After a decade of selling glitz to a nation of big spenders, consumer-product companies are being forced by the economy’s slowdown into new ways of pushing products and grabbing business from competitors.
Elaborately staged soft-sell “image” ads have given way to harder-hitting pitches that stress quality and value. And increasingly, marketers aren’t spending money on ads at all--betting that they can sell more cars and hamburgers by putting their marketing money into price reductions rather than glossy magazine spreads and television spots.
McDonald’s Corp. and Coca-Cola Co., normally among the showiest of brand-name advertisers, have joined the hard-sell movement in recent weeks with a barrage of TV commercials promoting discount offers, giveaways and contests. To combat sluggish sales, McDonald’s plans to reduce many menu prices early next year.
The more somber mood has also spread to makers of luxury products, whose sales strategies have depended on images of the good life. Two years ago, Mercedes-Benz ran TV commercials that showed a pair of men riding in a train as a Mercedes sedan cruised alongside. As the commuters gazed enviously out the window, the driver of the Mercedes motored along blissfully oblivious, Mozart streaming from the car’s stereo system. The not-so-subtle message: A Mercedes conveys status.
Now the train commercial is gone--and so is the status sell. A new Mercedes ad shows a company engineer discussing the safety features of the company’s cars. Other ads emphasize reliability and durability, a decidedly down-to-earth approach for an auto maker with its lowest-priced model starting at $29,000.
“We want to show that we are not arrogant, we are not aloof,” said Albert Weiss, who directs national advertising and sales promotion at Mercedes-Benz of North America’s headquarters in Montvale, N.J. “We are real people and we are concerned about the real consumer out there.”
A recent campaign by New York Life Insurance Co. made an especially obvious appeal to consumer concern about the economic downturn. “New York Life is large, conservative and dull. Reassuring in times like these, isn’t it?” the insurer’s TV and print ads ask.
But by far the most sweeping change brought on by the softening economy has been the dramatic reduction in advertising by a wide range of companies, from airlines to auto makers to retailers and marketers of packaged goods.
“This is a miserable time,” said John O’Toole, a veteran advertising executive who serves as president of the American Assn. of Advertising Agencies in New York. O’Toole and others suggest that advertising cutbacks have wide consequence: If consumers have less stimulus to buy, they argue, the economic downturn could be prolonged.
On Madison Avenue, a prolonged slump has led to layoffs and belt-tightening. The world’s two largest advertising companies, WPP Group PLC and Saatchi & Saatchi Co., have been among the hardest hit. Saatchi & Saatchi has said it will lose $166 million for the year, while WPP Group has eliminated a stockholder dividend, citing weak cash flow.
Advertising cutbacks also have rippled through a wide swath of the media, from newspapers to television networks, which have seen their advertising sales and profits shrink. After several years of double-digit growth in the mid-1980s, total advertising expenditures are expected to fall this year, after inflation is taken into consideration, said Robert Coen, a forecaster with the ad agency McCann-Erickson. Next year, Coen expects media expenditures to grow at the slowest rate since 1970, 4.6%, although some observers think that is overly optimistic.
“What we are seeing is various industries under real stress,” said Laurel Cutler, a veteran marketing executive who is an officer of both Chrysler Corp. and the ad agency FCB-Leber Katz Partners. The need to service heavy debt loads, Cutler said, has forced many companies to conserve their cash or spend money only on promotions that produce instant results. “When everyone else is cutting back that’s just the time when (a company) shouldn’t,” she said.
In fact, companies have devoted a growing share of their marketing budgets to coupons, contests, free samples and other consumer- and trade-oriented promotions, and less to traditional media advertising, according to Donnelly Marketing, which keeps track of marketing spending. Although Donnelly has not completed figures for 1990, the business slump is expected to accelerate the trend, company executives said.
At the same time, marketers are fiddling with the packaging of their brand-name products to keep customers from switching to cheaper generic goods, the sales of which historically rise as the economy tightens. A recent Gallup Poll showed that many consumers are trading down to private-label goods, sparking fear within the food business that well-known products could be on the brink of a price war.
Star-Kist Seafood Co., for example, has slightly reduced the size of its standard 6 1/2-ounce tuna can. Without the change, Star-Kist would most likely have had to raise its prices, said Erik Bloemendaal, general manager of quality and communications for the Long Beach company. The company said consumers haven’t complained about the smaller can, which saves Star-Kist 2.8 million pounds of tuna a year.
The makers of Maxwell House and Folgers coffee brands, meanwhile, are employing special roasting techniques that “puff up” coffee beans so that 11 1/2 ounces of coffee will fill the volume of a 12-ounce can. Nan Redmond, a spokeswoman for General Food’s Maxwell House brand, said the “high-yield” packaging technique doesn’t compromise the coffee’s quality and helps hold down retail prices. The packaging technique is not an attempt to short customers, she said.
One theme that advertisers seem to be embracing is safety, an approach that has cropped up in ads for cars and tires, as well as for life insurance policies and investment companies. The trend may have more to do with changing demographics, however, than with a changing economy.
“Baby boomers are nesting. They’re more conservative,” said Jane R. Fitzgibbon, who heads the trend-research division of the ad agency Ogilvy & Mather. “People aren’t buying disco dresses, they’re buying pajamas.”
The intensified appeal to the pocketbook may be hitting an appropriate chord. A recent survey by the research firm Video Storyboard Tests Inc. indicates that consumers are becoming more receptive to ads that are factual and harder hitting.