As gasoline prices hit record levels, consumers trading in large and mid-sized trucks and SUVs are getting smaller vehicles instead, according to J.D. Power & Associates. Per the consultancy's Power Information Network (PIN), gasoline price surges of 20 cents, to a national record average price of $3.10, have eroded owner loyalty of big vehicles. The consultancy measures loyalty as a percentage of owners in a given segment who stick with that segment when they trade in for another vehicle. Per PIN data culled between February and April this year, sales of small vehicles as a percentage of total new-vehicle sales have risen from 26.3% in 2004 to 31.8% so far this year. Gasoline price increases are also reducing the number of used small cars, compact basic cars and small luxury crossovers sitting on lots. While loyalty toward large vehicles has slipped, loyalty toward small cars and crossovers has gained. And gasoline prices have had minimal impact on mid-sized crossover vehicles, reflecting both the proliferation of vehicles in that segment and also the fact that crossovers garner higher mileage. Gas prices have also had no effect on large and mid-sized cars, and on small crossovers and SUVs in recent months. Not surprisingly, sales of hybrid vehicles closely track monthly variations in gasoline prices, per the consultancy's PIN research data from January 2005 through April this year. For example, hybrid sales hit 40,000 in August 2005, when gasoline spiked to just below $2 per gallon--up by 75 cents a gallon eight months earlier when only 25,000 hybrids were sold, per the consultancy. In August last year, when gasoline prices hit a national average of $2 per gallon, sales spiked again to similar levels, then dropped in the fall, when gas prices tempered, before heading up again this year. Tom Libby, senior director, industry analysis for J.D. Power, says the key point is that at least until the sky falls, or gasoline prices hit $4 per gallon and stay there, the loyalty patterns will follow, roughly, gasoline prices. "We are seeing patterns repeating themselves after last year. The segment loyalties are following the same trends," he says. "The propensity to re-buy or trade for the same vehicle goes down in [large and mid-sized SUV and truck segments] as gas prices rise like this. But it could reverse itself; we have seen that happen. "But if the market reaches that $4 level in general and stays there for an extended period, we think there will be dramatic shifts in the market. If those two conditions develop, there will be major shifts."
In the face of critics who say direct-to-consumer marketing of prescription drugs tends to send consumers racing to their doctors for a dose, the 10th annual national survey on Consumer Reaction to DTC Advertising of Prescription Medicines has found that just 8% ask their doctors for a specific medication after seeing a DTC ad. Perhaps the biggest change found in the survey, says Cary Silvers, director of Consumer and Advertising Trends at Rodale, is the change in consumer behavior. "We're picking up a trend where more consumers are looking to be able to compare one medicine to another," he says. Since 2005, the percentage of people who compare drugs online has risen 15 points, to 61%. The annual survey is conducted by Prevention, Men's Health and Women's Health magazines, with technical assistance from the FDA's Division of Drug Marketing, Advertising, and Communication. The desire for on-demand information is "another element that [the direct-to-consumer industry] has to contend with in additional to the traditional gatekeepers," Silvers says. Acknowledging that Rodale publications profit by DTC advertising, he notes that there are many opinions, pro and con, on the issue. "We bring the voice of the consumer." The survey found that the No. 1 action taken by consumers after seeing a DTC ad is information seeking--before, during and even after a prescription is filled. Other key findings, according to Rodale:
When did Americans become so irregular? Following the lead of Dannon Co.'s $100 million Activia yogurt rollout, several marketers have jumped on the probiotics bandwagon with products that claim to keep the human gut in working order. The probiotic trend extends beyond the refrigerated dairy case: So far this year, marketers have introduced 71 new non-yogurt-based probiotic products that offer to aid in digestion and maintain intestinal health, according to Datamonitor's Productscan Online. Last year, a total of 113 new non-yogurt-based probiotic products were introduced over 12 months. Four years ago, that number was just 39. "It's a trend we're seeing everywhere," says Productscan Director Tom Vierhile. "We've even seen probiotics in a German salami." Dairy marketers are trying to catch up to Dannon's lead. In June, Kraft Foods will roll out in the U.S. LiveActive probiotic cheese cubes and cheese sticks, which claim to balance naturally occurring gut flora and aid in digestion. It recently introduced cottage cheese enhanced with prebiotic fiber under the Breakstone and Knudsen brands, with labels that promise "For Digestive Health." Dean Foods Co. recently started selling probiotic cottage cheese in the upper Midwest under its three flagship brands: Dean's, Country Fresh and Land O'Lakes. Yoplait markets Yo-Plus dairy drink with probiotics. And Dannon is expanding its probiotics usage to Danimals drinkable yogurts and yogurt cups. 'Smores, anyone? Other probiotic products run the spectrum from cereal to marshmallows. According to Productscan, new probiotic brands include:
Honda has launched the latest iteration of its Civic Tour, a Honda-sponsored arena concert series, now in its seventh year. The tour puts Honda's Civic car central to promotional activity in which Civics customized by band members are dangled as promotional prizes. News, tour dates and band information as well as the bands' own Web sites are housed at civictour.com, which changes every year to reflect the sponsored bands. This year, the company is focusing on its Hybrid Civic, and a beefed-up web site allowing for user-generated content around this year's Civic Tour band, Fall Out Boy. It also includes a relationship with social-networking site friendsorenemies.com, where fans interact with band members and with which Fall Out Boy is involved. The effort, comprising video content delivered to both civictour.honda.com and friendsorenemies.com, includes documentary video clips of the band and videotaped responses from band members on the Civic Tour site, to questions posted by fans. It also offers a "Long Song Title Game," which asks users to write long song titles similar to the band's own modus. Honda's site links to friendsorenemies.com, which the band is using to post photos of the tour taken from band members' own camera phones. They are also using the site to post journal entries and blogs. The tour launched last Friday in Denver. Also on the bill are +44 , The Academy Is..., Paul Wall and Cobra Starship. The band-modified car this year is a Hybrid Civic, which is showcased on the Honda Civic Tour Web site and will be displayed at each concert venue. Throughout the tour, fans will have the opportunity to enter a drawing to win the band-autographed car. The interactive effort was developed by L.A.-based RPA, Honda's agency of record, and is being produced by Buzznet, which runs friendsorenemies. Fern Shlauter, RPA's interactive management supervisor, says that although Honda promotes Civic Tour in traditional media, the Web site is intended to drive interest. "I think that we have always wanted the Civic Tour site to be very interactive," she says. "In the past, for instance, you could vote for bands and submit feedback, but this is a really big departure in terms of user-generated content." This is the first time Honda's tour site has linked with other social networking sites. Honda doesn't market its cars on the site. The only vehicle shown is the one customized by the band and promoted as the ultimate prize in a Honda Tour sweepstakes. "We try not to be heavy handed with product promotions on the site. We want people to have a fun, engaging experience. It's more of a life-style play." She says Fall Out Boy appealed to Honda partly because they had a huge fan base ... online. "MySpace is a measure of popularity that people study. And they are the number-one most popular band on MySpace, with one million friends, so they have a strong fan community. They also have compelling radio play numbers, and they are the kind of up-and-coming band we like to work with." Honda and friendsorenemies are also running a promo in which consumers can upload videos of fans lip-synching the band's songs. Shlauter wouldn't mention site traffic numbers, but says: "We have had significant increases over the previous year and are getting strong traffic."
Hoping to shore up disappointing sales, especially in home furnishings, Federated Department Stores said it's rethinking its marketing strategy. In the quarter ahead, it says it will spend more on public advertising for sales and special promotions--especially TV--and less on private marketing efforts. "We do need to communicate more effectively, and we need to bring more customers in to try the Macy's store," said Karen M. Hoguet, Federated's CFO, during a conference call to discuss first-quarter earnings. "While we are having success building a proprietary database, we need more time to be effective. Until that happens, we are going to have to advertise more in the public media rather than in the direct mail." The company also said that while first-quarter sales came in more or less as expected at its established Macy's stores, sales at the "new" Macy's--such as Marshall Field's and other stores converted from its merger with May Corp.--were disappointing in February and March, particularly in furniture. By April, that softness spread to all its stores, and while there was no clear geographic trend, apparel was also hit hard. Poor sales "are primarily a traffic issue," she said, "and it's been a whole lot weaker in the home store. More public advertising will bring more people in the store." She also said Macy's would not consider exiting the home-furnishings business at this point: "We believe we have a real competitive advantage in this area." The company lowered its sales forecast for the coming quarter. On a same-store basis, Federated--which will soon be known simply as Macy's--expects second-quarter sales to be flat to up 2%, versus prior guidance of up 1.5 to 2.5%. But it's expecting better results in the second half of the year. "While April has given us some concern about the consumer and the economic environment, we remain optimistic that our trends will improve, particularly in the back half of the year as we reach the first anniversary of the Macy's brand conversion," the company said in its release. "With the warmer weather, trends have improved," added Hoguet. "And research is showing that customers at the former May stores are understanding and liking Macy's more and more." In the first quarter, sales fell 0.2% to $5.9 billion, versus the same period last year. Previously, the company had told investors to expect sales in the $6-6.1-billion range. And on a same-store basis, a measure observers say is especially critical in monitoring the company's post-merger performance, sales gained 0.6% in the quarter. At Bloomingdale's, however, sales were much stronger, and--except for weakness in home furnishings-comparable with its competitors. In fact, based on the strong performance of the new Bloomie's opened in the first quarter, the company may decide to step up growth plans. "We feel good about Bloomingdale's expansion potential," a spokesperson said.
Baby boomers were revolutionary--but they are less brand-loyal than preceding generations. According to a study released this week by market-research firm Focalyst, a joint venture between AARP and the Kantar Group, boomers defy expectation. The Focalyst data provides specific measures of boomer "brand loyalty" for products and services, drawing on a panel of about 35,000 consumers over the age of 42. The baby-boomer data represents something of a departure from conventional ad wisdom. Advertisers covet the 18-34 demo in part because it's believed that lifelong brand loyalties are formed during this period. Recently, however, research has contradicted this belief. In April 2006, an article titled "Brand Purchasing by Older Consumers" published in Marketing Letters, an academic journal, found that "patterns of buying between brands within a product category do not reveal marked age-based differences, and leading brands tend to be leading for all age groups." Still, certain categories do score higher in terms of brand loyalty among boomers in the Focalyst study, with data suggesting relatively high degrees of loyalty for service-oriented brands, like insurance and banking, and significantly lower brand loyalty for product-oriented brands. TVs scored the lowest brand-loyalty rank, with just 22% of respondents saying they didn't switch brands regularly, followed by computers at 24%, apparel at 27%, home appliances at 30% and prepared foods at 36%. In addition, 72% said they didn't switch auto or home insurance, and 67% were sticking with medical insurance, 65% with life insurance and 63% with their bank. Heather Stern, Focalyst's director of marketing, remarked: "Boomers are most loyal when companies give customized service, a natural reflection of boomers' desire for personalized attention and rewarding brand experiences." They are also willing to pay more if a product or service makes their busy lives easier. "For consumer categories such as home appliances, computers and televisions that score low on brand loyalty, marketers may be able to develop stronger bonds with boomers," says Stern. The trick: focus on the service aspect. Remember, this is the Me Generation.