new brand advertising may often backfire.  So stay away from gimmicks and stick to your message.

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Source:  MSW●ARS Analytical Database

5.  Don’t be afraid to compare:

A completely new brand needs to find a way to convince consumers to choose it over what they currently use.  In pointing out how they are unique and different from the competition, such brands should not shy away from comparing and claiming superiority, as these approaches have a strong track record among completely new brands in terms of both CCPersuasion and Related Recall.  Just make sure you can back it up.

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Source:  MSW●ARS Analytical Database

Please contact your MSW●ARS representative for information on how our communications research tools can help your brand win in the marketplace.

Categories: Ad Pre-Testing Tags:

Why won’t TV advertising just die already?

September 9th, 2016 Comments off

The answer…  Synergy – the compelling reason why television advertising is as relevant as ever.

For the last two decades it has been fashionable to prognosticate the death of television advertising whether delivered by broadcast, cable, satellite, or stream.  The general storyline has been that emerging digital channels will displace television advertising through a combination of lower costs per exposure and better ability to target specific audiences both demographically and by exhibited category interest.  But while digital advertising has seen explosive growth it has not yet toppled television from the top of the media spend hill.  Television still maintains a one percent edge over digital with 2016 U.S. ad spending for traditional, non-digital television projected to be $70.6 billion versus combined digital at $68.8 billion.

 

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Source: www.emarketer.com

Given the above cited advantages of digital how can this be?  Part of the answer lies in the richness of the television exposure.  Television provides a ‘lean back’ experience that combines smooth full motion video with high quality sound.  The typical digital display ‘lean forward’ experience with smaller screens and less dynamic speakers doesn’t provide the same level of emergence.  Another part is the interruptive nature of television advertising which occurs in stream with the programming and seamlessly takes over the whole experience.  In many digital forms the advertising exposure occurs simultaneously with the content, effectively having to compete for attention with that content.  And digital also has a significant viewability problem with served ads appearing off-screen, being blocked, or viewed by non-human bots.  According to the latest comScore benchmark study in the U.S., only 48% of desktop display and 41% of desktop video are non-fraud, viewable impressions.  And this is not confined to the U.S.; according to comScore similar rates are occurring worldwide as shown in their infographic.

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In aggregate this means that television still typically delivers the highest sales return on a per reach basis.  A recent single-source meta-analysis by Nielsen Catalina Solutions dramatically illustrates this point.  Spanning fourteen hundred campaigns conducted by four hundred fifty CPG brands over eleven years, the analysis calculated incremental sales per household reached.  Compared to three common digital formats, television campaigns returned approximately 40% more incremental sales per reached household.

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However, when looked at on a per-cost basis the results are much closer.  Essentially the lower cost for digital (except for digital video) and its ability to better target brings it into parity with television on average.

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But this should not be interpreted to mean that spend can be moved from one channel to another without implications.  One thing we know for certain is that media channels are not an “either this or that” proposition.  In fact, confining advertising to just one channel can have a substantial, negative impact on advertising returns.   A new quantification of this synergy was included in the How Advertising Works study sponsored by the Advertising Research Foundation.  A meta-analysis of 3,200 campaigns whose sales impact was modeled by Analytic Partners showed a substantial increase in incremental return-on-investment for campaigns using more than one platform.  The additional lift over the single platform ROI ranged from +19% for campaigns using two up to +35% for campaigns using five.  Especially synergistic was the combination of TV and digital.  When digital was layered with TV the average increase in ROI was +60%!

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But this just begs the questions: From where does this synergy arise? and Why is TV advertising so synergistic with other forms of advertising?  Surprisingly, four distinct sources of synergy have been identified and all are in play for television advertising.

Advertising Wearout and Refreshment

As media spend is placed behind an ad its ability to generate sales diminishes.  This wearout has been proven to occur at an individual execution level.  Within a single media channel this is typically managed by identifying the strongest ad from the available pool (via pretesting) and then refreshing it with new versions after it has worn out.  In this way media dollars are not wasted by being placed behind ineffective ads.  The below example shows how this refreshment approach can be successfully used to drive share higher and higher within one channel, in this case television.

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Source: www.emarketer.com

This effect is inherently built into cross-media campaigns.  Because different platforms typically use a different ad format there is a natural tendency for this diversity to minimize wearout.  There are, however, two caveats to this.  First is that television and online video need to be managed collectively if the same executions are used.  The second, less obvious issue is that highly targeted campaigns can increase wearout by concentrating spend on a smaller number of consumers.  For example, a brand which heavy ups on digital may find itself over saturating a specific target at the expense of reach among a broader audience.  As cited in a recent Wall Street Journal article, the Procter and Gamble company recently faced this issue and will now “move away from ads on Facebook that target specific consumers, concluding that the practice has limited effectiveness.”  As explained by P&G CMO Marc Pritchard: “We targeted too much, and we went too narrow, and now we’re looking at: What is the best way to get the most reach but also the right precision?”  This reportedly includes ramping up spending on multiple digital sites and traditional media channels.

Recency of Exposure to Purchase Occasion

Another dimension of media plan effectiveness is recency – the time between exposure to advertising and the shopping occasion.  While numerous single-source studies have verified this effect, the classic examination of Nielsen data by Colin McDonald perhaps still best illustrates it.  In it the impact of advertising on share was shown to steadily decline as the time following potential ad exposure increased.  This includes a drop of 16% from the first day following exposure to the second day.

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This decline can be partially explained by a rapid decay in advertising memories.  An MSW●ARS study showed that proven ad recall after incidental advertising exposure faded by nearly fifty percent in the first three days after exposure.

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Since each channel exhibits a different pattern of engagement time in terms of both days and hours, the use of multiple channels can increase the probability of reaching the consumer close to a buying period.  In particular, prime-time television viewing coincides with peak online shopping times for many categories.  And even more compelling, online brand search volume has been directly linked to television exposure.

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In fact, in one attribution analysis conducted by MSW•ARS eighty-two percent of one brand’s online search conversions were first set in motion from a television exposure.  This is the primary reason some brands have experienced substantial, unexpected drop-offs in search ROI when television spending is reduced; their attribution models did not take into account that television advertising was driving substantial portions of their search activity.

Priming

The increased use of neuroscience techniques has driven a greater appreciation for the effect of cross-media priming.  In a recent interview Gayle Fuguitt, President of the ARF, summarized many of the learnings from the How Advertising Works initiatives.  In it she touches on the subject of priming effects:

“…if you see the same advertisement on a mobile phone and then on television it will have even more effectiveness. It resonates better.  We know brands are built in the brain.  That work was done using neuroscience.  And so it’s really unlocking consumers’ emotional connection, literal emotional connection, right?  Their heart and their pulse in their heads not just their feet, their behavior…buying behavior, to understand how advertising interactions can help build brand loyalty.”

Television advertising has been proven to be especially sensitive to these types of priming effects.  The more familiar people are with a brand, the more attentive they are to television advertising.  Even prior product use leads to greater attentiveness to, and recall of, the advertising.  Illustrating this point the below graph compares proven brand recall levels of brand users and non-brand users for ninety-seven television ads.  Across the ads, on average forty-two percent of non-brand users recalled both the ad and featured brand.  The corresponding number for brand users was fifty-one percent.

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Given this sensitivity to priming and its ability to reach broad audiences, television plays an especially important role in the retention of existing customers.  Laying down a consistent brand dialogue via television facilitates all other media channels in effectively contributing to this retention.

Message Ratcheting

One of the most interesting forms of synergies arises from the internalization of brand messaging across multiple advertising exposures. When consumers become exposed to the first ad of a new campaign they tend to take away specific “lower level” messages.  But as the consumer is exposed to new ad executions they tend to generalize to “higher level” messages.  As an example, the below blinded “green” campaign included three ads each focused on an environmental initiative; ‘Waste Reduction’, ‘Energy Efficiency’, and ‘Reduction in Emissions’.  Viewers of individual ads primarily took away only messaging related to the specific environmental initiative whereas those exposed to the entire campaign took away broader message of a “sustainability-focused company”.

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This “ratcheting” of messaging can be used to great effect in conveying difficult and vague concepts or in tying the brand to aspirational sentiments.  But it requires that consumers be exposed to multiple, effective ad versions.  One of the most cost effective ways to do this is to use television’s reach to introduce the campaign and then use other, less expensive channels to activate the message synergy.

The net of this discussion is that while television advertising is effective on its own, its synergies with other media channels make it a sine qua non – an essential tool for brand building.  For this reason the future of television looks as bright as ever.

Please contact your MSW●ARS representative to learn more about how our cross-media suite of tools can help your brand grow.