Between the lines

What consumers say and what they actually do in a recession can vary widely. To find out what their intentions really are, researchers must look at the reasons behind the answers.

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In response to a comment I made a few months back about how most Britons spend bank holidays doing nothing, a blogger on a rather obscure website referred to me as a “clipboard-waving goon”. While insults only sting if based on truth (I am not a goon, and the only clipboard I use regularly is on Windows), this comment reflects the widespread misconception of consumer research among the general population. But what about the business community? Most businesses, of course, understand the role of, and appreciate the need for, consumer research. Nevertheless, it is often reported that research is one of the first casualties of an economic downturn. While this is surely not the case among all companies, there are some that will be looking at trimming research in a bid to keep down costs.

However, the current economic situation means that consumer research is more important than ever before, something clearly understood by Scottish Widows Head of Customer Insight, Anne Rae, who said: “If anything, talk of credit crunch and recession leads us to invest more in market research, rather than less. It’s at times of uncertainty and change that it is important to make sure that your business really understands how customers are thinking, feeling and behaving. Good market research, real customer insight and being close to the customer represent a competitive advantage at times of economic downturn.”

Mintel’s experience suggests there are plenty of people who would agree with Ms Rae’s sentiments, yet are perhaps unsure as to how market research should be utilised. We are often asked, for example, which markets fared well in the last recession, as an indicator as to which sectors may perform well in the current economic climate. But, today is a different world, one which cannot be compared with the early 1990s.

Finding today’s designer underwear

In the last recession, for example, sales of designer underwear outperformed other clothing markets, representing both an inexpensive treat and a relatively cheap way to buy into a brand. To suggest that the same would happen again in the current economic downturn, however, is to ignore the wider changes that have occurred in the underwear market: the relative maturity of the designer underwear sector, a more fragmented underwear market, and, of course, the presence of value retailers.

So the question a lot of clients ask me is this: what is today’s designer underwear? When faced with economic uncertainty, where will consumers cut back and where will they continue to spend?

Consumer research, of course, can point us in the right direction, but must be interpreted correctly. For example, research conducted by Mintel in December 2007, and again in July 2008, asked respondents where they would cut back if they found themselves in dire financial straits. In both survey waves, the response was overwhelmingly geared towards convenience foods such as ready meals, takeaways and fast food.

Is this the end for convenience food?

Initially, such findings make sense: convenience foods represent (arguably) unnecessary expenditure and are potentially unhealthy, ergo the (perceived) need to cut back. Yet, it is difficult to believe that a fast food enthusiast, for example, would forgo a 99p burger in the face of economic uncertainty. Likewise, for the timepressed, ready meals still represent good value for money.

Indeed, it could be argued that convenience food, as an inexpensive, convenient treat, could benefit in a faltering economy. So why have consumers cited this area as one for the chopping block? More importantly, how do we test whether or not it’s true?

While it is often said that consumers are bad at predicting their own behaviour, comparing what consumers say they will do with what they actually do helps us to understand the consumer mindset further. The intricacies of how they truly behave can only be gleaned from monitoring research results over a period of time, combined with strategic analysis and expert insight of such findings.

For many, convenience is a way of life, one that they would be loath to give up, yet we know that consumers view ready meals, takeaways and fast food as “non-essential”. For some, given unhealthy connotations, relegating convenience food to the top of the unessential list is just good politics.

When we look at what consumers have actually done to save money in recent months, however, the picture becomes clearer. Instead of cutting down on the amount of convenience foods they buy, they have shifted other areas of expenditure so as to maintain their reliance on products such as ready meals and takeaways. For example, they have started buying more own-label food, have moved some of their shopping to discounters such as Lidl and Aldi, and have even cut back on the number of extras (side dishes, for example) they order at restaurants.

Maintaining their lifestyle

The end result: high volume, reduced value. So consumers were correct in predicting that they would cut back on the amount they spend on convenience foods, but they have done everything possible to ensure that this doesn’t adversely affect the lifestyle to which they’ve grown accustomed.

I cite convenience food as an example of why consumer research is so much more complex than most people understand. It would be tempting to take the survey on consumer intentions at face value without further investment. But this would be a false economy as consumer research only comes to life when examined over time, tackled at all angles and backed up with insightful analysis.

Likewise, simply looking back to the last recession doesn’t help in predicting consumer expenditure during the credit crunch. Not only has the world moved on, but there is a large demographic who has never known anything other than good times; a demographic who has grown up on designer underwear and convenience food; a demographic whose behaviour will be extremely difficult to forecast without good quality, continuous consumer research, correctly interpreted and analysed.

CV James McCoy
Head of research services
Mintel
2007
Head of research services, Mintel
2005 Global coverage manager, Global New Products Database (GNPD), Mintel
1995 Senior consultant, consumer goods, Mintel

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