Author: Nelly Naneva, LL.M, MBF, Markets Weekly
Against the background of the financial difficulties of households and despite some forecasts of last year for a revival of the economy, the vast majority of consumers have restricted their consumption and remain pesimists for the recent exit of the crisis. Europe’s consumers have already reduced their spending in reaction to the economic slowdown. Drawing on extensive interviews, an in-depth study by MGI and McKinsey’s Marketing Practice examined how consumers across five EU countries respond to the current recession, how they react to the economic slowdown, and how businesses can align themselves with the changing consumer behavior during the slowdown and place themselves for the forthcoming economic revival.
The analysis identifies the Best Consumer Tactics to Beat the Recession: two related to price of products and three related to volume. The study of consumer behavior in crisis also presents an opportunity for the companies to position themselves better in the fast changing economic environment and to meet their customers’ needs.
Less purchases and spending control
This is the most employed approach as consumers try to decrease their total expenditure and reach a level of predictability in an uneasy situation. At its most extreme, the restriction of spending leads to the total withdrawal from consumption of some categories of goods. This is a threat for all goods, but especially for discretionary items such as eating out, vacations and leisure. Forty percent of consumers answer that they will not afford family vacations; a large majority of the others will travel in the country. The Possible producers’ responses may include new offers, which help consumers to restrict spending (like repackaging of some goods or even changing store formats to smaller stores rather than supermarkets or department stores).
Replace only when needed
This tactic is outstandingly popular in the events of expensive purchases such as new cars, houses and apartments, consumer electronics, and furniture. Many consumers intend to postpone novel purchases, using their devices for longer, thus increasing the lifetime of current possessions. The consumers that indicate such costs, plane mainly emergency repairs of dwellings and cars, financed with funds, which they will allocate or have already managed to save. About 40 percent are considering purchase of equipment this year; the proportion is comparable with that in 2011.
For recurrent purchases, which consumers cannot delay buying altogether, they attempt to avert waste by purchasing the exact quantity they demand. Companies may go on the offensive to ensure sales but with a new message. For fast-moving goods, they can concentrate on offering the right quantity at the accurate price. In addition, they can provide incentives to consumers to replace their old possessions with new by organizing secondhand markets or by offering resale bonuses.
Do it yourself
The consumers, opting for self-made solutions, often utilize this tactic to beat the recession (e.g., holding dinner parties at home instead of eating out at restaurants or letting go household help and cleaning themselves). Such a withdrawal to the home must not be a setback to businesses. Companies should concentrate on promoting the advantages of their products and deliberate where their offers are more cost-effective than the homemade alternatives. Delivering the message of how to use a company’s products at home could be a winning strategy. Merchants that play the do-it-yourself trend should further analyze whether some additional opportunities stand to “outsource” all or part of merchandise assembly to the consumer, thus reducing the product price.
Consumers under pressure consider more seriously for what they spend money and what, exactly, they are receiving in exchange, approaching high frills with a new level of disbelief. For bigger purchases one of the best consumer tactics is to turn to the Net or other information provider to better rate the product features. For fast-moving consumer goods (such as food, alcohol, toiletries, and so on,) the unbranded solutions are coming out on top as consumers prioritize functionality over frills. Companies can reply by distinctly stressing on the features, advantages, and availability of their products on all distribution channels. The study suggests that retailers and producers possibly could adopt new lower-cost products or sell more basic versions at a lower price, while taking care not to stain their brand-mark.
Recession-stressed consumers, who desire to proceed to purchase the products they appreciate, search more intensely for a better price, limited bargains, exclusive sales and promotions. While this technique appears across categories, it is especially dominant in the case of clothes, with 66 percent of consumers ranking smarter shopping as their top beating the recession tip. Smarter shoppers profit of new channels, such as the Net and hyper-discounters; they are able to discover the same product at a lower price on sales and promotions. Companies have to target promotions at the right consumers and make efforts to be visible across distribution channels. Businesses can benefit from the contemporary tools consumers utilize to shop smarter (e.g., winning the search-engine war on price criteria, running Internet promotions, or spinning off a discount outlet to compete with hyper-discounting channels).
Those companies, which look beyond mere survival and accommodate their marketing strategies and products to these consumers’ tactics, will place themselves more effectively not only during the economic slowdown, but also in the recovery period that will follow.
The data shows that the majority of consumers still remain pessimists for approaching economic improvement. The negative expectations for economic change have a direct impact on consumption. As a defense, most consumers have become more economizing; they reduce their consumption, deny of certain goods, or simply look for cheaper alternatives.