Identifying how consumer attitudes are shifting in this downturn and which shifts will stick is an important, but tricky, task. John A. Quelch and Katherine E. Jocz tackled this issue in the Financial Times with their Managing in a Downturn.
I can recommend this article as thought provoking, and it contains some good insights. But there's some bad mixed in with the good. First the good.
Key takeaways:
"What is certain is that the market segmentation scheme you were using to plan your marketing budget and programmes this time last year is obsolete. You need to listen to your customers and possibly develop a new segmentation approach."
Very true. The authors recommend an overlay segmentation that adds insights to how consumers are reacting to the current environment. This is likely a good first step.
"[R]ecessions often accelerate rather than decelerate underlying trends in consumer behaviour . . .Conventional wisdom suggests that consumers return eagerly to their old attitudes and behaviours once a recession abates. Indeed, the theory is that pent-up demand during a recession is unleashed once consumer confidence rebounds and credit becomes more readily available. . . . What is not so clear is whether all consumers in developed economies will revert to past behaviours. If the recession is long, as appears likely, new attitudes and behaviours are more likely to become ingrained. . . . In much the same way that life-changing events such as marriage or divorce may prompt us to reappraise our basic values and goals, so an economic shock can provoke a similar response."
This is the big question. We know attitudes will change, but will the changes be permanent? Some commentators look back to past recessions, see temporary pullbacks in consumption, and conclude that this time the changes will also be only temporary. However, there are potentially two big differences this time. First, the severity of this recession or depression may provoke more lasting changes. But perhaps more importantly, an anti-materialist counter culture has been developing for some time and has grown beyond a fringe movement. Today, if consumers want to make permanent changes to their behaviors and lifestyle, they have a place to go. There are groups, publications, products, and philosophies that support pared-down living, and it's closer to the mainstream.
"In no industry will the challenge of understanding customer behaviour and market segmentation be greater than in retail financial services. Consumer trust has been severely shaken as the share prices and integrity of hitherto stalwart institutions have been undermined."
This is spot on. An additional factor is that the supply-side of retail financial services will be changing as well with new regulations and a re-look at business models. The potential exists for profound changes in both what consumers want and what their choices are.
Some cautions, though, on the not-so-good.
Quelch and Jocz suggest a specific segmentation overlay, but there is no sign this is data-, rather than intuition-, driven. Their instincts might be good, but don't bet any dollars without data to back this up.
Also, Quelch and Jocz echo the conventional wisdom that marketers are underspending on digital media because their percentage of spend doesn't align with the time consumers spend online. See our recent post on online ad pricing for the problems the come from ignoring supply-side issues when drawing these conclusions.
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