A steady flow of thoughts about advertising
and marketing from True Creek.
Posted by truecreek on March 7, 2012 under Opinions. Everyone has them. | 
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What do you think about the pricing of the new iPad? Very aggressive move to the upside, IMHO. I’m sure the early adopters won’t push back too hard, but the second tier customer might just need a decent incentive to make the purchase decision.
Posted by truecreek on November 17, 2011 under Opinions. Everyone has them. | Be the First to Comment
The always controversial Benneton has done it again with a series of posters entitled UnHate. The concept is one that I can embrace as a marketer and the truth is, the imagery is just amazing. While some folks may find this to be a bit tawdry, it is some compelling work. See it all here.
Posted by truecreek on September 13, 2011 under Opinions. Everyone has them. | Be the First to Comment
When looking through this, I couldn’t believe that the Michelin Man was first introduced in 1898. Bibendum, his real name, is mute. So that’s why the poor guy never says anything. At least Michelin saves on the VO.
Some great ones in this slideshow. From Ad Age and CNBC.
Posted by truecreek on February 1, 2011 under The Work | Be the First to Comment
At True Creek, we are into big ideas. The Creekbed draws from the brightest, most creative minds in the industry today; people who have shaped brands like Intel, Apple, Nissan, Best Buy, Volkswagen, Cox, Comcast, NASA – and many local and regional names that are big fish in a smaller pond.
We offer our clients a wide variety of services: Media Planning, Placement and Reconciliation, Television and Radio Production, Newspaper, Four-Color Magazine, Collateral Materials, Direct Mail, Promotional Merchandise, Point-of-Purchase, Outdoor and Out-of-Home, Logo Design and Corporate Identity/Graphic Standards.
Our agency is based in Oakton, VA, which is just outside the Capital Beltway in Washington, D.C.
Please take a moment to tour the site. Afterwards, let’s talk about how we might be able to help you. 703-281-2165. Or send a note: joseph@truecreek.com.
Posted by truecreek on December 8, 2010 under More Dam News, Opinions. Everyone has them. | Be the First to Comment
It stands to reason. Might our entertainment industry be offering up the best form of propaganda? Desperate Housewives being used to ‘counter the extremists?’ Amazing. Wonder how Modern Family is going over?
By Devin Dwyer.
American television shows broadcast across the Middle East are proving to be effective “agents of influence” in the ongoing battle over hearts and minds of ordinary Muslims pondering jihad against the United States, a confidential government cable published by Wikileaks reveals.
ABC’s “Desperate Housewives” and “World News with Diane Sawyer,” as well as CBS’ “Late Show with David Letterman” and NBC’s sitcom “Friends,” all carry more sway with viewers than a U.S. taxpayer-funded Middle East broadcast network, an unnamed Saudi source told U.S. embassy officials last year.
“It’s still all about the War of Ideas here, and the American programming on [privately-owned] MBC and Rotana is winning over ordinary Saudis in a way that ‘Al Hurra’ and other U.S. propaganda never could,” the source said.
“Saudis are now very interested in the outside world, and everybody wants to study in the U.S. if they can. They are fascinated by U.S. culture in a way they never were before.”
The Saudi government, which exerts tight control over media in the country, has permitted the satellite broadcasts of American programming uncensored with Arabic subtitles over the privately-owned Middle East Broadcasting group (MBC) as a “means of countering the extremists.”
Posted by truecreek on July 20, 2010 under The Work | Be the First to Comment
Another version of the sting banners created for Fortress Technologies. The banner is designed to unroll at 50%, for table top use as well.
Posted by truecreek on June 22, 2010 under Opinions. Everyone has them., Research | Be the First to Comment
There is so much research on this topic already and more seems to come out every day. There needs to be a greater focus on advertising to combat this horrible trend. It will have to be powerful stuff, like Marsteller’s “Crying Indian” that featured Native American actor, Iron Eyes Cody. It was one of the most successful campaigns of its kind, with some suggesting it reduced litter by almost 90% in 300 communities.
Now that’s how you do it.
By Mary Madden and Lee Rainie.
Adults are just as likely as teens to have texted while driving and are substantially more likely to have talked on the phone while driving.
In addition, 49% of adults say they have been passengers in a car when the driver was sending or reading text messages on their cell phone. Overall, 44% of adults say they have been passengers of drivers who used the cell phone in a way that put themselves or others in danger.
Beyond driving, some cell-toting pedestrians get so distracted while talking or texting that they have physically bumped into another person or an object.
These are some of the key findings from a new survey by The Pew Research Center’s Internet & American Life Project:
Posted by truecreek on May 20, 2010 under Opinions. Everyone has them. | 3 Comments to Read
By Joseph Young
They have been all over television over the past few years. You’ve seen them before. The beautifully art directed HD spots from BP. All those bright green and yellows flying around to that perfect music. It’s easy to find outstanding animated spots in just a few minutes on the web. And from what I have heard within the business, there were some spots produced recently that were in the $3 million per range. All of that backed up by a substantial national media buy.
All concepted and produced with one thought in mind: to position BP as a friendly, “we’re here with you” company that is working hard to make the world a much better place.
What a crock.
How long do you think it will be before the millions of dollars spent by BP to position themselves as the savior of our collective energy future just melts away?
When a brand screws us all like this, they become lepers. We cringe at the very thought of doing business with them. We now look at their brand as a ‘taker’, not a ‘giver.’ And in the case of BP, I suspect you will see a growing disdain for the company as the days wear on.
So I wonder when the first round of new TV spots will start up? It must suck for the agency that is responsible for producing what comes next from the company. If it were my shop, I would really have to do some soul searching before anyone spent another minute behind the lens on behalf of BP.
Posted by truecreek on May 4, 2010 under Opinions. Everyone has them. | Be the First to Comment
Summer is almost upon us, a time when the cinema industry generates over 40% of their total annual box office revenue. It’s a time when people go out to the movies in droves, choosing to watch the hot new movies of the summer rather than stay on the couch and sit through another season of reruns on television. According to Nielsen, the shift is dramatic, with a 13% tick up for cinema in share during the summer months.
Last year, the industry experienced a record-breaking summer, with huge hits like Transformers, The Hangover, Harry Potter and the Half-Blood Prince and many others. Coming up this summer there will be another 13 blockbusters and remakes scheduled for release on the big screen.
Here’s just a few of the flicks you can expect to see this summer at a theater near you:
Iron Man 2
Shrek Forever After 3D
Sex and the City 2
Marmaduke
Toy Story 3D
The Twilight Saga: Eclipse
For most consumer marketers, cinema is the place to be this summer. And throughout the year, cinema advertising is a fantastic complement to any broadcast TV schedule. So if you are in the theater, consider yourself a smart marketer. If you’re not, give True Creek a call and let’s fix that.
Posted by truecreek on March 23, 2010 under More Dam News, Research | Be the First to Comment
AP NEW YORK — The amount of time people spend on the computer while watching TV is going up sharply.
The Nielsen Co. said Monday that people who multitask this way spent an average of three and a half hours doing so in December. That’s up sharply from the two hours, 29 minutes that Nielsen reported only six months earlier.
The percentage of TV viewers who do this isn’t going up that fast. That increased by 57 percent to 59 percent during the same period. But those who are doing it spend much more time at it.
Television executives have pointed to this trend to help explain why big events like the Oscars, Grammys and pro football playoffs have been doing so well in the ratings – people watching and making comments to their friends through social Web sites like Twitter and Facebook.
More about TV, computer use multitasking up sharply: Nielsen here.
Posted by truecreek on March 5, 2010 under More Dam News | Be the First to Comment
By: Julia Boorstin
“Alice in Wonderland” opens in theaters today, accompanied by Disney’s most wide-ranging array of consumer products ever, chasing an unprecedented broad audience.
Tim Burton’s 3-D “Alice” follows the classic character years after her first visit to Wonderland, so it makes sense that Disney would go after an older audience.
So now Disney has adult women in its cross hairs: in addition to the usual range of kids toys, games and apparel, it’s licensing “Alice” for products for adults.
Disney’s going grown-up and high end.
For more on the potential Consumer Products Tea Party, check here.
Posted by truecreek on February 3, 2010 under The Work | Be the First to Comment
Delivered in a small and rugged form factor with its size, weight and power specifically tailored for vehicles, the Fortress ES820 provides industry leading radio range. It’s an amazing piece of equipment. This is the latest in 4/C print work produced by True Creek for Fortress Technologies.
Posted by truecreek on January 5, 2010 under The Work | Be the First to Comment
I love headlines. We just completed a campaign for Comcast touting their new 50/10 Internet product. The campaign is to run in the Atlanta Journal Constitution for 11 consecutive weeks, starting next week.
You have to appreciate just how impactful these ads will be with their big and bold copy running across the bottom of the page. Simple and clean look, with essentially nothing but a great headline to drag you in.
To me, a print ad should entice and entertain, not educate. There will be more than enough time to do that later after I call you or hit your site.
Check ‘em out.
Posted by truecreek on January 4, 2010 under The Work | Be the First to Comment
The start of a new campaign for Fortress Technologies. Nice, clean look mated with a very strong visual. Definitely a bit more earthy in tone than what has been the norm, but I think it works well. Many other great headlines to work with in the future.
Posted by truecreek on December 10, 2009 under More Dam News | Be the First to Comment
If this software works well, it could really improve the creative process for digital media.
From Creativity.
Burt, a software development company that sprang from Crispin Porter + Bogusky Europe, has released its digital media analytics product, Rich.
Rich is aimed squarely at agency creatives and is designed as a streamlined, accessible – and free- tool for measuring the success of online campaigns.
Burt was co-founded by Gustav von Sydow and Gustav Martner of Daddy, which was acquired by CP+B this year. von Sydow was a planner at Daddy and is now working at Burt full-time; Martner is still ECD of CP+B Europe. As agency types, they say they have a greater understanding of the specific needs of creatives when it comes to these sort of tools.
Burt is making Rich available to agencies for free and, starting in January, will offer premium services like media quality audits and pre-testing for a fee.
Read more about Burt Unit Launches Analytics Tool for Creatives here.
Posted by truecreek on December 2, 2009 under More Dam News | Be the First to Comment
From Popsop:
The Nike (RED) campaign was launched yesterday, December 1, in 13 countries around the world. Like Starbucks, another global brand, the sportswear maker joined the movements dedicated to fighting AIDS in Africa. All the revenues gathered from selling red football laces, with each pair costing $4.00, will be donated to the Global Fund.
Posted by truecreek on November 30, 2009 under More Dam News, Research | Be the First to Comment
By Bertha Coombs, CNBC
Retailers drew more shoppers to open their wallets this Black Friday weekend, but the steep discounts they used to get them in the door meant that on average, shoppers spent less.
The National Federation of Retailers says 195 million people shopped at stores and online over the weekend, up 13.3 percent from last year. Total spending was flat at $41.2 billion, but on average consumers spent 8.5 percent less, roughly $343 per person compared to $372 a year ago.
Department stores emerged the shopping destination of choice for nearly half of all shoppers polled in the NRF’s Black Friday survey, conducted by BIGresearch.
Discount stores came in second garnering a 43.2 percent share, and outlets picking up 7.8 percent of shoppers. Just over one in four surveys shopped at electronics stores (29 percent) or online (28.5 percent).
Two years into the deepest recession in a generation, consumers may be showing signs of what some have termed frugal fatigue, says the NRF’s Ellen Davis. “Retailers have to come away from this weekend encouraged,” she says, “that shoppers were willing to spend on some discretionary items.”
Capital Growth Partners president Craig Johnson says the consumer was back in force over Black Friday weekend. In a note to clients, he wrote, ‘These are not simply browsers, but buyers, with checkout lines of 30 or longer in some mall teen specialty stores, and checkout lines exceeding 350 in several Big Box stores.”
Just over half shoppers bought clothing, according to the survey, helping to boost department store sales. About forty percent bought books, DVDs and video games. Those numbers were about the same as last year.
Price wars on popular toys at Wal-Mart, Target and Toys R Us saw more shoppers buying toys as gifts. About a third of shoppers said they spent money on toys, a 12.9 percent increase from last year.
According to the survey, more shoppers bought sporting and leisure items this year — 12.6 percent, up a point from last year. Personal care and beauty items saw a bigger increase — 22.4 percent up from 19.0 percent — along with gift cards — 21.2 percent vs. 18.7 percent a year ago.
Did those early door busters in the wee hours of the morning pay off? Nearly one-third of shoppers (31.2 percent) were at the stores by 5 a.m. according to the NRF survey, that’s up from 23.3 percent last year. The majority of those early shoppers were men or younger shoppers.
Posted by truecreek on under More Dam News | Read the First Comment
By Meg James
There’s finally some new life in old media.
After pummeling traditional media companies for nearly two years, the advertising recession is showing signs of a recovery. TV networks — including Fox, CBS and ABC and such leading cable channels as TNT, TBS, USA, Bravo and Fox News Channel — have benefited the most as advertisers have been snapping up available commercial spots and agreeing to pay significantly higher prices than they did just five months ago.
“In challenging times, people go back to what they know, and what they know best is television,” said David Levy, president of sales for Turner Entertainment, which includes TNT and TBS. “It is a little too early to declare victory, but the market is definitely improving.”
The welcome news is the result of stronger-than-expected demand for TV advertising in the “scatter” market, in which advertisers frequently have to pay premiums for scarce available commercial time. It also represents something of a win for the networks, which gambled this summer that demand would pick up later in the year and held back a larger percentage of their inventory than in previous years, hoping to capitalize on the improved economy.
Fourth-quarter commercial sales have been propelled by retail chains hoping to ignite their holiday sales; technology giants Microsoft Corp. and Apple Inc., which have new products to promote; cellphone carriers such as Verizon, AT&T and Sprint, which are battling for customers; and even such financial firms as American Express, according to television executives and advertising buyers surveyed this week.
Such strong demand has made up for the weaker orders from other mainstay advertisers, including automakers, still reeling from weak sales, and Hollywood movie studios, which have fewer new movies to hype.
A fourth quarter described by one top network sales executive as “gangbusters” amazed even veterans who have lived through several economic cycles. Only five months ago, the industry was bracing for another dismal year as TV network sales teams were engaged in protracted negotiations with advertisers that were demanding that the networks roll back prices as much as 20%. Networks eventually agreed to trim rates about 5% to 8% to mollify advertisers and begin unloading their time.
But now, in some cases, advertisers have agreed to pay rates 10% to 35% higher than the prices established in June and July, when the networks sold the bulk of their time for the new TV season. In addition, advertisers that placed their orders in the summer are honoring their commitments. Network executives said that few advertisers have canceled their orders for commercial spots, in contrast with a year ago.
“We have all been surprised that the ad market has come back this soon,” said Gary Carr, executive director of national broadcast for the advertising firm TargetCast. The networks, he said, also face easier comparisons because last fall, with banks failing and the economy on the skids, companies were afraid to spend on advertising.
“A year ago, people thought the world was coming to an end, and the U.S. economy was falling apart,” Carr said. “But the world did not come to an end. Cars still have to be sold, and studios still need people to go see their movies. Advertisers have begun releasing the money that they have been holding onto all year.”
Even local TV stations — among the hardest hit by the slump in advertising spending — have received a lift, primarily fueled by stores that unleashed their holiday sales campaigns earlier in the season, according to television executives.
Not all media outlets have rebounded, however. Many small cable TV channels and Spanish-language television networks are still hurting, according to television executives. Newspapers, magazines and radio stations also continue to struggle.
“In many sectors, the news is still grim,” said Jon Swallen, senior vice president for research at TNS Media Intelligence, which tracks advertising spending. “And there is still a fairly large hole for these companies to dig out of before they get back to the levels they were a few years ago.”
Unexpectedly, online advertising also has taken it on the chin.
Many advertisers are no longer as eager to buy Internet display ads as they were two or three few years ago, when firms were steering millions of ad dollars to online sites.
“There is still a big push toward digital and online video, but the Internet display advertising market is challenged,” said Greg Kahn, senior vice president of strategic insights at advertising firm Optimedia. “There is so much clutter in the space, and advertisers have begun to question the effectiveness of those display ads.”
More here.
Posted by truecreek on November 3, 2009 under More Dam News | Be the First to Comment
In wake of recession, consumers look for value, focus on essentials.
By Allison Linn
The recession has dramatically changed many Americans’ shopaholic habits, at least temporarily and perhaps forever.
Now the question is whether the nation’s retailers have kept up.
“The answer is no,” said Marshal Cohen, chief industry analyst with NPD Group.
He’s not alone in that assessment.
Although it’s still early days of the holiday shopping season, some analysts are already worried that too many merchants are taking a business-as-usual approach to an era that is anything but usual. Any miscalculation could be disastrous for retailers, who typically expect up to 20 percent of annual sales and a bigger share of annual profits during the critical holiday season.
“Retailers still don’t have a full grasp of reality,” said Burt P. Flickinger III, managing director of Strategic Resource Group, a consulting firm.
Flickinger thinks many of the nation’s retail executives don’t completely understand how severely the Great Recession has affected the millions of Americans who have lost jobs, had their wages cut or are living in fear of a job loss.
That, he noted, is on top of other financial concerns many Americans are facing, including a steep drop in home and investment values.
Retailers have good reason to fear such financial jitters, having only last year endured a disastrous season in which holiday retail sales fell 3.4 percent as Americans, rattled by the financial crisis, held onto their pocketbooks.
This year, Flickinger said, consumers are facing the reality of a sky-high unemployment rate and growing concerns about credit card debt.
“Shoppers are more scared going into this holiday season than any time in the last 50 years,” he said.
In the new era of tight budgets, consumers are looking for good value on the items they want and need. But instead, many analysts say retailers seem to be taking a different approach: offering ever-more extreme discounts on items they want to get rid of.
The super-low price method of offloading excess inventory has become so commonplace, even among higher-end retailers, that shoppers are coming to the conclusion that many products are just worth less, said brand analyst Robert Passikoff.
“It isn’t just that you learned that there will be sales — there will always be sales — but what it’s done is it ultimately affects the value perception of the product,” said Passikoff, president of the customer loyalty research firm Brand Keys.
More here.
Posted by truecreek on October 28, 2009 under Opinions. Everyone has them. | Be the First to Comment
By Joseph Young
Well, we’ve crossed the threshold. In my travels today, I had the chance to stop off at the local Wegman’s to take advantage of their snappy food bar. Lunchtime can be pretty busy in that place and today was no exception.
What was interesting was seeing what I will call “The New Sweatpants Society.”
Men and women, meeting, then having lunch with their significant others at the grocery store. That is no big deal.
What was interesting was that in almost every case, one of them was dressed in business attire. The other, in sweats.
It was striking.
Couples all over the place, dressed entirely differently. Someone obviously didn’t get the memo.
So, do you think it’s a statement of the times? The extremely casual nature of their dress could mean that one of the two is working from a home office, works in a very casual environment or perhaps they have a day off. But this is Tuesday, yes?
Unfortunately, I suspect it’s something a little more sinister. One of them is out of a job.
On the bright side, I’m sure most of these couples are relishing the chance to break some lunchtime bread together.
But on the other, perhaps it’s a sad commentary on the current employment situation in our country.
I plan on checking in again in a month or so to see if the things have changed any. Let’s all hope I see a few more shirts and ties!
Posted by truecreek on October 27, 2009 under More Dam News | Be the First to Comment
By Christina Cheddar Berk
Most of the early reads on how retail sales will shape up for the Christmas holiday period haven’t been all that jolly. At best, they have painted a picture of a shopping season that will be better than last year’s dismal turnout. But, according to some industry analysts, there are several reasons to believe that Santa might bring retailers a little joy this season.
1. Frugal Fatigue
Speaking on a conference call hosted by Dow Jones analyst Indexes and STOXX, Marshall Cohen, chief industry of market researcher NPD Group said consumers are getting tired of watching their pennies.
“Consumers are clearly telling us they are beginning to get tired of saving money,” Cohen said.
It has been more than a year since the economy started putting the pinch on consumer pocketbooks. Consumers have been trying to get their debt under control, and have pushed up the savings rate to decade-high levels. The holidays may finally give consumers a reason to start spending again.
2. Store Traffic Is Increasing
Have you noticed more folks at the store lately? ShopperTrack has, according to data analyzed by Richard Hastings, a consumer strategist for Global Hunter Securities. Hastings said he has seen signs of both year-over-year and month-to-month gains in the numbers of shoppers at the stores.
The increased store traffic is one signal that has prompted Hastings to boost his forecast for holiday sales. Although he previously expected sales to fall, he now anticipates retail sales for the November through January time period will rise 2.5 percent from last year.
3. Improved Guidance from Smaller Retailers
Another sign that things are starting to turn for retailers is the improved forecasts issued by even smaller retailers such as Bon-Ton Stores, Tuesday Morning and Pier 1 Imports.
Hastings said these comments are a sign that a new tide is coming in and “the smaller boats are being lifted up by a bigger wave.”
4. The New Normal
It just may be that consumers are finally comfortable with the new landscape. They have been spending carefully and planning for the holidays.
Retailers also have had time to plan, and with advancements in the way retailers track their inventory, are more capable to reacting quickly to chances in demand.
5. Weather
Weather may also play a role. Trends are aligning right now for better weather than last year, according to Paul Walsh, of Atmospheric and Environmental Research. For example, AER ,a Boston-based firm that analyzes the impact of climate change on business operations, expects, colder temperatures in December for the eastern part of the country, which could put consumers there in the holiday mood.
Weather has already played a key role in helping to boost retail sales in September by driving more sales of warm weather apparel before retailers marked down the cost of those items.
Posted by truecreek on October 26, 2009 under The Work | Be the First to Comment
Couple of nice pages and a spread from some recent work Chris produced for an agency in Tampa, FL.
Posted by truecreek on October 14, 2009 under More Dam News, Research | Be the First to Comment
By eMarketer.
College students are the most connected demographic group in the US. They own multiple electronic devices and are a prime audience for online video.
eMarketer estimates 18.2 million college students, 95.7% of the total, will go online at least once a month in 2009. As Internet usage becomes ubiquitous, the percentage of students online is growing more slowly, rising to an estimated 96.8% in 2013.
“Not only is Internet access widely prevalent, but so is technology ownership in general,” said Debra Aho Williamson, eMarketer senior analyst and author of the new report, “College Students: Connecting with the Connected Crowd.” “Since students own multiple devices, they want to use those devices to interact with friends and information in multiple ways. They care less about what method they use for their interactions and more about how easy and seamless those interactions are.”
Students are heavy consumers of online video—but also regular TV. They use social networking Websites to stay in touch with their friends—but rely on text messaging as well. And smartphones, which are becoming more and more common on campus, give students the ability to do many activities without touching a computer at all.
Despite the fears of some industry-watchers, college students are not abandoning social networks now that the sites have caught on among their elders.
“So far, that is not happening,” said Ms. Williamson. “In fact, the opposite is true. Students are more likely than ever to use social network sites.”
EDUCAUSE, which has tracked social network usage on campus for the past several years, found that the percentage of students visiting sites such as Facebook or MySpace on a daily basis has more than doubled in the past three years, from 32.9% in 2006 to 66.2% in 2009.
“But other indicators bear watching,” cautions Ms. Williamson. “One is how often students visit social networks and how much time they spend there.”
Still, in May 2009 Youth Trends found that Facebook was the No. 3 source among college students for learning about new products and services, after word-of-mouth and television commercials. Social networks remain a viable venue for marketing to the college crowd.
Posted by truecreek on October 9, 2009 under More Dam News | Be the First to Comment
My wife has been complaining about this for years. Do you know a production house that does it?
By John Eggerton.
The House Communications Subcommittee has approved a bill that would require the broadcast and cable industries, which includes satellite and other multichannel video providers, to regularize the volume of advertisements and the programming surrounding them.
By a voice vote, the committee passed the Commercial Advertisement Loudness Mitigation (CALM) Act, backed by Rep. Anna Eshoo (D-Calif.), and referred it to the full Energy & Commerce Committee.
Eshoo said the bill premise was simple: “To make the volume of commercials and programming uniform so that spikes in volume do not affect the consumer’s ability to control sound.” Eshoo said that ad volume spikes had “endangered hearing for decades.” She also said legislative spouses had been urging their husbands or wives to sign on as co-sponsors. “I think they are all tired of getting blasted out of their easy chairs or off their exercise equipment due to these ridiculously loud commercials.”
Posted by truecreek on October 7, 2009 under More Dam News | Read the First Comment
Continuing the discussion about the change in consumer spending behavior….from today’s Washington Post.
By Nancy Trejos
The recession has cooled the American ardor for living on credit. After years of saying “Charge it,” consumers are more often paying with their debit cards instead.
Worry about jobs, fear of fluctuating interest rates on credit cards and wariness about spending too much are contributing to the change.
“People are managing their money in a different way,” said David Robertson, publisher of the Nilson Report, which tracks the credit card industry. “You clearly have a situation where those people who have jobs are exhibiting recession anxiety and they are making more debit transactions.”
Nine months ago, Alyson Chadwick, a public relations representative for a nonprofit organization on Capitol Hill, got a debit card with a MasterCard logo so she could use it anywhere for purchases. Carrying cash was unsafe, she thought, and a debit card would help her manage her spending better.
“I use my credit cards hardly at all,” she said. “I don’t even carry them with me.”
Trish Preston, head of U.S. debit for MasterCard, said the changing fortunes of debit and credit tell the story of how the recession has transformed consumer spending.
“Think about what’s happening in the economy,” she said. “Appliances, furniture, jewelry: Those are very sensitive to the economy, and those have generally been credit spending categories.”
Debit cards, meanwhile, tend to be used for routine necessities such as groceries and gasoline. “Those kinds of expenditures are happening,” she said.
The Federal Reserve said that revolving credit, primarily credit cards, dropped by $6.1 billion in July, or 8.1 percent on an annualized basis. Debit card usage, meanwhile, had been steadily growing over the years but has surged in this recession.
Credit cards draw on money borrowed at often high interest rates; debit cards withdraw money from the cardholder’s bank account.
Visa announced this spring that spending on Visa debit cards in the United States surpassed credit for the first time in the company’s history. In 2008, debit payment volume was $206 billion, compared with credit volume of $203 billion. MasterCard reported that for the first six months of this year, the volume of purchases on its debit cards increased 4.1 percent, to $160 billion, in the United States. Spending on credit and charge cards sank 14.8 percent, to $233 billion.
“Consumers are rational thinking individuals, and they’re going to shift their behavior in a way that fits with their current economic situation,” said Scott Strumello, an associate with the Auriemma Consulting Group, a Long Island-based payment card advisory firm. “They’re thinking more seriously about it, and many may decide, ‘I’m going to use debit where I can and reserve credit for larger purchases.’ ”
For three decades, credit cards, which emerged about 50 years ago but were not in widespread use until the 1970s, have reigned as the preferred mode of payment, mostly on big purchases, for baby boomers and their children. Before that, people used cash, bank loans or the installment plan.
Baby boomers typically charged responsibly. Their children, who grew up in the mostly prosperous 1980s and 1990s, became dependent on cards from an early age, partly because card issuers marketed heavily on college campuses. Unlike their parents, they tended to see credit cards as long-term loans. And they charged too much.
“An awful lot of kids grew up in a very big house and they grew up with pretty much everything they wanted, and then they became adults and their parents, rightly or wrongly, probably wrongly, conditioned them to a set of conditions they cannot afford,” said Lewis Mandell, professor of finance and business economics at the University of Washington and a senior fellow at the Aspen Institute.
Industry executives said much of the debit card growth is fueled by a growing disdain for carrying cash and writing checks. But they also acknowledged that credit cards have fallen out of favor with consumers who want to save more and limit their discretionary spending. In July, the personal savings rate reached 4.2 percent, up from about 1 percent of after-tax income early last year, according to government data.
“The real question is: Is consumer behavior permanent?” Strumello said. “And that’s something where the jury is still out. Consumers have made moves in other downturns.”
Mandell said the next generation might reject credit after seeing their parents struggle with money. “I think the next generation may be self-correcting depending on the duration and magnitude of the downturn,” he said.
There is some indication that the shift to debit is partly a visceral reaction to credit card industry practices in the past few months. Since a law was passed in May that will limit the industry’s ability to raise rates and fees, many issuers have cut credit lines and increased rates, forcing borrowers to look for other modes of payment.
