The sun is rising on thriftiness

In this installment of Michael Carney’s Marketing Week:

  • Farewell to TV3’s Sunrise and ASB Business
  • The new Age of thrift – why thrift is back with a vengeance
  • Four Discrete Segments – what are the different segments of post-recession consumers?

Farewell to TV3’s Sunrise and ASB Business

It costs a lot of money to produce local content for New Zealand television, at least in comparison to filling the equivalent time slot with international content. Even when the local content in question is simply a presenter or two in front of a camera, the bills mount up — presenter salaries, production resources, journalists and researchers to gather the content, yadda yadda. So it comes as no real surprise that the axe finally fell on TV3’s Sunrise and ASB Business this morning, as the private broadcaster continues to look for savings in our recession-ravaged advertising sector. A more fiscally-fixated management would have given the shows the chop much earlier.

Advertising expenditure traditionally is the first to get slashed in tough times — and the last to be restored when good times return. Unfortunately, recovery from our latest economic downturn remains as slow and protracted as we and others have been predicting for some time. As the Institute of Economic Research (IER) noted earlier this week, its latest survey of business opinion points to an economy on the mend, but to a recovery that is fragile and more gradual than businesses in general expected.

That rosy glow depicted in some of the economic indicators late last year? That was just a reflection off the rose-coloured spectacles of those whose job it was to talk the economy up (think real estate brokers and shopping mall operators in particular).

The IER survey also depicted a two-speed economy, with large firms back in expansion territory while small and medium enterprises are still finding the going really tough. With the NZ advertising sector reliant on SMEs for much of our revenues, it’s clear that slowly, slowly is still the order of the day.

The New Age of Thrift

It’s also becoming clear that the economic troubles have brought about a seismic shift in consumer attitudes. If you’re of a certain age (okay if you’re a Gen-Xer or a Baby Boomer) you’ll probably recall the thriftiness of your grandparents and others who’d grown up in Depression times.

Guess what — thrift is back, with a vengeance and with a super-powered secret weapon.

Twelve months ago our research was telling us that the majority of consumers expected to go back to their free-spending ways once the economy rebounded. In 2010, that’s no longer the case. Thrift is the new black. No longer is it shameful to negotiate the cheapest price, to shop around, to cut a deal. In fact now it’s clever, wise and astute to know where the best discounts are.

But it’s thrift with a new-generation spin. In earlier times, when you wanted to be thrifty self-denial was the safest form of action. The catch-cry: “you can’t afford it”.

Nowadays? See something you like but shouldn’t really buy? To practice thrift 2010-style, turn to the web.

Turn to Trade Me first, in case someone’s selling similar items for much less.

No joy there? Next stop Google, searching for the item by name to see who’s listing it cheaply — or perhaps Facebook, asking your friends if anyone knows where to find stuff at the best price.

Consumers today also spend a lot more time researching online, even if they eventually end up buying in a bricks and mortar store. Depending on the product category, they might look at product review or comparison sites (eg TripAdvisor for travel, Amazon for books, PriceSpy.co.nz for computer equipment), search for positive/negative comments on Twitter, ask their Facebook friends for feedback, look for videos on YouTube or just Google “+widget +reviews”. If the information is out there (and these days it usually is), they’ll find it.

Four Discrete Segments

If you’re wanting to market to these new thrifty consumers then you need to understand them better.

US firm Decitica Marketing Strategy & Research conducted research in late 2009 that split post-recession consumers into four segments: Steadfast Frugalists (20%), Involuntary Penny-Pinchers (29%), Pragmatic Spenders (29%) and Apathetic Materialists (22%).

  • The Steadfast Frugalists (60% female, predominantly Over 40) are the most disciplined in their behaviours and seriously committed to self-restraint. They were probably already considered tightwads even before the recession.
  • Involuntary Penny-Pinchers (many 30-49) are the most severely affected -– financially and emotionally — by the recession. Their new-found frugality for the most part has been forced upon them. Half have not saved any money for emergencies.
  • Pragmatic Spenders (58% male, typically 50+) have the greatest capacity –both financial and psychological –to willfully resurrect their past spending patterns. Their approach to spending is tempered with caution; they have cut back and are engaging in thrift like others but seem less troubled by the recession.
  • Apathetic Materialists (largely Gen Y) are less perturbed by the recession. They are the least changed in terms of their spending habits and future intentions. It is likely that their relative indifference springs from their life stage –more younger, single people with limited disposable income at the moment.

Trading Down

  • Steadfast Frugalists not only engage in coupon-clipping and deal-seeking behaviours with greater frequency but also do so with considerable enthusiasm.
  • Involuntary Penny-Pinchers, forced to adopt frugality, shop for discounts and buy store labels quite extensively, but not many of them get pleasure from these activities.
  • Pragmatic Spenders and Apathetic Materialists, perhaps motivated by different factors, get the least satisfaction from trading down and clipping coupons.

Money Attitudes

  • Steadfast Frugalists and Pragmatic Spenders are the most confident in controlling spending, resisting the temptation to spend now and worry later, save money and stick to a budget.
  • Less than half of Involuntary Penny-Pinchers are confident about their abilities when it comes to controlling spending and resisting the temptation to spend now and worry later; only one in three expects to be able to stick to a budget; and less than one in five Involuntary Penny-Pinchers expects to be able to save money in the current economic environment.
  • Apathetic Materialists, on the other hand, have the least confidence in successfully restraining themselves (less than 5% expect to do so) — and they’re clearly not at all concerned about the fact.

When asked whether the recession has permanently altered buying behaviour, the strongest feelings were expressed by Steadfast Frugalists and Involuntary Penny-Pinchers. More than half in these two groups agreed that the recession has changed how and what they buy forever.

In terms of actions taken to control spending habits, two-third of Pragmatic Spenders said they are already doing something about it.

Overall, all four segments confess to getting less pleasure from buying things now compared to the time before the recession. Also, what is more telling is that they anticipate this will still be true one year from now.

Apathetic Materialists continue to derive the most gratification from buying, but even this group of consumers has shown a declining interest in materialistic consumption.

Impulse Buying Down

The drop in impulse buying is quite stark for all segments, particularly for Involuntary Penny-Pinchers (down from 61% to 25%).

Apathetic Materialists continue to be the most impulsive in their purchases, with 40% saying they expect to buy on impulse even one year from now.

Steadfast Frugalists, while not that spontaneous to begin with, have become even less so.

How Much?

Price has become the dominant consideration in the purchase of all kinds of products.

What is of considerable significance is the fact that half of Pragmatic Spenders are looking at price before other features and one-third say that brand name products are not worth the extra price, heralding what will likely be a long uphill struggle by marketers to shift the focus away from price.

Gulp. Welcome back to the Age of Thrift.

Our grandparents are expecting us.

To make sure you’re up to speed with all savvy online marketing world, make sure you check out the Social Media Marketing eCourse. This seven-week series on today’s hottest marketing topic started in early March and finishes up next week. It’s proven extremely popular, with more than forty marketers, PR practitioners and clients signed up for the first series.

The next course begins on Monday May 3, 2010.

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