News Byte: Cheapskates Rule!

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Cheap is in.
Cheap is in.

Tough times endured during the recent recession that may have left marketers with a nation full of cheapskakes, whose penchants for thriftiness can no longer be defined in demographic terms.  The most price-sensitive segments, however, are more likely to respond to direct mail.

That's the conclusion of a study, "Using Advertising to Engage the Price Sensitive Consumer," released this week by Dunnhumby that tracked the purchase behavior of more than 60 million U.S. households. The company segmented shoppers into four classifications of price sensitivity, ranging from very price sensitive (VPS) to least (LPS). While CPG marketers often blanket-market to “moms” as price sensitive, Dunnhumby found that fairly equal numbers off LPS and VPS women aged 25 to 50 in the U.S. demonstrated price sensitive shopping behaviors.

At the same time, LPS “moms” don't react to price promotions at the same level that their VPS counterparts do, leading the study to suggest that marketers play closer attention to this dichotomy when planning advertising and promotional campaigns.

Some promotional guidelines for marketers in approaching price-sensitive segments:

  • VPS consumers redeem direct mail coupons at the highest rate. Single-brand mailers to this group returned 15% redemption rates, while multibrand mailers won 35% redemptions.
  • VPS shoppers are 19% more likely to belong to a store loyalty program, and loyalty club member—whether very or low price sensitive—are 70% more likely to buy a brand with a coupon.
  • TV ads work better with all price groups if combined with in-store promotions like shelf coupons and price deals in circulars. In the case of one yogurt brand followed in the study, sales resulting from the use of both tactics indexed 50 points higher than using TV only.

Dunnhumby is a UK-based company that instituted Tesco's loyalty program and is now largely owned by Tesco. Its American operation, DunnhumbyUSA, is a joint venture with Kroger.

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