It’s the news many businesses have been hoping to hear. Consumer spending rose 1.6% between February and March according to the Commerce Department. And to make sure that consumers return to purchasing well-known and trusted brands, many consumer-packaged goods companies plan to ramp up advertising.
One consumer strategy during the recession had been to trade down to less expensive store brands for everything ranging from tissue to dish soap. To win back consumers, well-known companies like Procter & Gamble and Clorox plan to launch “new and improved” versions of favorite brands. The product launches will be supported by higher ad spending. On average, major companies in the industry plan to increase ad spending from 8.6% of sales to 9.7%.
So far this year, at least one measure of market share indicates that private label brands of household and personal products had a sales growth rate of 5.4% which far exceeded the general sales growth of the category (0.2%).
Analysts are currently debating how much the increased advertising will impact sales. Writing for the Wall Street Journal, Ellen Byron reports that “[a]mong major household products, market share stayed the same or rose 64% of the time over the past 16 quarters when a company's advertising reach exceeded its market share by 50% or more, according to research by Sanford Bernstein's Mr. Dibadj.” However, experts believe that CPG companies need to shift the tone of their message and prove to consumers that the extra cost for these products is matched by extra value.
Either way, big CPG companies are committed to spending more money on ad campaigns for the rest of this year and perhaps into next year as well.[Source: Byron, Ellen. Consumer-Goods Makers Pour Out Ads. Wall Street Journal. 12 Apr. 2010. Web. 19 Apr. 2010]