Supermarkets are about to embark on a seismic shift in the way they use their advertising budgets, according to new evidence from Register-MEAL.
At the beginning of the Nineties, they channelled massive spends through TV in brand-building campaigns, such as Sainsbury’s “Recipes” ads and Tesco’s Dudley Moore ads. But as the chains sharpen their tactics in the battle for market share, new data suggests their ad spends are being ever more closely targeted.
Advertisements for loyalty cards have soaked up a heavy proportion of recent spending – as can be witnessed by Safeway’s blanket coverage of the national launch of its ABC loyalty card.
Supermarkets save most of their advertising for the pre-Christmas push – it usually accounts for the highest proportion of the yearly budget. The fourth quarter is already half over and Register-MEAL believes this year’s spend will not be as great as last year’s.
In the second quarter of this year, grocery supermarkets spent 50m on advertising, an increase on the previous year of 73 per cent.
This may be an important turning point in the continuing marketing battle between the major UK retailers. Although 41m was spent in the third quarter – an increase of 32 per cent on last year – there are clear indications that a change in focus for supermarket chains’ advertising is taking place.
In chart one, the overall growth for grocery supermarket advertising from 1993 to 1995 is shown on a quarterly basis. This also illustrates the seasonal pattern, with massive advertising in the fourth quarter, pre-Christmas periods.
However, the most interesting peak in spending comes in the second quarter, showing up in the chart as the most significant increase across the 11 quarters’ trend data.
In the second quarter, all seven of the top grocery supermarkets – Tesco, Sainsbury’s, Safeway, Asda, Somerfield, Kwiksave and Iceland – increased their advertising spend on last year.
In contrast, when we look in detail at the third quarter this year, we see in the second chart that three of the top seven store groups significantly reduced their spend compared with last year. The increases, particularly by Sainsbury’s and Safeway, were sufficient to lift the overall spend, but Asda, Kwiksave and particularly Tesco cut back on their advertising.
Tesco has been a successful marketing trendsetter in the past two years and its chairman, Sir Ian MacLaurin, has announced the main focus for the forthcoming activity is going to be in support of the Clubcard loyalty scheme.
In the first quarter of this year, Tesco spent more than 3m, out of its overall 7.2m of advertising, in support of Clubcard, according to Register-MEAL. This fell away to only 12,000 in the second quarter and 9,000 in the third quarter.
But this strategy is likely to change. There are indications that Tesco will use the Clubcard data on its customers to target them more carefully. This could mean more tactical advertising, using poster sites near stores, local radio and newspaper and magazine ads rather than blanket TV coverage.
This is not totally unexpected, given that much of Safeway’s recent huge advertising investment, with 3.6m in September alone, has featured their ABC loyalty card.
Another indication of change has come from Sainsbury’s, which spent 4.5m in September. Chairman and chief executive David Sainsbury has not only replaced his group marketing director, Ivor Hunt, (MW November 3) but has announced that the company intends to “regain price leadership” and do more in terms of service.
Tesco spent 15.6m on advertising in the fourth quarter of 1994 and Sainsbury’s 10.7m. These levels are unlikely to be matched in 1995. The focus is changing with selective support for loyalty promotions, cut-price petrol, discounted books and distinctive customer service initiatives dominating major grocery chains’ activities.
The prospect of a petrol price war between the supermarkets and the petrol majors could mean the grocers channel spend once used for strategic TV campaigns into promoting the new lower-priced petrol.
These tactics are aimed at winning the battle for shoppers’ hearts and minds, and the issue of loyalty may well be the next one to vex agencies and their advertising.