The winter of discontent left many consumers feeling the pinch at the start of the year. With high street stores like Woolworths and Barratts falling into administration and job losses on a mass scale announced daily, it is no surprise that consumers feel unsettled.
Eighty-one per cent of consumers are already feeling affected by the recession, warns new research from media agency Arena BLM. The “Crunchonomics” report, drawn from polling 1,000 people across five representative groups based on their age and exposure to financial risk, claims that people have had to re-evaluate their lifestyles as a response.
With some economic experts warning that the worst is yet to come and talking of a “full-blown depression”, marketers are having to urgently rethink their strategies to ensure they do not ignore severe anxieties among consumers as they cautiously carry on with their everyday lives.
Charlie Makin, chief strategic officer at Arena BLM, explains: “The industry needs to understand what consumers are thinking before we can get out of recession. Advertisers also need to be prepared for when consumers are bored with the recession and want to go back to the disposable income lifestyle.”
The research identifies five distinct groups of participants. Three of these are concerned about their job security to varying degrees – “young independent people”, “secure families”, and “insecure families”. There are also two groups who have fewer dependents but are affected by pension difficulties and interest rate cuts: those whose children have left home – the “empty nesters”, and the older “pensioners”.
The research suggests that in February, consumers were spending 8% less in general compared with three months before, with the young independents and insecure families particularly money-conscious.
Makin says that marketers need to focus especially on younger generations, who have never experienced a recession before and insecure families who are hearing about businesses falling into administration and going bankrupt. “Brands need to change their messaging to be considerate and consolatory to all audiences. They have to offer genuine value for money,” he warns. “They shouldn’t focus on the corporate identity, but consider behavioural messages targeted at every audience possible.”
The latest government figures suggest that the unemployment rate is rising faster than in previous recessions. The number of people in the UK alone seeking Jobseeker’s Allowance rose by 138,400 during February and the figures from March are expected to be equally bad.
So far, it appears that marketers are having little success getting consumers spending. The Crunchonomics research finds that where its respondents can make cutbacks because of the economic situation, they are doing so. A third (33%) are cutting back on grocery spend and half (51%) are cutting back on home improvements.
While marketers may not be having too much luck in prising money from frightened consumers, some brands are making good efforts. Supermarket Tesco has been promoting its Discount Brands line since September 2008, offering branded products for lower prices. DIY chain B&Q also recently launched a campaign encouraging shoppers to buy home decoration materials again under the banner “It’s all do-able”, recognising that “none of us are feeling flush right now” and promising consumers they can achieve their desired results “without spending a penny more than you have to.”
Makin says it’s important that brands continue to try and keep people economically active. The figures make grim reading, however: consumers are spending considerably less on non-essentials (-38%), including shopping (-56%) and eating out in restaurants (-54%).
There are still opportunities, however. Since people are anxious to save money and stay indoors, they are consuming media in new and different ways. They are looking to digital media such as interactive TV and online news or entertainment for their daily dose of information.
The research also found that consumers were spending 46% more on gas and electricity than before, though this could also be attributed to a cold snap at the start of 2009.
Makin says: “Advertisers can’t go back to their old ways once the recession is over. Digital sources are offering trackable returns on investment that the other mediums couldn’t prove. The challenge now is to ensure that people do click on the ads, in the same way that interactive TV relies on the red button being pressed and user interaction.”
In such tough times, sectors such as pay TV companies and takeaway franchises that fit into home-oriented lifestyles are likely to survive the tough financial climate. Institutions such as banks and retail are most likely to continue to suffer the effects of the credit crunch, as families feel the pinch. They will resort to incentivised promotions to lure customers back.
“The recession has introduced a deep mistrust in institutions ever since the Lehman Brothers collapse, so consumers are understandably fearful and resisting spending frivolously now. You can’t just change these attitudes immediately; it will take time. But appearing genuine, offering good value and not being overly corporate in your approach will stand a brand in good stead,” advises Makin.
He says that the financial services sector is probably the one with most work to do to repair its reputation after multiple bailouts and job layoffs. Fifty-four per cent of respondents claim their trust in banks has fallen compared with three months ago, with the empty nesters (63%) and insecure families (61%) most affected.
While it might be expected that travel would see consumers cutting back and spending their holidays at home, the figures suggest this is the area least likely to suffer in the recession with 70% saying they will still holiday abroad, despite spending less on non-essentials.
Makin suggests that package holidays will weather the recession well because they can relate to what consumers are seeking in bleak times. He suggests that they are offering a “sanctuary” for consumers, enabling them to escape the doom and gloom at home. He argues that package holiday companies can position themselves effectively as “the good guys”, while banks remain “the enemy of society”.
As ad spend falls across the board, it will be difficult for marketers to convince their boards that they need to keep spending to make the most of any small windows of hope. But Makin says that those businesses that can get consumers to believe that they are able to keep living their lives in ordinary ways, rather than ditching all spending, will survive the recession.
“The marketing industry needs to pull together and talk to consumers intelligently, with the aim of winning the customer back,” he says. “Despite headlines being bleak, we see signs of hope. There will be more grim things to come, but seeds of hope are appearing. The building of a new marketing architecture can begin.”