Advertising: Courting Thrifty Consumers With Value and Quality Brands Stress Value and Quality to Reach Thrifty Consumers

Many on Madison Avenue are deciding to focus on value, as in value for money, celebrating thriftiness as they did during the dark days of 2008 and 2009 but also, in an effort to keep ads from growing stale, suggesting that product attributes like quality matter, too, in a “you get what you pay for” fashion.

For example, advertising to be introduced on Monday by Vonage, the Internet phone provider, replaces its usual message of lower prices, expressed by exhortations like “Ditch the big bill,” with a theme, “Crazy generous,” voiced by a brand character styled as the company’s new chief generosity officer. “What we need is a company that connects us with generosity,” the character says in a commercial by JWT, part of WPP.

The new theme is “bigger than just saving money,” said Barbara Goodstein, chief marketing officer at Vonage Holdings in Holmdel, N.J.

“We believe people should have the opportunity to find value in technology,” she added, listing elements that, in addition to low cost, include “flexibility, simplicity, quality, new products and innovation.”

The “Crazy generous” theme is meant to convey that Vonage remains “committed to providing consumers with low-cost communications services,” Ms. Goodstein said, as part of “a business philosophy” embodied by the brand character.

“He is a champion of the people,” she added, in a populist way, which makes him “the right spokesperson for our times.”

Procter & Gamble, the nation’s largest advertiser by spending, has been scrambling to fine-tune its lineup of mostly premium-price household staples in categories like beauty, detergents and paper goods. The goal is to add lower-price items to appeal to shoppers who have been switching brands to save money but still seek efficacy from what they buy, while not eroding sales for the company’s higher-price merchandise.

The recent abrupt departure of the Procter & Gamble chief executive, Robert A. McDonald, who was succeeded by his predecessor, A. G. Lafley, was attributed partly to concerns the effort was hitting too many bumpy patches.

One example of how Procter has sought to adapt to the times was the return in January of Vidal Sassoon hair products, discontinued in North America in 2003, as what the company called the “affordable” Vidal Sassoon Pro Series line — i.e., priced lower than the company’s Pantene brand name hair products, but higher than store brands.

This June, Procter & Gamble plans to introduce Iams So Good, a dog food that will cost about 15 percent less than the Iams line, which is among the higher-price dog foods like Eukanuba and Hill’s. Iams So Good, aimed at brands like Beneful and Pedigree, is being introduced with advertising by the creative agency for Iams, Saatchi & Saatchi in New York, part of the Publicis Groupe, that includes commercials, print and online ads, displays in stores and content in social media. The budget for the Iams So Good campaign, which echoes the Iams brand’s ad theme, “Keep love strong,” is estimated at more than $50 million.

Making Iams “more accessible” is “a big move for us,” said Kristine Decker, marketing director for North America at the Procter & Gamble pet care division in Cincinnati.

“We’re broadening our appeal,” she added, because “we realize a lot of our brands need to ‘tier down’ to appeal to more consumers.” She compared adding Iams So Good as part of the Iams line to the way the company added lower-price Bounty Basic and Charmin Basic products to the premium-price Bounty and Charmin lines of paper goods.

As Iams So Good arrives in stores, Procter intends to “support regular Iams, too,” Ms. Decker said, because “we’ve got to build the base as we expand.” According to Kantar Media, a division of WPP, Procter spent $69.9 million to advertise Iams last year in major media, compared with $67.4 million in 2011. That could help deter defections to Iams So Good by buyers of Iams.

The campaign for Iams So Good promotes the absence of ingredients like added sugar, dyes and artificial preservatives and proclaims that the new variety “has 100 percent wholesome ingredients and nothing else.” The product’s lower cost will be conveyed through the store displays and packaging rather than brought up in commercials or print ads.

“We don’t talk about the value or the price,” said Tris Gates-Bonarius, global creative director on the Iams and Eukanuba brands at Saatchi & Saatchi, so “the look and feel of the campaign” can be in “the Iams tone of voice, celebrating authentic, real relationships between pets and owners.” For instance, she added, the commercials for Iams So Good will feature pets, rather than trained animals, that appear with their owners, just as commercials for Iams do. One spot for Iams So Good depicts a dog named Harvey performing what is described as his “ ‘I’m happy you’re home’ dance.”

Ms. Decker echoed Ms. Gates-Bonarius. “Our first priority is to create awareness of what’s in your dog’s bowl,” Ms. Decker said of the campaign’s emphasis on the ingredients in Iams So Good. “We will drive more overt value awareness in stores.”

DealBook: The Selective Memory of the Fed's Stress Tests

Seth Wenig/Associated PressThe Federal Reserve Bank of New York.

The Federal Reserve seems to be hoping that an ugly chapter in America’s economic history won’t repeat itself.

As part of the regulatory overhaul that took place after the financial crisis, the Fed now has to conduct annual stress tests of the banking system. In these tests, the central bank tries to assess whether the banks have the financial strength to get through some pretty dire conditions. On Thursday, the Fed outlined those circumstances, giving theoretical forecasts for things like economic growth, bond yields and house prices.

But there’s a certain type of dire possibility that the Fed doesn’t seem to want to contemplate: the sort of economic turbulence that affected the United States in the 1970s and 1980s. Back then, inflation would get out of control and the Fed would have slam on the economic brakes by hoisting key interest rates. An economic slowdown would ensue.

In its latest stress test documents, the Fed supplies a baseline case, an adverse situation and a severely adverse one. In the latter two, the Fed does envision a lot of nasty things. In the severe one, for instance, it assumes the unemployment rate exceeding 12 percent in early 2014.

But what the Fed doesn’t consider is the country’s cost of borrowing rising to the peaks seen during the 1970s and 1980s.

In the severe case, the yield on the 10-year Treasury note is at 1.2 percent during the theoretical slump. In the merely adverse case, the Fed assumes it goes as high as 4 percent during a putative recession that goes from the end of 2012 to the beginning of 2014. The 10-year Treasury yield exceeded 10 percent for sizable part of the 1980s.

Granted, high Treasury yields may be introduced in some form. The Fed said Thursday that in the next couple of weeks it will provide a “market shock” scenario, to be applied only by large banks with Wall Street operations. This will factor in “a broad increase in U.S.Treasury yields.”

It’s highly unlikely that runaway inflation will return any time soon, forcing interest rates back to 1980s levels. And if we start to move into an economy with higher inflation, the Fed can always adjust its stress tests to reflect that reality.

Still, stress tests are meant to capture the unexpected. Remember that housing crash hardly anyone foresaw? Perhaps there needs to be a fourth stress test possibility: the super severe retro recession.