Big Brands Tailor Marketing Around Customers' Pay Days
20 2월 2009 - 10:44PM
Dow Jones News
Makers of household goods and food are paying more attention to
the "paycheck cycle" as cash-strapped consumers are showing a
tendency to make their largest purchases when their salaries first
come in and to cut back as that money runs out.
With more consumers living from paycheck to paycheck, some
companies have looked at ways to time their promotions around
periods when consumers' wallets are likely to be well
cushioned.
PepsiCo Inc.'s (PEP) snacks business Frito-Lay has in some
stores tried "promotions that are different at the beginning of the
month than at the end of the month," Chief Financial Officer
Richard Goodman said in a recent interview. "People have more money
to spend at the beginning [of the month] and a little less at the
end," he said.
The insight to promote around paychecks came from one of the
company's retailers, said John Compton, the chief executive officer
for PepsiCo Americas Foods. That retailer noticed "the strength of
the first of the month compared to weakness at the end of the month
as people were simply running out of cash," said Compton. Early in
the month the Purchase, N.Y., food and beverage maker started
promoting large snacks "multipacks" sold in the range of $5.98 to
$6.98, while near the end of the month it pushed smaller packs that
sold for less than $2.
"The first of the month we might promote bigger sizes and at the
end of the month we might shift down to smaller sizes in order to
keep our sales growth going." said Compton. "It's worked well." The
company's direct store delivery system, which delivers products
directly to retail store shelves, gives it more flexibility on
merchandising and promotions.
Consumer purchases can be driven by a paycheck cycle in good
times and bad. But the cycle has been heightened in the midst of
the U.S. recession and global slowdown.
Reaching consumers at the right time and stocking store shelves
with the right package size can be key for makers of branded
consumer goods, which are pushing to drive sales at a time when
consumers are cutting back on even daily basics.
Kimberly-Clark Corp. (KMB) has watched the paycheck cycle "to
make sure we understand it so we have the right things in stock,"
said Kimberly-Clark's Chief Executive Thomas Falk. The company has
seen volume spikes in the first week of the month in its Depend
incontinence products business, which is used a lot by senior
citizens, who get Social Security checks around that time.
"We want to make sure we've got extra inventory, displays set up
so we don't run out of stock at retail," Falk said. "It's just an
understanding of how the consumer wants to buy, so they've got the
right mix of goods at retail so they are not disappointed."
Consumers have been picking smaller pack sizes rather than the big
bundle packs later in the month, Falk said.
H.J. Heinz Co. (HNZ) has seen the paycheck cycle come into play.
The consumer industry is suddenly seeing a "more sophisticated,
more disciplined consumer," said Chief Executive William
Johnson.
In the U.K., the company has looked at concentrating promotional
activity around certain weeks when consumers are most likely to
have their paychecks in hand.
As consumer companies presented this week at one of the
industry's largest annual conferences, the theme of offering
consumers better "value" took center stage. Most consumer makers
aren't cutting list prices for their brands, so finding ways to
help consumers stretch paychecks is key. Some companies have gone
to great lengths to re-create products to offer consumers more
value.
ConAgra Foods Inc. (CAG) reworked its Banquet frozen meals so
that it could continue to sell them for $1 a meal, a price that was
difficult to maintain as raw material costs spiked. So the company
tweaked the meals, eliminating some varieties and coming up with
fresh ones, to keep them under the $1 price tag. Heinz is offering
consumers larger ketchup bottles that sell at smaller price gaps to
private label in the U.S. To cater to cash-strapped consumers
searching for better value for their dollars, Frito-Lay in North
America will begin adding 20% more product to take-home bags of its
corn-based Tostitos, Fritos, Cheetos and Doritos without increasing
the price.
-By Anjali Cordeiro, Dow Jones Newswires; 201-938-2408;
anjali.cordeiro@dowjones.com