Monday, September 6, 2010

Consumers shift with recession; can retailers shift with them?

To paraphrase James Carville, "It's the stupid economy." Today's economic news is all over the map, and it is not inspiring business or consumer confidence.
A survey from the Pew Research Center's Social and Demographic Trend Project focused on the past 30 months and reported that 55 percent of all working adults have suffered a spell of unemployment, a pay cut or a reduction in hours, or have become involuntary part-time workers.

As a reaction to all that, more than 60 percent have reduced personal spending since December 2007.

Other surveys reinforce the concept of a new normal in consumer behavior.

BIGresearch in Worthington, Ohio, reported that two-thirds of Americans have reduced credit card spending and that almost 73 percent won't return to previous levels of credit card use.

Research by Alix Partners, a consulting firm in Southfield, Mich., showed weak consumer confidence.

Seventy percent believe that their economic situation is worse than 12 months ago, and 83 percent expect to spend the same or less on nonessential purchases in the next 12 months., an online comparison-shopping site, reported that almost six in 10 American Internet users go online to compare prices, up by 19 percentage points from 2009.

And the 2010 American Pantry Survey from Deloitte and the Harrison Group reports that:

• 92 percent changed their grocery shopping behavior in the past two years.

• 93 percent expect to continue cautious shopping even when the economy grows again.

• 89 percent feel they have become more resourceful because of the economy.

• 84 percent see themselves as more precise in what they buy.

• 81 percent enjoy saving with coupons and loyalty cards.

• 79 percent believe they shop smarter than two years ago.

• 65 percent don't see their new shopping behavior as "sacrificing."

"Personal gratification and a desire to feel smart about what consumers are putting into their shopping carts are trumping brand satisfaction … price-consciousness. Value orientation and bargain hunting will remain prevalent for years," said Pat Conroy, vice chairman of Deloitte.

4 distinct strategies

Deloitte found that shoppers expressed four distinct strategies to deal with the economy.

They have become Super Savers, who are diligent coupon users; they are attuned to sacrifice — comparing unit prices and trying store brands; they are planners, who set budgets, plan meals and buy in bulk; and they have become spectators, who are loyal to national brands to a degree but focus on in-store discounts.

"The extent and duration of the recession has given people the motivation to learn and adapt new strategies — and family gratification has replaced product satisfaction as the go-to goal for American shoppers," said Dr. Jim Taylor, the Harrison Group's vice chairman and director of syndicated research.

Here's what marketers need to learn from all of this: Adjust your product offerings and pricing strategy to reflect value; reward customer loyalty; and provide discounts through multiple channels, including print, direct mail and online.

David Bohan founded BOHAN Advertising|Marketing, a Nashville agency with clients in travel, hospitality, health care and consumer products, in 1990. He has worked in marketing and advertising since earning a degree at the University of Tennessee-Knoxville in 1970.

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