Marketers face battle against the fear factor

Consumer confidence may be higher than it was in the depths of the recession, but new research shows that fears of unemployment and other economic uncertainties are still having a negative effect on spending.

Consumers may be starting to feel more confident as the effects of the recession ease, but rising unemployment figures mean marketers face an uphill battle to convince potential customers to overcome their fear of the future and part with their cash.

This is the conclusion reached by the latest Nationwide Consumer Confidence Index. The NCCI is made up of a number of sub-indices, including the Present Situation Index, which looks at consumers’ feelings about the current economy and the labour market and are scored accordingly. Another is the Expectations Index, which focuses on what consumer confidence is likely to be in six months time.

According to the latest research from the NCCI, conducted by TNS, scores continue to increase and the index now stands at 71, a 26-point increase from January (MW 7 May) and 24 points higher than a year ago.

But TNS consultant Richard Bussy, who analyses the NCCI, warns that while consumer confidence may be returning, the recession is still affecting sales. “The uncertainty surrounding the economy and its effects on life mean that although consumers are looking ahead for signs of recovery, they are still living in fear.”

The score for the Present Situation Index fell to 19 in the current wave of research, but the Expectations Index reached 106, nearly double the record low score of 58 in January.

Bussy says the results offer hope for a better 2010, but this will be reliant on market conditions continuing to improve as trade begins to increase again.

“Consumers are beginning to show much more optimism for next year, and are ready for a much more cash-positive new year. They are expecting it to get better sooner rather than later, and will be watching intently for any signs that things are getting better and the job market is stabilising. The media will have a role to play in educating them about this, but it remains a wait-and-see approach at this time,” he suggests.

The rise in unemployment to 7.9% – up 0.7% over the last quarter and 2.3% on last year – appears to be responsible for the low levels of confidence in the current market among the research respondents.

TNS found that 66% of consumers think there are few or very few jobs available, compared with 35% who believe that employment opportunities were the same as last year.

Bussy says that because this fear surrounds the present, consumers are hopeful that the future has more to offer. “Consumers now have a greater sense of optimism about the coming six months than they have had since the Index started in 2004,” he says. “It is fair to assume that as confidence in the current economic state declines, more consumers will think that the situation will be better in six months than it is now, simply because most consumers expect the UK to return to its bright and thriving past.”

Signs of this are already noticeable. The media has shifted its focus from the economy to MPs’ expenses and swine flu. On the occasions where the recession is reported, a more positive tone addresses the problems facing the UK, concentrating on ways of recovering and predictions for an uplift in the next year or so.

Bussy says/ “Consumers have been expressing slightly more positive sentiment towards the current economic conditions. They have also been expressing an even greater sense of optimism towards future conditions, meaning that consumers feel that improvements in the current situation will continue well into the future. It’s fragile, but seems to be picking up slowly.”

There are some bright spots in the research for marketers needing instant results. The Spending Index, which gauges attitudes towards spending on household purchases and big-ticket items, has been one of the greatest areas of growth over the past 12 months. Last September, the index was at its lowest point of 52, but has since almost doubled to 102.

Bussy explains: “This was largely on account of confidence to make purchases such as houses and cars, possibly as a reaction to falling property prices. It is worth noting though that confidence to buy household items like fridges and TVs has also improved greatly since September 2008. Clearly, consumers feel they can afford to be less frugal now than they were last year, which is good news for marketers and retailers.”

He adds that the improvement in confidence levels shows a potential “return to the empowered, confident consumer” and some possible “light at the end of the tunnel”. This seems to be borne out in sales figures, with multichannel and high street retailers now able to command a larger spend from shoppers per visit in October than September – encouraging consumers to spend an average of £167 per visit, according to the monthly IMRG Capgemini eRetail Sales Index.

Bussy says: “Marketers must tap into this new way of thinking and help consumers to speed up the economic recovery through increased spending on necessities. Show you understand the uncertainty but address the positivity.”

The joy of shopping appears to be on its way to a healthy return, but consumer fear is still high and confidence just creeping up, which indicates there is still some way to go before customers are positive again.

As a result, economists and business entrepreneurs will need to observe the next six months carefully if they are to capitalise on rising levels of consumer confidence increase.

The Frontline

Will Harris
UK marketing director, Nokia

In troubled times, with confidence at an ebb, it is the responsibility of brands to find new ways of associating with their customers. For marketers, this isn’t always easy because we are working on reduced budgets, while having to make more decisions in less time with fewer in our workforce but more agencies to satisfy. The pressure businesses are under makes it easy to see why consumers are not confident right now.

What is important is that marketers looking to tap into these customers remember that it’s not them who control the brand, but the customers. Marketers can only try and influence consumers. They can’t control the messages or the social media, and in troubled times like these, it’s all about associating with them and making their brand experience as pleasant as possible.

I would advise marketers to take a “do, learn, do” approach that helps them evaluate each piece of work they do and see if it generated the right response or missed the spot.

Will Abbott
Marketing and communications director, Freesat

When consumers have so much choice open to them, it’s all about maintaining a point of difference and remaining focused on the future. It’s important to recognise that a TV ad alone is not enough, but messaging must be a joined-up picture, recognising the multitasking habits of consumers.

The lessons learned and experiences of this recession will change the way that people choose their entertainment and how much they want to pay. We have to prove this in our marketing approach, both to potential and existing customers, building advocacy and satisfaction scores by giving them a reason for positive word-of-mouth.

Marketers must strive to ensure that their strategies are right and encourage interaction. Failing to facilitate this now could result in failure in the long term. Equally, it’s very tempting to try and do too much and fail as well, so you have to ensure you are in the right place at the right time with the right dialogue.

Alison Sagar
Vice-president of global network marketing strategy, American Express

We’ve identified a new mindset among customers, exacerbated by the economic situation. People are looking to fulfil their lives in different ways and explore their lifestyles in new ways.
Financial services brands are going through tough times and people are looking for brands to trust. Our real challenge has been to re-enforce the consumer’s perspective of value through our brand, so we aren’t just considered premium. Our ads have been much more about presenting the brand in a fresh, bold way, to aim at people who perhaps haven’t considered the brand before.
We are focusing on the real values for consumers though great rewards, high quality customer service and unique experiences that the brand can offer access to. It’s important to us that customers think of us as more than just a card and regard us as a brand that catches people’s attention and means business prospects will look at us in a different way.

Simon Carter
Marketing director, UK Government, Fujitsu UK & Ireland

Now is the time for brands to be standing out in the crowd by focusing on three key areas – price, trust and ease. It is important that brands find unique ways to stand out from the crowd. On average, people see 1,700 brands a day everywhere they look. We live in a world where we are being bombarded by messages.
It’s important that a brand remembers that it has no control; the dynamic has changed and consumers now control the brand – so in times of confidence issues, brands must recognise this and guide themselves through this evolution.
We must help to restore this confidence and be one step ahead of the consumers. That can only work by taking a journey-led approach led by charismatic leaders within the company. It’s about associating with your customers and finding subtle ways to strike a dialogue with them, using whatever media you can. And remember that consumers take the multichannel approach. Ignoring that would be at your peril.

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