Five ways to reach a "cautiously optimistic" generation of spenders''

Five ways to reach a "cautiously optimistic" generation of spenders:

A special report for businesses and marketers

Consumers have emerged from economic downturn with a new mindset.  When it comes to spending, they're proving to be more methodical, practical and proactive than in years past. 

After all, they've been burnt before.     

Some are referring to this new generation as "cautiously optimistic" since consumers are purchasing with caution, but are optimistic about finding the best values.  They take pride in stretching the dollar and saving money without sacrificing quality.

 To ensure that their purchases provide unique value, consumers are doing more research, comparing prices, using ratings and reviews and actively searching for coupons and savings.  They're making fewer impulse purchases, and quite frankly, they're embarrassed by flashy shows of wealth.

But consumers aren't the only ones approaching spending with a "cautious optimism".  Businesses and advertisers are sharing these sentiments, too.

The state of the economy has forced businesses and marketers to look at every cent of the marketing budget.  While ROI has always been an essential, marketers are now more pressed to prove that their campaigns are impacting consumers and generating revenues. 

So how do businesses make the most of their marketing funds and resonate with a cautiously optimistic society?  Based on trends and data from 2008-2010, here are five key ways. 

1) Offer savings incentives

For the first time in 17 years, consumers used more coupons than they did the year before, with 3.3 billion coupons redeemed in 2009, a 27% increase over 2008.

For many, price promotions and coupons have become requirements when planning shopping trips and making buying decisions.  Some post-recessionary consumers find that shopping more prudently and rebuilding their savings gives them peace of mind.  Couponing itself has become a "sport" among consumers, with numerous blogs, websites and instructional couponing classes popping up nationwide.

This frugal behavior or cautious optimism is especially representative of the baby boomer generation, who watched their savings and property value plummet when the economy took a turn for the worse.

According to The Nielsen Company, affluent consumers ($70k+) are considered super-heavy coupon users.  Other serious coupon users include those from large households, households with female heads age 54 and younger, as well as those living in affluent suburban neighborhoods.  According to a recent survey by Coupons.com and Harris Interactive, coupon users are more likely wealthy and educated.  Key findings include:

- 61% of adults with household incomes $100,000+, have redeemed a coupon in the past 6 months; 39% of this group have redeemed a printed online coupon.  This is double the amount that consumers with incomes $35,000 & below have redeemed

- Consumers who have college degrees are twice as likely to redeem coupons than those who did not graduate high school

- More than 3 in 4 (77%) of those that have redeemed coupons in the previous six months live in metropolitan areas

- 80% intend to continue to seek and use coupons after the economy recovers        

Matthew Tilley, Director of Marketing for Inmar's promotion services expects coupon redemption to grow in the range of 3-5% annually

Accordingly, retailers who wish to capitalize on this shift in consumer behavior have to make promotions and savings offers accessible to customers and make redemptions an easy operation

The increase in coupon use will likely outlast the economic downturn as marketers gain a deeper understanding of how coupons affect shopping behavior and as more companies learn how to successfully employ them.  Local businesses are embracing coupons this year, with the value of their coupons jumping more than 50%, according to Borrell Associates.

2) Go digital

In addition to traditional forms of coupons (i.e. direct mail, FSI, magazine), cautiously optimistic consumers have begun to rely on the Internet as a source for money-saving offers. 

During recession, shoppers discovered a growing number of tools, techniques and programs to help manage their spending and maximize their savings.  They include online and mobile coupons, "opt-in" e-mails, comparison shopping sites and loyalty reward programs.

Since last summer in 2009, the growth in digital coupons has increased markedly

-Some 44 million adults printed online coupons, a 21% increase from the same period last year (Experian Simmons, 2009)

- One-third of all U.S. Internet users in October 2009 visited deal-oriented sites (CMO Council, 2009)

- Overall, two-thirds of US households use coupons, a 46% increase over the past three years (Experian Simmons, 2009)

- Local coupon spending is forecast to almost triple during 2009-2014, expanding from $730 million to $2.7 billion

- According to a BIA/Kelsey consumer tracking study, 58% of respondents report using an online coupon when shopping for products or services in their local area

Mobile coupons

Mobile couponing is a fast-growing market and is expected to grow exponentially from the current 2.3 million coupons redeemed today to 66.9 million coupons by 2013, largely due to the increase in Internet use, SMS texting, smartphone adoption and mobile applications, according to the Yankee Group

The trend toward providing rich media coupons (electronic versions of print coupons, bar coding, video ads with offers) like those provided with mobile applications will also continue to grow.   Some key statistics describe the growth opportunity:

- Redemption rates for mobile coupons are ten times greater than newspaper-distributed coupons (Borrell Associates, April 2010)

- 80% of online coupon mailings saw higher transaction-to-click rates than non-coupon campaigns (Experian, 2009)

- According to Scarborough Research, 8.6 million (or 8%) of U.S. households currently acquire coupons via text messages and/or email

- 42% of 18 to 34-year-old adults and 33% of 35 to 44-year-olds are interested in getting opt-in mobile alerts from their favorite places 

- About 90% of mobile users have made impulse purchases while shopping due to a sale with 22% of these shoppers doing so on a weekly basis

Cox Target Media-Valpak Study

The availability and convenience of digital coupons are attracting a newer and younger base of consumers, many of whom use Twitter, Facebook and other forms of social media; this trend is expected to bring the number of global coupon users to 300 million, who will generate close to $6 billion globally in retail redemption value by 2014 (Juniper Research, November 2009)

A recent Cox Target Media/Valpak study of "Generation Y" or "Millennials" revealed the following:

- Generally, 18-27 year-old adults are very interested in mobile marketing and receiving offers through the use of their mobile phone

- Study participants stated that dining and entertainment coupons were among their most preferred categories

- Overall, the quality of the text offer and its relevance to their lifestyle were key to their satisfaction and willingness to participate in mobile marketing

Email Coupons

The most common methods for consumers to find online coupons are search engines and email.  According to Online Retailer's annual analysis of the nation's top 500 Web retailers, these businesses collectively generated more than 4,000 e-mail campaigns a month in 2009, and 80% included incentives.  Combined, these efforts generated more than 1.8 million unique visitors per month (Borrell Associates, 2009).  Several key statistics highlight the opportunity for marketers to utilize e-mail to send coupons to promotionally-receptive consumers who are likely to redeem these offers:

- 41% of consumers will open promotional emails (CMO Council, 2009)

- Preferred methods for companies to contact consumers about product or service promotions are 51% for traditional mail and 43% for email (CMO Council, 2009)

- 46% of North American small businesses surveyed in 2009 used email marketing, with another 36% planning to do so in the coming year (Hurwitz & Associates, 2009)

- About 8.1% of all adults are using coupons delivered in e-mail (Borrell Associates, 2009)

- Emails w/ coupons that can be used online were most likely to be clicked at 4% (Experian Simmons, 2009)

According to the DMA 2009, email marketing is expected to generate a ROI of $43.62 for every dollar spent on it in 2009 and $42.08 in 2010.  This medium will continue to be used by marketers to reach receptive, cautiously optimistic consumers and create transaction-triggering events.

Social networking

According to a recent report by Razorfish, the top reason consumers followed a brand on Twitter, Facebook, or MySpace was to receive exclusive deals or offers.  With Twitter specifically, 43.5% of consumers claimed that exclusive deals or offers was the primary reason they followed a brand, compared to 23.5% who said they followed a brand because they were current customers. 

Search engine optimization

During the recovery, thoughtful shoppers will start their shopping with specific products in mind.  Retailers and manufacturers need to realize the growing trend of "search-engine shopping" and the necessity for them to optimize their search engines.

75% of consumers indicate that they look online for store, price or product information before or during their in-store shopping, according to a Deloitte survey.  51% of consumers say that an online product review has influenced their decision to buy a product, or to not buy a product

In sum, the more consumers utilize digital devices in their daily lives for social and business reasons, the greater the opportunity becomes for marketers to reach them in a digital manner.  Electronic coupons are expected to play a key role in driving consumer response and prompting transactions for businesses and marketers in the years to come.

3) Make the most of targeting techniques

With fewer dollars available to experiment on campaigns, targeting has become a favored way to reach cautiously optimistic spenders and stimulate a response. 

Precise targeting and market segmentation puts the advertising message in front of the consumers most likely to respond to it.  Targeting by geographics, demographics, consumer behavior and consumer expenditures ensures that a business mails to its exact audience.

According to a recent Winterberry Group report, the organizations struggling the most are those that have depended on saturated marketing with little or no regard for rich personalization or the particular needs of the individual recipient.

Industry experts predict more robust personalization techniques in 2010.  Continued advancements in database management and variable data printing (VDP) will allow marketers to refine the message down to the individual level without spending a fortune.   

4) For continued success, track results 

Marketers are being asked to produce quality, measurable campaigns with fewer resources than ever before.  Naturally, measurement tools and techniques are no longer a media program's "added-value", but rather a necessary cost of doing business. 

Companies need to see how their marketing dollars are being spent, and how effective each activity is.  Responses also provide valuable information about who a businesses' best customers are, and where to focus marketing efforts. A business can continually improve the success rate of its marketing campaign by gaining constant feedback right from its customers.

It's difficult at best to measure results with some media, but by providing the consumer a unique way of responding, it's easy to tell if your advertising is working.

Provide the consumer with a unique method of responding via coupons, bar coding, key coding, point of sale, versioning, and more, and you can begin tracking advertising results more accurately.  Service and home improvement businesses can utilize unique phone numbers, or call tracking services to better analyze cost per lead.  Consequently, reconciling your costs against your response and determining your return on investment (ROI) is much easier and more accurate.

5) Understand economic projections, and plan accordingly 

During recession, an undesired accumulation of inventories forced businesses to slash production, layoff employees and reduce the unwanted inventories.  Through discounts and couponing, though, some firms were able to stimulate final sales of domestic products, reduce bloated inventories, and ultimately, close the gap between production and sales.  This production catch-up has played a large role in the positive gains seen in GDP over the last three quarters.  

The Institute for Supply Management indicates there will be acceleration in real activity in 2Q10, with GDP anticipated to be higher than last quarter's 3%.  The remainder of the year, however, doesn't look quite as bright.

In June, consumer confidence and expectations about the future took a sharp dive after three consecutive months of growth.  Consumer confidence is directly related to a consumer's willingness to spend.  The decline in confidence signals the possibility for a reduction in consumption, and in turn, a decrease in the growth of GDP (which can no longer rely on production catch-up).  Unemployment typically lags GDP by 6-8 months, so a reduction in the growth of GDP can mean a deceleration in job growth down the line.

In spite of these factors, interest rates remain historically low, and average weekly hours and wages have risen.  These are positive influencers as long as consumers and banks engage in lending again, and the additional wages earned are used to consume.  Retail sales growth has slowed in recent months, but remains higher than in 2009, which indicates a healthier economy over the previous year. 

In sum, with tax credits and incentives coming to an end, overall economic growth will be more dependant on employment gains than was the case in early 2010.  Some estimate that GDP growth will slow considerably to a 1-2% growth rate for the remainder of the year.  For that reason, as cautious optimism and societal "shift to thrift" presses on, it may be in retailers' best interest to once again stimulate sales through discounts and offers.