Sunday, July 18, 2010

The Upside of a Recession

Unemployment rates vary between 7% and 17% depending on where you live. But that means over 80% of the population is still working and nearly everyone is still spending.

Taco Bell lowered the price of a value meal to $2.00.

Walmart's advertising talks about lowering prices.

If prices are dropping, then as a business, you need more than a low price to be successful:

Deloitte Study: Consumers Love Spending Less

The good news from Deloitte's "New American Pantry" is that the vast majority of consumers don't feel bad about the recession -- they actually love it: 81% of those surveyed say they find saving money, using such techniques as coupons or loyalty programs, fun.

The bad news is for brands everywhere: The more adept consumers get at saving, the less they care about buying a certain brand, and are more willing to trade down or in favor of a sale than most marketers imagine. Think they've got a favorite brand in many categories? Ha!: 51% percent say they are loyal to no more than two to three brands, in any given supermarket.

"There was a very palpable sense of remorse and embarrassment about the way they used to shop," Pat Conroy, vice chairman and Deloitte's consumer products practice leader in the U.S., told Marketing Daily. "They have a real sense of 'I can't believe how wasteful I used to be when I shopped. I didn't even know what was in my pantry and freezer.' Now, it's almost like they are energized by this new approach -- it's like saving money when they shop is a new kind of game, a way to stick it back to the man."

The survey, conducted with the Harrison Group and based on data from more than 2,000 adults, revealed four distinct types of consumers. It calls the largest group (at 36%) spectators -- they are the youngest and most affluent group, the least impacted by the recession and the least likely to change their shopping habits.

Next come the sacrificers (22%), who are the lowest-earning group, and the most impacted. Next (at 21%) are the super planners, who also take the most delight from saving. Finally, planners -- also 21% -- focus more on saving money through food preparation and menu planning.

Of the four, only the sacrificers are resentful about the recession's impact on their shopping, and somewhat bitter at the continual sacrifices the economy has demanded. "For them, there's a real sense of being hit by bad circumstances from all sides," Conroy says.

Overall, 79% say they feel smarter about the way they shop versus two years ago, 65% feel like they aren't sacrificing very much, and 61% say they are more price-conscious. Loyalty cards are critical: 84% have at least one, and 65% say they are either essential or very important as a money-saving method; 44% now use loyalty cards in grocery stores every time they shop.

But brands are clearly huge losers, with 31% saying they are less brand-loyal, and 85% saying they have found several brands that are just as good as national brands. (In fact, 80% believe most store brands are manufactured by the traditional national brands, anyway.)

Deloitte also asked consumers to weigh in on brands in 21 categories -- more than 100 brands in all -- and found that only a handful are what it dubbed "destination brands," which he says means "an abundance of consumers say 'I will seek them out, regardless of channels, and for the most part, regardless of price." The second category was "preferred only" brands, which consumers say they would like to buy, but won't go out of their way to find them.

And finally, there was a category of "sale-only" brands, where consumers say they would only buy them if there were a significant promotion. "Consumers have a real 'I don't need 'em' attitude toward this final category," he says, adding that the implications for marketers are considerable. "There are brands offering coupons and promotions that probably don't need to, and others that need to know how little they are valued."

But Conroy says it would be wrong to think consumers only care about price. "What consumers are really focused on is the value," he says. "They're saying they won't buy large sizes because they are cheaper -- if it results in waste, for example. What's driving this is not just the urge to spend less, but to get the most value."

(Source: Marketing Daily, 07/13/10)

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