March 22, 2010
Amid steep unemployment, it sometimes seems that half the people who still have jobs are working to figure out whether consumers will continue scrimping even after the economy recovers. A couple of surveys -- one by Ogilvy & Mather Chicago in conjunction with Communispace, the other by Booz & Co. -- add their two cents to the body of data suggesting that Americans will continue to pinch their pennies long into the post-recession era. However, the findings also give reason to think that a lasting era of "frugality" won't be one in which consumers resign themselves to lives of "deprivation."
Whether the recession has technically ended or not, consumers are in no rush to loosen the tight grip they've had on their spending. For one thing, it's not as though they're necessarily hankering to do so. In the Ogilvy report (released this month, based on polling fielded in the fourth quarter of last year), 78 percent of respondents said they believe the recession "has changed their spending habits for the better."
"They look at their old spending habits and are a bit embarrassed by their behavior, just like you may look back at some of the crazy things you did in high school or college," says Graceann Bennett, managing partner and director of strategic planning at Ogilvy Chicago. "The new consumer is wiser and in more control, and so while consumption may never be as carefree and fun as it was before, consumers seem to like their new outlook, mindfulness and strength. They are sober and clean and not anxious to get 'drunk' on overconsumption anytime soon."
So, how should marketers finesse this? "The big thing is the way marketers are framing their brand or product propositions in the context of things like 'we know money is tight' or things like 'there is a lot of uncertainty,'" says Bennett. "There are two ways marketers could go to be effective. One, assume that all the anxiety and uncertainty is there, build off of it, but don't waste time actually stating this known fact in advertising. It is just a downer and a no-duh statement -- a waste of precious time to communicate to consumers. Two, tap into the positive feelings consumers are having about their newfound mindfulness and smart shopping habits -- they are in control, are seeing things clearly, and are feeling pretty good about themselves." In this context, Bennett suggests there are some words or phrases marketers should avoid: "financial stress, times are tough, recession." And she notes other terms that will have "more resonance" now with consumers: "you are in control, new perspective, possibilities, fresh outlook, you know what you want and need."
One thing consumers don't believe they need is more financial or professional stress. In the Ogilvy survey, 93 percent said they'd rather have a "smaller house without a mortgage" than a "big house with a mortgage." And 75 percent would rather have "a secure job, but without the opportunity for raises" than a "less secure job, but with consistent raises."
"The pursuit of money has lost some of its allure, and Americans aspire to better, more fulfilling lives and are less enamored with filling their lives with stuff and junk," says Bennett. "And if it means they have to work at a job they don't like or take on a second job to spend mindlessly on 'stupid' stuff, it is definitely not worth it." It's not simply a matter of people's finances being tight at the moment. "They see their houses filled up with the useless junk they acquired during the free-spending times of the past and are struck by how not worth it those purchases were," says Bennett.
With many expenditures having been put on hold or shifted to cheaper brands, is there a lot of pent-up demand that (despite consumers' vows of austerity) will give spending an upward push as the economy improves? Matthew Egol, a Booz partner, is skeptical of any across-the-board surge. "There has been a lot of deferred consumption of big-ticket purchases such as cars and home improvement, as well as day-to-day luxuries like eating out," he remarks. "While it's hard to make a case for 'a lot of pent-up demand' overall, given that consumers indicate they don't anticipate going back to their old ways quickly and intend to save more, some discretionary categories like consumer electronics, appliances and eating out took such a beating that we would expect them to improve faster than other categories."
Of course, when people predict they'll be prudent in their spending, one always wonders whether they really mean it and will carry through on their good intentions. In the case of post-recession behavior, do respondents who give pollsters the respectable answers overstate the likelihood of long-term frugality? Egol sees reasons to believe behavior will change for real. "Unemployment is likely to remain high for some time, and people are reducing financial leverage and saving more, given worries about the future," he notes. "As these anxieties subside, spending will recover at a more rapid clip. At the same time, there is a lot more price transparency than in the past, and shoppers have learned how to get better deals. Retailers and manufacturers are embracing digital to compete for attention and to distribute offers. Combined with learned behaviors and aggressive retail-format competition, there is a lot of inertia toward value-conscious behavior and a focus on frugality."
The Ogilvy findings also show indications of such behavior. Ninety-two percent of that survey's respondents said they're using coupons; 91 percent are shopping at cheaper/discount stores; 90 percent are buying more store brands/generics. And they're looking before they leap into a purchase, with 47 percent saying they now spend more time researching before they buy. This does not mean, however, that they have stopped treating themselves or indulging in an unplanned splurge. For example, 60 percent of Ogilvy's female respondents report having "bought something on a whim" in the past year, and 39 percent have made at least one impulse purchase in the past month.
A NEW 'CONSCIOUS RECKLESSNESS'
In part, this is in reaction to what the Ogilvy report calls the "exhausting" experience of keeping their financial balance. "They are longing for permission to splurge and be spontaneous again," says the report. But how can marketers tap into this without seeming oblivious to the financial constraints many people feel and to the satisfaction they derive from consuming more prudently? "That is going to take some skill," says Bennett. "We are seeing an emergence in what we call 'conscious recklessness.' This is where consumers actually plan out frivolous or indulgent spending. This way, there is a bit of method to their madness -- just like someone on a diet who saves up calories through prudent eating Monday-Thursday so they can let loose and eat and drink something indulgent when they go out with friends on a Friday night. The recklessness is going to happen, but it is more likely going to be part of a master plan that keeps consumers out of financial danger.
"Advertisers can tap into this by putting some of the more indulgent purchases into a broader context like 'you deserve this for all your good behavior' or 'if you are going to indulge, don't waste it on something that isn't worth it,'" Bennett continues. "Advertisers that can get consumers to feel like their product or service is worth the indulgence can win big, since consumers definitely still want to indulge and are definitely treating themselves today. Total deprivation is not a sustainable or enjoyable way to live, even during tough economic times. Indulgences and luxuries are key to maintaining sanity and happiness through these tough times. Consumers are just going to be more selective and demanding of the products or services they do indulge in, and they better deliver."
Manila Austin, Communispace's director of research, also stresses that the shift toward careful spending doesn't mean an embrace of hair-shirted self-deprivation. "Results suggest that Americans are actually looking forward to being able to spend a bit more freely, but that spending will be the result of a very deliberate decision process," says Austin. "People are more mindful now and aware of the consequences of their (and others') spending. So luxury is still on the 'to-do' list, but people are taking a more mindful approach to where, how and on what they spend."
In such a nuanced environment, the Ogilvy report suggests that marketers can't endlessly bond with consumers by acknowledging how tough things are. "It is no longer productive or new news to remind Americans of how bad it is out there," says the report. Since "Americans are feeling stronger than we give them credit for and are ready to rise to the occasion, brands just need to align with this can-do attitude and be helpful to people in their quest for something better."
So, how should marketers finesse this? "The big thing is the way marketers are framing their brand or product propositions in the context of things like 'we know money is tight' or things like 'there is a lot of uncertainty,'" says Bennett. "There are two ways marketers could go to be effective. One, assume that all the anxiety and uncertainty is there, build off of it, but don't waste time actually stating this known fact in advertising. It is just a downer and a no-duh statement -- a waste of precious time to communicate to consumers. Two, tap into the positive feelings consumers are having about their newfound mindfulness and smart shopping habits -- they are in control, are seeing things clearly, and are feeling pretty good about themselves." In this context, Bennett suggests there are some words or phrases marketers should avoid: "financial stress, times are tough, recession." And she notes other terms that will have "more resonance" now with consumers: "you are in control, new perspective, possibilities, fresh outlook, you know what you want and need."
One thing consumers don't believe they need is more financial or professional stress. In the Ogilvy survey, 93 percent said they'd rather have a "smaller house without a mortgage" than a "big house with a mortgage." And 75 percent would rather have "a secure job, but without the opportunity for raises" than a "less secure job, but with consistent raises."
"The pursuit of money has lost some of its allure, and Americans aspire to better, more fulfilling lives and are less enamored with filling their lives with stuff and junk," says Bennett. "And if it means they have to work at a job they don't like or take on a second job to spend mindlessly on 'stupid' stuff, it is definitely not worth it." It's not simply a matter of people's finances being tight at the moment. "They see their houses filled up with the useless junk they acquired during the free-spending times of the past and are struck by how not worth it those purchases were," says Bennett.
Amid steep unemployment, it sometimes seems that half the people who still have jobs are working to figure out whether consumers will continue scrimping even after the economy recovers. A couple of surveys -- one by Ogilvy & Mather Chicago in conjunction with Communispace, the other by Booz & Co. -- add their two cents to the body of data suggesting that Americans will continue to pinch their pennies long into the post-recession era. However, the findings also give reason to think that a lasting era of "frugality" won't be one in which consumers resign themselves to lives of "deprivation."
Whether the recession has technically ended or not, consumers are in no rush to loosen the tight grip they've had on their spending. For one thing, it's not as though they're necessarily hankering to do so. In the Ogilvy report (released this month, based on polling fielded in the fourth quarter of last year), 78 percent of respondents said they believe the recession "has changed their spending habits for the better."
"They look at their old spending habits and are a bit embarrassed by their behavior, just like you may look back at some of the crazy things you did in high school or college," says Graceann Bennett, managing partner and director of strategic planning at Ogilvy Chicago. "The new consumer is wiser and in more control, and so while consumption may never be as carefree and fun as it was before, consumers seem to like their new outlook, mindfulness and strength. They are sober and clean and not anxious to get 'drunk' on overconsumption anytime soon."
So, how should marketers finesse this? "The big thing is the way marketers are framing their brand or product propositions in the context of things like 'we know money is tight' or things like 'there is a lot of uncertainty,'" says Bennett. "There are two ways marketers could go to be effective. One, assume that all the anxiety and uncertainty is there, build off of it, but don't waste time actually stating this known fact in advertising. It is just a downer and a no-duh statement -- a waste of precious time to communicate to consumers. Two, tap into the positive feelings consumers are having about their newfound mindfulness and smart shopping habits -- they are in control, are seeing things clearly, and are feeling pretty good about themselves." In this context, Bennett suggests there are some words or phrases marketers should avoid: "financial stress, times are tough, recession." And she notes other terms that will have "more resonance" now with consumers: "you are in control, new perspective, possibilities, fresh outlook, you know what you want and need."
One thing consumers don't believe they need is more financial or professional stress. In the Ogilvy survey, 93 percent said they'd rather have a "smaller house without a mortgage" than a "big house with a mortgage." And 75 percent would rather have "a secure job, but without the opportunity for raises" than a "less secure job, but with consistent raises."
"The pursuit of money has lost some of its allure, and Americans aspire to better, more fulfilling lives and are less enamored with filling their lives with stuff and junk," says Bennett. "And if it means they have to work at a job they don't like or take on a second job to spend mindlessly on 'stupid' stuff, it is definitely not worth it." It's not simply a matter of people's finances being tight at the moment. "They see their houses filled up with the useless junk they acquired during the free-spending times of the past and are struck by how not worth it those purchases were," says Bennett.
With many expenditures having been put on hold or shifted to cheaper brands, is there a lot of pent-up demand that (despite consumers' vows of austerity) will give spending an upward push as the economy improves? Matthew Egol, a Booz partner, is skeptical of any across-the-board surge. "There has been a lot of deferred consumption of big-ticket purchases such as cars and home improvement, as well as day-to-day luxuries like eating out," he remarks. "While it's hard to make a case for 'a lot of pent-up demand' overall, given that consumers indicate they don't anticipate going back to their old ways quickly and intend to save more, some discretionary categories like consumer electronics, appliances and eating out took such a beating that we would expect them to improve faster than other categories."
Of course, when people predict they'll be prudent in their spending, one always wonders whether they really mean it and will carry through on their good intentions. In the case of post-recession behavior, do respondents who give pollsters the respectable answers overstate the likelihood of long-term frugality? Egol sees reasons to believe behavior will change for real. "Unemployment is likely to remain high for some time, and people are reducing financial leverage and saving more, given worries about the future," he notes. "As these anxieties subside, spending will recover at a more rapid clip. At the same time, there is a lot more price transparency than in the past, and shoppers have learned how to get better deals. Retailers and manufacturers are embracing digital to compete for attention and to distribute offers. Combined with learned behaviors and aggressive retail-format competition, there is a lot of inertia toward value-conscious behavior and a focus on frugality."
The Ogilvy findings also show indications of such behavior. Ninety-two percent of that survey's respondents said they're using coupons; 91 percent are shopping at cheaper/discount stores; 90 percent are buying more store brands/generics. And they're looking before they leap into a purchase, with 47 percent saying they now spend more time researching before they buy. This does not mean, however, that they have stopped treating themselves or indulging in an unplanned splurge. For example, 60 percent of Ogilvy's female respondents report having "bought something on a whim" in the past year, and 39 percent have made at least one impulse purchase in the past month.
A NEW 'CONSCIOUS RECKLESSNESS'
In part, this is in reaction to what the Ogilvy report calls the "exhausting" experience of keeping their financial balance. "They are longing for permission to splurge and be spontaneous again," says the report. But how can marketers tap into this without seeming oblivious to the financial constraints many people feel and to the satisfaction they derive from consuming more prudently? "That is going to take some skill," says Bennett. "We are seeing an emergence in what we call 'conscious recklessness.' This is where consumers actually plan out frivolous or indulgent spending. This way, there is a bit of method to their madness -- just like someone on a diet who saves up calories through prudent eating Monday-Thursday so they can let loose and eat and drink something indulgent when they go out with friends on a Friday night. The recklessness is going to happen, but it is more likely going to be part of a master plan that keeps consumers out of financial danger.
"Advertisers can tap into this by putting some of the more indulgent purchases into a broader context like 'you deserve this for all your good behavior' or 'if you are going to indulge, don't waste it on something that isn't worth it,'" Bennett continues. "Advertisers that can get consumers to feel like their product or service is worth the indulgence can win big, since consumers definitely still want to indulge and are definitely treating themselves today. Total deprivation is not a sustainable or enjoyable way to live, even during tough economic times. Indulgences and luxuries are key to maintaining sanity and happiness through these tough times. Consumers are just going to be more selective and demanding of the products or services they do indulge in, and they better deliver."
Manila Austin, Communispace's director of research, also stresses that the shift toward careful spending doesn't mean an embrace of hair-shirted self-deprivation. "Results suggest that Americans are actually looking forward to being able to spend a bit more freely, but that spending will be the result of a very deliberate decision process," says Austin. "People are more mindful now and aware of the consequences of their (and others') spending. So luxury is still on the 'to-do' list, but people are taking a more mindful approach to where, how and on what they spend."
In such a nuanced environment, the Ogilvy report suggests that marketers can't endlessly bond with consumers by acknowledging how tough things are. "It is no longer productive or new news to remind Americans of how bad it is out there," says the report. Since "Americans are feeling stronger than we give them credit for and are ready to rise to the occasion, brands just need to align with this can-do attitude and be helpful to people in their quest for something better."
So, how should marketers finesse this? "The big thing is the way marketers are framing their brand or product propositions in the context of things like 'we know money is tight' or things like 'there is a lot of uncertainty,'" says Bennett. "There are two ways marketers could go to be effective. One, assume that all the anxiety and uncertainty is there, build off of it, but don't waste time actually stating this known fact in advertising. It is just a downer and a no-duh statement -- a waste of precious time to communicate to consumers. Two, tap into the positive feelings consumers are having about their newfound mindfulness and smart shopping habits -- they are in control, are seeing things clearly, and are feeling pretty good about themselves." In this context, Bennett suggests there are some words or phrases marketers should avoid: "financial stress, times are tough, recession." And she notes other terms that will have "more resonance" now with consumers: "you are in control, new perspective, possibilities, fresh outlook, you know what you want and need."
One thing consumers don't believe they need is more financial or professional stress. In the Ogilvy survey, 93 percent said they'd rather have a "smaller house without a mortgage" than a "big house with a mortgage." And 75 percent would rather have "a secure job, but without the opportunity for raises" than a "less secure job, but with consistent raises."
"The pursuit of money has lost some of its allure, and Americans aspire to better, more fulfilling lives and are less enamored with filling their lives with stuff and junk," says Bennett. "And if it means they have to work at a job they don't like or take on a second job to spend mindlessly on 'stupid' stuff, it is definitely not worth it." It's not simply a matter of people's finances being tight at the moment. "They see their houses filled up with the useless junk they acquired during the free-spending times of the past and are struck by how not worth it those purchases were," says Bennett.
Closed November 2010
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