How to turn the browsers into buyers

FEATURE-2-shopperMarketers may be justified in feeling a little bit of optimism about the state of the world, despite the ongoing global recession. The latest research from the Nationwide Consumer Confidence Index (NCCI) suggests that consumer confidence is stabilising.

While the economic situation might have many in the marketing profession fearing for their product sales, the latest figures suggest that people may be willing to spend if given the right enticements.

TNS consultant Richard Bussy, who analyses the NCCI, explains: “Consumer confidence is becoming stable; it’s plummeted since October 2007 when it stood at 94 points. It fell to 41 points in January but has stayed the same since then.”

Bussy adds that while the index figures might remain flat, consumer confidence in spending has begun to rise. He says: “This suggests that consumers recognise that now is a good time to buy, although we know from actual sales figures they just aren’t ready to do so yet.”

No data should be seen in isolation with the economic events of the past year, he adds. In many respects, 2008 was the year that the bubble burst, and Bussy says it will be remembered as the year when the high street retail environment began falling apart, house prices tumbled, multinational companies disappeared overnight, and sterling crumbled.

In the run-up to last year’s collapse, the NCCI began to wobble. Consumer confid­ence began to deteriorate from September 2007 when the Northern Rock bank collapsed.

The NCCI is made up of a number of sub-indices, one of which is the Present Situation Index, which looks at consumers’ feelings about the economy and the labour markets at the current time. Another is the Expectations Index, focusing on what consumer confidence will be in six months’ time.

When looking at the Present Situation Index, it is clear which major events have jolted consumer confidence. The index saw big falls in April and May 2008 when ongoing economic uncertainty, a weakening housing market and the higher cost of food and fuel were all being widely reported, taking the index to its then lowest recorded levels.

The index fell further as the year progressed, with particular shocks when negative stories broke about Lehman Brothers, HBOS and Lloyds TSB, Woolworths and RBS.

Comparing these falls to the Expectations Index gives a clearer picture of how consumers respond to less immediate news. The biggest rise in people’s confidence about the future economic and employment market situations was reported in October 2008, when consumers were told about VAT cuts.

The biggest fall in the Index was seen in July 2008, when financial and construction companies started to report half-yearly losses, leading to widespread predictions of job cuts.

Since the start of 2009, the NCCI has stabilised. Confidence fell to 41 in January, but then rose by 5% to 43 in February, before falling back to 41 in March. This relatively consistent performance suggests that the doom and gloom could be coming to an end. This can largely be attributed to consumers’ increased confidence in the UK’s future economic situation.

While the percentage of consumers who think the economic environment will be somewhat better or much better in six months’ time remains relatively unchanged at 19% (against the 2008 half two average of 18% and the 2008 quarter four average of 23%), there has been a marked shift away from the feeling that the economy will get worse. Instead, consumers are starting to believe that the economic landscape in six months’ time will be neither better nor worse. Stability is the first step to recovery and it is clear that people are beginning to feel that we are in a steady environment; it’s not good but they are getting used to it.

A further part of the Index looks at consumer spending and monitors how happy UK consumers are to make major purchases, such as houses or cars, and household items, such as white goods.

This is possibly the best measure to demonstrate the true extent of the nation’s financial worries and shows how high street sales and widespread discounts have been received by consumers. Interestingly, the pattern shows that as the other indices have fallen, the one monitoring confidence in spending has increased.

Bussy suggests that perhaps this rise in confidence in spending was partially a result of the end-of-year sales. From November 2008 to January 2009, the percentage of consumers saying it was either a good or a very good time to make household purchases shot up from 28% to 50%, demonstrating that consumers were aware that the Woolworths liquidation sales, Tesco electrical discounts and other reduced-price purchases represented a good opportunity to make major purchases.

Eighteen months ago, when Northern Rock was still in the headlines, just 14% of consumers saw a good opportunity to buy, compared to more than double the amount (38%) in March 2009.

This, however, does not mean that actual spending increased. It instead demonstrates that consumers are aware of being offered great deals on a plethora of items – from houses and cars to TVs and fridges – but they may not be actually purchasing any of these things.

Bussy says: “It’s difficult to say whether it’s just that consumers don’t want to spend because they think there may be no money in six months’ time or whether it’s more because they are concerned that they shouldn’t be spending because everything tells them that now is a bad economic time.”

But despite people’s reluctance to actually get out their wallets, the Confidence Index data spells good news for marketers and advertisers: if the confidence in spending is there, communications that address consumers’ remaining concerns could hold the key to converting this into actual purchases.

Bussy reveals: “Separate supporting data suggest that more consumers are acting as if they’re affected by the recession than actually are, leaving a gap in the middle of consumers who aren’t spending as much as before, and therefore should have more savings. It is an opportunity and it’s up to marketers to drive stimulation in this group.”

Bussy suggests that one strategy might be to encourage consumers to feel there is “no shame” in making a purchase and nor is it “self-indulgent”. The Spending Index is now at 94, the highest it has been since October 2006, while the Present Situation Index and Expectations Index scores all rest at their lowest or joint lowest levels since NCCI records began.

This may suggest that consumers are slowly starting to see the light at the end of the tunnel. Their minds are still open to the potential of 2009. However, greater positivity is not abound just yet; while consumers believe that the economic situation is not going to get worse in the next six months, they are also not thinking it will be more merry, but rather that it will not change.

Bussy says: “There seems to be a lot of people out there browsing.”

Should the economy start to pick up soon – even just slightly – this data suggests that marketers have the chance to turn good intentions into actual behaviour. The will to shop is there; now consumers just need to be convinced they have the means. 

Additional reporting by Richard Bussy

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