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March 9, 2010

Good Things Comein Small Packages

Smaller sizes of perfume are growing
While prestige fragrance sales attributed to Valentine’s Day have been declining since 2006—dropping 4% in total in between February 2008 and February 2009—going into Valentine’s Day 2010, executives at The NPD Group found a positive trend in sales of small size fragrances.
“Though the fragrance market has been challenged, there are areas that are resonating with consumers. Smaller sizes are becoming an increasingly important option today. What’s encouraging is that they are not just working in women’s scents or new fragrances…we are also seeing growth in smaller sizes for both women’s and men’s fragrances (one ounce and smaller) and classics, as well as new scents,” said Karen Grant, vice president and global industry analyst, with Port Washington, NY-based NPD Group.

According to NPD, in 2009, unit sales of women’s fragrances less than one ounce in size rose 8% versus 2006. Looking at new SKUs in 2009, growth came from new items like the Harajuku Lovers Snow Bunnies, as well as existing SKUs like Beautiful and Pleasures. For men, growth came in new one ounce SKUs like Polo Blue and Polo Black, according to NPD.
“Smaller sizes are a great way for consumers to get a taste of what’s new or to remember a loved favorite scent. This could be not only a thoughtful option, but a budget friendly one for Valentine’s Day gift giving,” ended Grant.

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Importance of ‘Brand’ Skyrockets

The “decade of the brand” begins now, according to the 14th annual Brand Keys Customer Loyalty Engagement Index (CLEI). For the 38 cosmetics brands (see box) tracked in the CLEI, attributes relating to brand and the degree to which brands affect customer decision-making, category-expectations, and engagement have increased significantly, according to Brand Keys, the
New York company behind the index. Brands that ranked the highest in their sectors included Estée Lauder, Mary Kay, Clinique and Clairol.

“While a powerful finding, it’s not entirely surprising. Our 2009 findings predicted that value, not price, was the watchword in consumer behavior. And you can’t have the value conversation without the brand conversation, as true brands provide meaningful differentiation in a world over-run by commodities,” noted Robert Passikoff, founder and president of Brand Keys.

“That makes brands a surrogate for value, and more important than ever to consumers in every category. But that’s brands—real brands—not just well-known products and services or the latest celebrity-endorsed offerings that stand for nothing in consumers’ minds. It’s real brands that have reached their highest level of consequence since the 1960s,”Passikoff added.

According to Passikof, based on the levels of commoditization that have occurred in the past decade, it’s no surprise that consumers are looking for brands to make a difference.

“The consumer value equation has shifted dramatically from price-value to value-for-dollar. The undeniable fact is that consumers looking for value have been forced to look beyond mere primacy of product, price and service,” he said, noting that with increased standardization and decreased product differentiation, a “real brand can serve up the value consumers expect.”

Passikof sees this as critical time for cosmetic marketers. “At a time when brands are struggling to differentiate from their competition and to find ways to profitably engage their customers, the changes this year serve as a bellwether for marketers. It will be the products and services that answer with a truly consumer-centric view of their category—being a real brand—based on predictive loyalty metrics, that stand to gain the most, and establish themselves as this decade’s brand leaders,” he said.

Passikoff also issued a warning: “If cosmetic marketers think that differentiating their products and services and engaging consumers is hard now, just wait until they try doing it when their brands devolve into category placeholders, a product or service that everyone knows, but doesn’t know for anything in particular. That’s when no discount will be deep enough, which is a hard lesson that many retailers have already learned.”

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Contract Cleaning Service Revenues To Rise

Revenues for contract commercial and residential cleaning services in the U.S. are forecast to rise 4.5% annually to $66.8 billion by 2013, according to a new report from Freedonia Group. The Cleveland-based industry research firm says gains will be driven by ongoing increases in both the number of households and the number of business establishments, coupled with growing availability and affordability of cleaning services.

The recession that began in late 2007 and persisted through 2008 had no discernable short-term effect on cleaning services revenues; in fact, many companies reduced operating expenses by outsourcing cleaning services as the economy worsened, Freedonia reported. Longer-term growth in cleaning services revenues, however, will require economic recovery to expand the potential pool of customers, Freedonia reported.

In its Commercial & Residential Cleaning Services study, Freedonia reports that nonresidential markets, which accounted for more than 75% of the total market in 2008, will get a boost from the trend to outsourcing cleaning functions to cut costs. And while some nonresidential markets have already seen much of this outsourcing take place, there remain opportunities for growth.

However, little to no growth is expected in nonresidential floor space, particularly in the office, commercial and industrial markets, which will moderate growth prospects.

According to Freedonia, through 2013, growth in cleaning services revenues in nonresidential markets will range from 3.7% annually in the relatively mature office market to 4.7% a year in the institutional market. Interior building cleaning services are the largest contributor to cleaning services revenues, accounting for 74% of the total in 2008.

Growth in revenues will derive from expansions in the number of business establishments and the total inventory of the U.S. housing stock, both of which will create more potential customers for cleaning service providers. Also, specialized services such as special event clean-up and seasonal cleaning will continue to offer niche opportunities for cleaning companies, according to Freedonia.

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Online Coupon Use on the Rise

Coupon usage is on the rise for the first time in almost two decades, and it appears more consumers are seeking out these money-saving offers online., Mountain View, CA, has reported an increase in printed savings of more than 170% during 2009. Compared to growth metrics for coupons inserted into newspapers, which ranges from 8-16%, digital coupons dramatically outpaced the growth of its newspaper counterparts, by more than 10 to 1, according to the privately-held firm.

“For the first time in almost two decades, the use of coupons increased in 2009, in part due to the growth of digital coupons as more consumers made them part of their shopping routine and more brands tapped them to engage with their consumers,” said Steven Boal, chief executive officer of Incorporated.“We expect the adoption of digital coupons will continue to accelerate in 2010 as consumers and brands alike increasingly adopt them, and as we continue to enable companies to engage with their consumers with coupons in innovative ways, including mobile and social media initiatives.”

Printed savings from and the digital coupon network in 2009 exceeded $858 million, according to the company. The 170% increase over 2008 represents even faster growth than the company experienced the prior year; there was a rise of 133% compared between 2007 and 2008.

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