Consumers have become more cautious and conscious about their purchases – and these traits are here to stay.
Our global economy has taken a beating and consumers everywhere are changing their buying habits to adjust to our new reality of insecure jobs, reduced real estate values, mistrust in business and government, and an uncertain economic future. Consumers are saving more, spending less, buying items when needed, and patronizing companies that care about more than just business.
Businesses wanting to survive this prolonged economic slump are paying attention to these new buying patterns and are adjusting accordingly. Will these new habits continue once the economy starts to recover? Studies predict that the longer these frugal economic conditions persist, the more ingrained the habits could become. Recovery has been much slower than many anticipated, but while things may not get worse, they might not get better anytime soon, either.
There are more important things than money
When the economy began its rapid downshift, one of the consequences was a spotlight on a society that had been chronically overspending on material goods and living precariously on credit. Eyes Wide Open, Wallet Half Shut, a 2010 study by Ogilvy and Mathers, found that three quarters of post-recession consumers surveyed were disenfranchised with the pursuit of money, responding that they no longer cared to climb the corporate ladder, would rather spend more time with family, and would choose job security over an insecure job with opportunities for raises.
Authors John Gerzema and Michael D’Antonio told brands to bid goodbye to the inflated wealth and hyper-consumerism of years past and say hello to “a lifestyle more focused on community, connection, quality, and creativity,” in The Power of the Post-Recession Consumer. Consumers are moving from “mindless consumption” to “mindful consumption,” specifically purchasing goods and services from vendors who echo their values and live up to their standards.
“More recently, the BAV [Young & Rubicam’s BrandAsset Valuator] surveys show sharp increases in the number of consumers who want positive relationships with marketplace vendors and who focus more on corporate behavior. Between 2005 and 2009, a growing number of people rejected status-driven values such as snobbishness and exclusivity, and embraced attributes related to bringing people closer together or making the world a better place. Among the once-prized brand attributes that declined in this period were: “exclusive” (down 60 percent), “arrogant” (down 41 percent), “sensuous” (down 30 percent), and “daring” (down 20 percent). On the opposite side of the scale, the brand attributes Americans found more important as they began to sense the impending recession and then suffered through the crisis were: “kindness and empathy” (up 391 percent), “friendly” (up 148 percent), “high quality” (up 124 percent), and “socially responsible” (up 63 percent).”
Frugality is cool
When faced with an increasing climate of job insecurity and falling equity, many consumers were forced to examine their own economic situation and revise their spending habits. People began economizing everywhere and both price and quality became key drivers for many purchases.
A Booz & Co. study, Forever Frugal? found that since the recession consumers are becoming extremely conscious about what they buy. They are spending less on household items, embracing less expensive private brands and buying fewer, high-quality items. The Ogilvy and Mathers study shows that 92 percent surveyed are using coupons, 91 percent are shopping at less expensive and/or discount stores and 90 percent are buying more store brands.
Buy now, use now
Finally, a good reason to curb the creeping Christmas shopping season that has managed to weasel its way into October (Editor’s note: a few clueless companies might take note. This morning – August 31 – we received a Christmas pitch). Brands could count on consumers to buy early and buy a lot on credit, but along with buying less, consumers are waiting until they need something to buy. Savvy companies are readjusting their seasonal selling to accommodate this recent trend. CEO of Newell Rubbermaid, Mark Ketchum, told the Wall Street Journal that his company changed its back-to-school selling season from its normal early July to mid-August range to late July through September to capitalize on the consumer’s desire to buy supplies later.
Consumers are also making their way through all the inventory they already own in their pantries, makeup cases, and bathroom cabinets, and restocking with smaller packages and less variety. Warehouse stores like Costco and BJ’s (based in MA), have noticed that shoppers bought less but shopped more frequently. Ahead of the curve, in 2008, BJ’s had already begun shrinking its package sizes to appeal to smaller households and people who wanted to stock up weekly, rather than monthly. These clairvoyant changes resulted in increased sales and memberships. As this economic climate persists, these changes might become the future standard.
Green is still good
Despite the sometimes higher price of green products, environmental consumerism is still going fairly strong. A 2011 UK study commissioned by Amex found that consumers place value on ethically sourced goods, and a Mintel study also reports that more than 35 percent of consumers surveyed said they would pay more for environmentally-friendly products. Green customers aren’t the majority, but it is a strong segment nevertheless.
As many consumers try to lead more conscious lifestyles, studies project that demand for ethical products will continue. Consumers want to buy from companies who implement internal environmental policies, work to reduce greenhouse gas emissions, and commit to environmental targets.
Consumers want companies who care about the community…
Corporate social responsibility (CSR) has gained visibility and momentum in the last several years with no indication of slowing down any time soon, but more than ever before, companies need to be strategic about their CSR efforts so they are complimentary to both the community and business growth. CSR isn’t simply about a company donating money to a worthy cause. CSR, implemented effectively, attracts both customers and employees, helps retain talent, and benefits both the company and the community. More than ever before, consumers are doing more research into companies and products before buying, requiring brands to be more transparent, ethical and accountable to customers in order to gain their business.
Each company defines CSR for itself. Intel focuses on energy conservation, emerging as one of the largest purchasers of renewable energy credits in the past few years, committing to 2.5 billion in 2011. The semiconductor manufacturer has also invested significant efforts toward creating clean energy solutions in several locations and employee education around their efforts. This helps the company save money on energy costs, reduces its impact, and engages its employees in energy saving initiatives.
ExxonMobil focuses on women’s education around the world. ExxonMobil Foundation’s Lorie Jackson explains that it’s good business because it broadens ExxonMobil’s pool of talent in the countries where it does business. This, in turn, helps ExxonMobil, and it helps communities worldwide. PepsiCo was looking to improve the nutritional value of its snacks. One solution, replacing palm oil with high-oleic sunflower oil (HOSO), will improve the economy of a Mexican region and the financial picture of 850 families, lessen its environmental impact and stabilize operating costs.
…and about customers, too
Although customers are more discriminating about their purchases and want to pay less, they still expect to be treated well by the companies they choose to patronize. Many organizations have cut back on easy return policies, shipping policies and customer service, but that has proven to be a mistake. After reeling from the large-scale meltdown of the financial industry, the last thing customers want to hear from a company is that they want their business, but don’t have the staff, time or inclination to treat customers well.
Companies who put customers first, versus those who sacrificed customer satisfaction for short-term relief, actually performed best according to Bloomberg BusinessWeek’s Third Annual Customer Service Champs list. Companies like Hertz, who had to cut back on services at some locations, angering travelers who already faced more aggravation in airports and more fees when flying, scrambled to find the right balance between making personnel cuts, and making sure those cuts weren’t so visible to customers that lack of service drove them away. Other companies like USAA found that cross-training call center reps, so that they had expertise in more than one area, helped them to keep their customer service level high, even when they had to cut back.
Although gaining new customers is important, companies have found that retaining already loyal customers is crucial. Zappos used to quietly upgrade both new and return customers with overnight shipping, but decided to shift those costs toward benefits for repeat customers. Dell has struggled with customer service woes for the last decade, and is still working to regain trust.
The Great Depression spawned a generation of savers. This recession is also affecting the buying habits of the next generation. Mindful consumerism may very well be here to stay.
image: Stevendepolo, the cleveland kid, martino!