Brand Disloyalty: Recession-weary Consumers Take Discounts to the Extreme: Knowledge@Wharton (http://knowledge.wharton.upenn.


Brand Disloyalty: Recession-weary Consumers Take Discounts to the Extreme
Published : October 26, 2011 in Knowledge@Wharton

Before Joanie Demer even sets foot in a grocery store, she thoroughly maps out her game plan. First, Demer, a married mother of two, gets her hands on several of the glossy circulars from her local Sunday newspaper and files away a few copies of each coupon inside. Next, she checks her favorite Internet coupon aggregators -- Smart,, as well as her own site, -- for printable coupons. She scours Facebook and company websites for other deals and uploads barcodes for vouchers to her smartphone. When she shops, Demer eschews brand loyalty for the best bargains. She often goes to multiple grocery stores depending on weekly discounts and is known to come home with a dozen 16-ounce jars of peanut butter if she has a coupon and the math is a single/personal use copy of Knowledge@Wharton. works out. She hits membership warehouse chains -- such as Costco Thismultiple copies, custom reprints, e-prints, posters or For plaques, please contact PARS International: or BJ's Wholesale Club -- for their fresh produce and dairy P. (212) 221-9595 x407. specials. For toiletries, she frequents chain pharmacies, such as Rite Aid and Walgreens, where her coupons entitle her to razors and bars of soap for free or for just pennies on the dollar. Demer, who lives in a remote corner of Humboldt County, Calif., spends about $40 a week on groceries, which is less than half of what she used to before she started couponing. She says she is not a "survivalist consumer," but nor does she cringe at the description, either. "I don't have a bunker full of a massive stockpile, and I'm not afraid of a government collapse or impending nuclear disaster," says Demer, who self-published a book titled, Pick Another Checkout Lane, Honey. "But in this economy ... it's smart to have a certain amount of food on hand. You never know when you might lose a job or have a medical emergency. It's good not to have to go to the grocery store for a few weeks and spend money you don't have." While Demer's zeal for grocery deals may border on the radical, her shopping practices are not unusual in mainstream America. As the unemployment rate hovers at a stubborn 9% and the food category of the consumer price index continues to rise, Americans are making subtle but important changes to their grocery buying habits in an attempt to stretch their household budgets. A weekly food stock-up used to mean a trip to the nearest supermarket and a cartload full of groceries chosen by brand preference, not price. Those days are gone. Customers today are chasing the best deals by shopping at multiple grocery stores depending on the sales, stocking up on products when they are being deeply discounted or bulk-buying at warehouse club chains. They are using the Internet to comparison shop or, like Demer, engaging in extreme couponing, a trend with its own reality TV series. "The era of conspicuous consumption, with the mindset of, 'I work hard; I deserve to waste money,' is pretty much done. Budgets are tight, and people are in the bargain-hunting mood," notes Stephen Hoch, a Wharton marketing professor. "Because there is more information available on pricing and quality, it's easier to make smarter decisions than it used to be" about shopping at multiple bricks-and-mortar locations, or online if necessary. "Extreme couponing takes less effort than it used to," he adds. "Why leave money on the table when you don't have to? Brands are playing that card, and retailers are reinforcing it. They are sending a message [that they] understand consumers are smart and savvy."

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they probably won't be getting any overtime. has experienced a similar trend: As of July.shares of Costco are up 21%.upenn. Many of the best deals are found in places other than the local grocery store.4% in September. according to Coupon redemption in the U. which was recently taken private by an equity investment group and no longer reports monthly sales data. Coupons and short-term promotions train customers to expect more for less.Brand Disloyalty: Recession-weary Consumers Take Discounts to the Extreme: Knowledge@Wharton (http://knowledge. same-store sales rose 7% during that period. an investment research firm. says David Reibstein. Chains today compete with drug stores. But now people are looking more at prices. in addition to websites and membership warehouse clubs.. Sam's Club. BJ's. where people are struggling because they have lost their jobs or they   All materials copyright of the Wharton School of the University of Pennsylvania. "People are afraid of losing their jobs.arguably some of the toughest years in stock market history -. compared with the same period in 2010. which tend to run in the mid-single digits. Over the past seven years.. There is a desire for a safety net. companies issued 367 billion coupons and shoppers redeemed 3. a North Carolina-based company that processes coupon transactions. "They realized. a division of Wal-Mart. Costco has grown its membership base by 25%.S. From January 2008 to today -.S." Wall Street has taken note." and are willing to travel to find the best deals. a Wharton marketing fact. "At the low end of the economy. But this is not a smart long-term strategy. They always tend to do better in a poor economy. By 2006. which has a strong foothold in the Northeast and Mid-Atlantic -. coupons made a comeback.Costco. according to Value Line. note experts. Costco's net sales increased 15% to $8.2%.S.2% in the past year. and BJ's.wharton. Warehouse club companies are considered some of the most "recession-resistant" equity bets. The Department of Labor reported on October 18 that food prices rose 0. dollar stores and supercenters.6 billion in September. according to Lars Perner. The economic downturn moved people to shop at warehouse clubs to save money. Sam's Club reported that its sales rose 16. and do not cultivate brand loyalty -.sell everything from bulk packages of paper towels and boxes of Cheerios to fine wines and diamond engagement rings. and many consumers had an epiphany. but this downturn has been especially profitable. Costco and other warehouse chains have stolen market share from traditional grocery stores by enlarging their stock of fresh fruits. In September.7% increase in same-store sales year-to-date. But even if they get to keep their jobs. 'Wow." Perner points out. By contrast. In the last five years. the Standard & Poor's index is down 15%. they may make customers even more fickle. In the second quarter of this year. peaked in 1992 (at the end of a recession) when 7. vegetables and meat. The warehouse clubs -.6 billion and languished there for years. The Coupon Comeback Another cost-saving strategy for grocery shoppers: clipping coupons. "It's hard for people to interpret the macroeconomic scene..9 billion coupons were cashed in.. "It used to be that location was the biggest factor in supermarket shopping choice. In 2009. pushed up by increases in the cost of cereal.' This recession has been a windfall for Costco [and places like it]. Inmar reported that coupon redemption rose 1% for the first six months of this year. while U." In recent years. as cracks in the subprime mortgage market erupted into the most severe global financial crisis and recession since the Great Depression.3 billion of them. As it is. a raise or a holiday bonus. But in the fourth quarter of 2008. Their operating margins. are even narrower today because of a flood of competition from other retailers. the third largest retailer in the U. a 27% increase. I'm able to get all of the products that I want but at a significantly lower price.cfm?articleid=2865) Brands may be surviving this new era of household austerity by increasing the number of coupons they issue. grocery store chains have a lot of fixed expenses and thus operate with slimmer margins compared to the standard industrial company. BJ's stock climbed 192% (the stock was recently de-listed) and Costco's rose more than 200%. Bulking Up on Discounts Saving money on groceries is not easy these days. a professor of clinical marketing at the University of Southern California's Marshall School of Business. the chain saw a 6. One reason for the current popularity of warehouse chains is that customers are stocking up on groceries now because they are not sure if they will have the means to buy them later. that number had declined to 2. fruit and vegetables.                    Page 2 of 4  . Dairy prices have climbed 10.

clipping coupons is a celebrated. "Although it makes for some entertaining TV. reported a 37% increase in the number of digital coupon offers last year. "Extreme Couponing". or attribute their choice to the price discount versus the inherent quality of the good or service. for instance. we don't know the boundary and actual reach of the more extreme forms of this phenomenon. In addition. educated city dwellers. 61% of adults with annual household incomes of more than $100. out of necessity. says" Reibstein notes. or have they merely made temporary adjustments in the face of a terrible economy? Experts say warehouse club chains are likely to continue to eat away at the market share of traditional grocery stores even after economic conditions improve. coupons weren't hip. but pay only pennies on the dollar through the use of multiple discount offers. "It's a short-term response. She says she never buys a bottle of shampoo unless she has a coupon for it. Similarly. people feel that they're being cheated if they then pay more than the discounted price in the future.'" Coupons are not just for down-at-the-heels penny pinchers." Technology is accelerating the movement toward couponing. adding that one thing is clear: "There is glory to be had in saving as much money as you possibly can by using coupons. not the retailer. While paper coupons still make up the bulk of coupons redeemed. But now. who is also a Wharton marketing professor. "Brands need to think strategically about how they use promotions and how they incentivize customers. [Consumers are thinking. such as Groupon. NCH. and I have to make it work. a marketing research firm.S.   All materials copyright of the Wharton School of the University of Pennsylvania. But most experts predict that shoppers who are currently bulk buying their groceries out of concerns about not having the means later will likely stop. Coupon clippers like Demer. "When the consumer gets something at a deep discount. we saw things like an upsurge in store-brand products.. In addition." Still.upenn. "Even just a few years ago. warehouse clubs have impressed deal-seeking customers.usually in the form of a text message with an embedded discount code -.Brand Disloyalty: Recession-weary Consumers Take Discounts to the Extreme: Knowledge@Wharton (http://knowledge. Demer. "There has been a significant change in the cultural meaning of coupons. By offering consistent value. coupon aggregators and online group buying sites.. "In previous recessions and economic downturns. they were only a few levels above food stamps. shoppers in general are likely to become less aware of store sales and price reductions. has learned to live without expensive products." says Brunel." Brunel states.cfm?articleid=2865) fear they will lose their jobs." save money by shedding any modicum of brand loyalty in favor of purchasing whatever is on sale. a series on the TLC cable channel that debuted last year. The couponing trend has even inspired a reality television show. Manufacturers' coupons cut into the margins of the original issuer. a marketing professor at Boston University's School of Management. they might perceive the quality [of the product] to be lower. "When you start playing the price promotion game. middle-class thing to do.] 'I only have X amount of money." notes Brunel." says Barbara Kahn. A poll of more than 1.                    Page 3 of 4  . the self-proclaimed "Krazy Coupon Lady. but it is also amplifying and reinforcing the social reach of this phenomenon.000 said they had redeemed a coupon in the preceding six months." Moreover. however." Strategic Promotion Have Americans made permanent shifts in the ways in which they stock their pantries. People changed their behavior to weather the economic storm. it is hard to say whether the couponing movement will remain as fervent once the economic landscape looks brighter. Baker Retailing Center.are also growing. Internet coupons and mobile phone coupons -. shoppers walk away with carts full of food and other staples. According to the survey.000 U. clipping coupons. features shoppers making extensive use of coupons to save money on their grocery bills. In many cases. people are." notes Frédéric Brunel.wharton. have proliferated. Coupons did not symbolize success or achievement. adults with college degrees were almost twice as likely to have used a coupon for a purchase in the previous half-year as those who did not graduate from high school. "Technology is not only making it easier and more accessible to look for deals. customers become addicted to the discounted price. cool. director of Wharton's Jay H. consumers conducted last year by Harris Interactive found that coupon use is highest among well-off. This is not a good recipe for long-term brand equity building. More than three quarters of those who redeemed a coupon of any kind during the previous six-month period lived in metropolitan areas..

posters or plaques.wharton. custom reprints. please contact PARS International: P.Brand Disloyalty: Recession-weary Consumers Take Discounts to the Extreme: Knowledge@Wharton (http://knowledge.                    Page 4 of 4  . For multiple copies.cfm?articleid=2865) "But usually when it was   All materials copyright of the Wharton School of the University of Pennsylvania. (212) 221-9595 x407. people reverted to form and went back to their favorite brands." This is a single/personal use copy of Knowledge@Wharton. e-prints.upenn.

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