The changing consumer priorities, and what is ahead in 2011

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Stuart McDonald, head of insight and trade marketing at News International Commercial, shares some insights from the company’s quarterly Consumer Eye Research.

Christmas is just around the corner, and at this time, our minds turn to reflection and an opportunity to take stock.

December 2010 also marks the two-year anniversary of our own quarterly consumer confidence survey, the NI Consumer Eye, so we thought we would re-visit the first survey, and compare the results to what we witnessed in the latest release.

Back in November 2008, against a backdrop of worsening economic climate, we were entering a stage of uncertainty, where our advertising clients were desperate for up to date information and clarity into the consumer psyche. To provide a timely finger on the pulse of the nation, we launched our consumer confidence survey via our in-house 20,000 strong consumer panel.

Our confidence measure is calculated by subtracting those that state they are feeling pessimistic towards items of their overall personal household financial situation from those that state they are feeling optimistic. The headline figure for consumer confidence on the very first Consumer Eye was -41 (ie, there was a net negative consumer confidence score of 41), and by the eighth wave there had been some improvement to -29.

The survey also allows us to investigate the various aspects of household expenditure, to understand where the biggest pressures lie.

Back in December 2008, the greatest concerns were around the economy (a catch-all phrase that I am sure a number of people do not get, but they hear that it is ’bad’) and utility bills. In December 2010, the concerns have become more personal and relate to job security, mortgages and house values. Over this two-year period, the economy has gone from being the most pessimistic area, to showing some increases and being overtaken, at the bottom of the scale, by two other areas.

Over the last few years, fuel prices have gone from less than 90p to through the £1.20 barrier, so it is no wonder that confidence is low in this area. Despite record profits, the increased taxation from the Government means that this trend is unlikely to reverse any time soon.

The grocery sector has witnessed increased promotion between the major players over the last couple of years, one that is played out in front of us on the pages of our newspapers and the television. Despite this, consumer confidence is low and our respondents still rate it as one of the lowest areas.

There have been some positives though – we have already touched on the positive movement for ’the economy’ (although it still scores low), and the other area to show improvement has been house value.

One of the biggest influencing factors in the recession was the over inflation of the housing market to the crash in late 2008. Consumer Eye has seen confidence return to the value that consumers put on their homes, however post election we have witnessed another decline.

With regard to consumer spending, our panellists tell us that they are trying to make reductions in the amount spent on heating and cosmetics, however the entertainment sectors (that is home entertainment and mobile) have remained moderately untouched.

Although the scores reflect a broad reflection of the public, we can also see that the higher social grades, as you might expect, feel more positive. Whilst the lower social grades do not, and have actually been through a number of peaks and troughs over the last two years, but always tracking lower than the headline figure.

The question for us has always been, when are we likely to see a positive consumer confidence score? But the more we do this survey, the less I think that we will ever see that. I do not believe that anyone will ever feel positive towards items such as mortgages, grocery bills and credit card debts.

With that in mind, we intend to continue this survey into 2011, especially with the following as areas of concern:
– The rise in VAT and the effect on disposable income
– We are starting to see confidence in house prices decline again – is this a blip or a more sustained trend?
– The job market is likely to get worse before it gets better thanks to the decreases in the public sector (and although business confidence is returning in the private sector, we are yet to see an effect on hiring)

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