Understand GDP to improve business, says study
particular marketing campaign or the introduction of a new product
is likely to be successful by studying the state of the nation's
economy, according to a new report.
The study by Information Resources Inc (IRI) says that through effective economic forecasting, food manufacturers are set to benefit from new growth opportunities and competitive advantage.
"The study highlights opportunities for manufacturers and retailers to more accurately assess the success of a specific marketing or promotional initiative, identify the optimal timing of a new product introduction or advertising campaign, and enhance the accuracy of sales forecasts," said IRI in a statement last week.
According to the report, consumer spending trends are closely linked to the US Gross Domestic Product (GDP).
"When the United States' total value of goods and services produced rises or falls, consumer spending also increases and dips respectively," says the study, adding that the two trends are most aligned during major economic events such as recessions.
Data collected over the past decade reveals that minor changes in the GDP tend to have little impact on the consumption of food products, affecting instead the purchase of non-food products.
However, when it comes to "significant swings in the GDP", consumers start to rein in on their spending on food.
"Food at-home spending typically tends to be impacted sooner by economic downturns but with less dramatic swings than away-from-home food spending," said the IRI.
"The study suggests that higher income consumers fuel total away-from-home expenditures and feel the pinch of an economic downturn later than lower income consumers. The result is new growth opportunities for food manufacturers and retailers," it added.
The IRI goes on to suggest that manufacturers should also study the relationship between general economic trends and their specific categories, brands and stores in order to determine the most successful timing for new product development and marketing campaigns.
These categories, brands and stores vary according to the income mix of the consumer base, promotional sensitivity, price elasticity and brand equity, says the market information firm.
"Consumer packaged goods (CPG) marketers will find it highly valuable to dissect the relationship between macroeconomic conditions and consumer spending trends within their products and stores," said IRI executive vice president Janet Eden-Harris.
"This IRI study will help retailers and manufacturers see this relationship at the industry level and identify essential early warning economic indicators. Empowered with this information, they can act on these insights in their strategic and promotional plans and consequently win at the shelf by implementing the right marketing and merchandising initiatives at the right time," she added.
The report concludes by outlining the projections of several "respected GDP forecasters", who predict solid economic growth into 2006, but also warns that "a review of current trends in real average hourly earnings suggests the potential for spending deceleration in spring 2006."
