Consumers savings rate highest in 15 years: Implications for marketers
06/27/09 07:11 AM Filed in: Consumer
lifestyles
1. Why aren’t consumers spending?
Consumers are not spending for a lot of reasons probably the biggest is the coverage of the recession in the media coupled with the loss of home equity. If you watched the Nightly News during the economic crisis you felt as though an economic tsunami was about to hit our country and that we were all destined to be standing on long lines for food ! Additionally consumers realize that no matter where they work their jobs are not safe and that they are truly nothing more than a digit on a balance sheet to be trimmed to meet company financial targets.
2. Will consumers ever go back to buying a lot of stuff ?
Probably not. As consumers cut back they are now learning that living within their means and putting away charge plates is not as bad as they thought. They are spending more time at home planting veggie gardens, watching HBO and they are coming to realize that spending time at home with the family and making love to their partners has benefits vs. going to the mall. It’s also nice, people are learning, to not have a car payment and use that money for something else therefore I am not going to roll over the lease or get a new car.
3. What does this mean for marketers?
Well first it means that you had better have a well planned and executed strategic brand strategy in place. Brands that discount are going to find lower profits at the end of the road and consumers thinking of your brand as a discounted brand. It also means that you need to redefine the value equation and move the battlefield from price to other brand assets. Things like customer service, brand reputation and even how your HR department treats candidates are all going to impact sales now. Private label sales continue to increase and more and more consumers are asking if your brand is worth the extra money.
4. What should marketers be doing now?
First they should be reevaluating consumer loyalty to identify which loyal consumers are profitable and which ones are not so that they can develop marketing programs to keep this segment happy and profitable.
Second they should be using every tool at their means to listen to what consumers are saying about them, their brand and the product category (yes this means social media !).
Stop mass segmentation and think mass customization: look at tools that allow you to develop relevant messages to individuals and learn how to respond with speed and quality to identify threats and opportunities.
Think carefully about brand discounts and sales as you may never be able to recover lost profits. Also, think Long Tail and realize that market share is not the answer but profitable marketing is.
Don’t focus on product benefits..focus on solving problems of consumers with your product or brand.
Finally if your marketing budget has been cut you are loosing. Research has shown that consumers who see less advertising of certain brands feel that brand maybe in trouble and thus they will stay away.
