Some say consumers’ new thriftiness is purely a reaction to the current economy; to others, it is one of several behavioral shifts taking place that marketers must address. Our experts debate
VP, marketing, iStorez.com
More than 16 years experience in marketing
I believe that consumers’ new thriftiness is definitely a reaction to the current economic situation. While I predict there will be somewhat of a bounce back when the economy improves, consumers will have formed new spending habits. They may feel like they’ve been deprived and will want to indulge a bit. However, they’ll likely be more cautious than before. Many have lost their jobs, and others realize how tenuous job security currently is. Dozens have seen 30% to 40% losses in their IRAs and savings accounts, which can’t easily be restored. For many, this means changing their lifestyles considerably: downsizing homes, wardrobes, entertainment budgets and travel expenditures. I predict consumers will be more mindful of what they buy and how much they spend.
When people experience a major blow to their finances, they tend to remember for a long time what it meant to their families and lifestyles. For example, those who lived through the Depression are much more frugal than the succeeding generations. When the recession has passed, it’s likely people will try to save more — just in case a similar circumstance occurs.
Consumers are in the process of forming new spending habits that will adjust as time goes on. This may well be a protracted recession beyond anything people under age 60 have witnessed before. Therefore, we must change tactics in marketing and sales to attract reluctant consumers by offering excellent price savings on good quality merchandise.
Vice chairman, Prophet
More than 20 years experience in brand strategy
During the next few years, it is likely that consumer spending and consumption will be down substantially and there will be significant switches downscale to value brands and private labels. Some project that habits developed during this period, such as a reduced interest in premium brands, will persist.
In my view, however, when the economy recovers and confidence returns, there will be a return to something close to past spending patterns, and premium brands will once again have a strong role in the economic mix.
Consider the following: First, consumers can get activated about a crisis and react by making huge behavioral changes in things like water usage or gasoline consumption, for example. When the crisis passes, however, they again start using water and cars at about the same rate as before the crises. Consumers have a short memory and dislike sacrifices to their lifestyle.
Second, there is an ongoing need for emotional, self-expressive and social benefits that can be satisfied by frugality for only so long. Eventually, these needs will promote a return to premium brands.
Third, brands are remarkably resilient and can emerge from tough times stronger than ever as was evidenced by Harley-Davidson, Apple and AT&T, all of which went through a period of inferior products or service but emerged with their brand equity intact. As Mark Twain commented upon reading his obituary: “The reports of my death are greatly exaggerated.”
Friedman contends the lessons from the economic meltdown have been ingrained in consumers, while Aaker believes consumers will intrinsically bounce back once the economy recovers. Consumer habits can be fickle but this time, for the most part, new spending patterns may be here to stay.
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