Has the economic recovery started for consumers?

Nearly two-thirds of people feel no benefit from the improving economy and are not kicking recession-formed habits, shows research seen exclusively by Marketing Week. But by familiarising themselves with these shoppers’ behaviours, marketers can still reach them.

Economic recovery trends infographic 1

The disparity between the UK’s economic growth and the day-to-day experience of ordinary people is set to be one of the main battlegrounds in next year’s General Election.

According to new research seen exclusively by Marketing Week, 64% of people believe changes in the economy have made no difference to them, while 76% feel their living standards have either stayed the same or got worse in the past 12 months.

The study by communications agency BJL suggests that 61% of UK consumers are among what it calls the ‘marginalised masses’ — anyone who has had to use credit cards, savings, loans or charity to pay for everyday expenses such as food or rent in the past year.

The poll of 2,000 UK adults shows that most are not enjoying the benefits of economic recovery and remain committed to frugal spending habits adopted during the recession. Nearly half (48%) now shop around to find discounts wherever possible, while 26% believe the economic downturn has prompted them to do more research before making purchases.

“We had a hypothesis that people learned certain behaviours as a result of the recession and that those are now ingrained,” explains BJL chief executive Nicky Unsworth. “Surprisingly, we found that alongside these behaviours, people don’t feel any better off .”

The report breaks the marginalised masses into sub-groups including ‘creative budgeters’, who comprise 41%. These use credit cards for everyday expenses or defer non-essential spending. Forty-seven per cent of the marginalised masses are categorised as ‘treading water’, meaning they use overdrafts or savings to fund everyday expenses.

Finally, 12.5% are categorised as having ‘no safety net’. These people have downsized, used food banks or taken out a payday loan in the past 12 months.

All this creates new markets for brands, as well as posing a threat to spending. Stephen Rowe, marketing director at Pockit, believes that economic pressures have created an opportunity to grow the prepaid card market. The Pockit card costs 99p, is not linked to a bank account, does not charge interest and requires no credit check. Investors in Pockit include former Manchester United manager Sir Alex Ferguson and new Mothercare boss Mark Newton-Jones.

Economic recovery trends infographic 2

“This market is aimed at people with tight budgets who aren’t yet feeling any upside to the end of the recession and are finding it hard to make ends meet,” says Rowe. He believes brands are conscious of the need to understand and engage with the marginalised masses as recession-era behaviour patterns continue.

“[Our demographic] tends to be people aged 20 to 45 who have some money but not much and who have to work hard to make the most of it. They are canny and understand the value of everything they spend,” he adds.

A breakdown of the study shows that 43% of those in the ‘no safety net’ group are aged 25 to 34, while 69% are male. In the ‘creative budgeters’ group, 49% are aged over 45 and the gender split is more even – 53% are men.

Elsewhere, the research reveals that 76% of people feel the cost of living has increased in the past 12 months, while 81% believe their disposable income has either stayed the same or decreased. Fifteen per cent say it has decreased significantly.

In addition to discounts and new payment tools, some brands are developing alternative finance packages to help consumers afford large expenditure items more easily. Car brand Mazda, for example, took the decision last year to offer zero deposit deals on as many of its models as possible to attract customers.

“That’s been particularly successful for us post-recession, particularly with consumer confidence still being quite low,” notes Mazda UK sales director Peter Allibon. He reports that around 80% of all retail cars sold by Mazda in the UK this year have been on one of its finance packages.

As these packages are a form of credit where the car is not owned until the buyer has completed all the payments, they represent further evidence of many consumers’ spending power lagging behind national economic growth. However, Allibon believes they lead to more brand loyalty, as consumers are more likely to stick with a brand when they trade a car in.

With most people still finding their income growing more slowly than inflation, cash-strapped consumers will remain a key target market for some time to come.

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