That was the Word of the Year for 2010, according to Merriam–Webster.com, which says assignment help austerity was the most searched–for word on the dictionary’s website last year. One definition: “enforced or extreme economy.”
In a few short years, the economy and consumer behavior swung from bubbly, even irrational exuberance to penny–pinching thrift and caution. The big binge is over. From governments to families, we’re on a financial diet.
“Americans are suffering from FUD—fear, uncertainty and doubt,” says Pam Goodfellow, a senior analyst of consumer behavior at BIGresearch in Worthington, Ohio. “And while economists may declare that the recession is officially over, the consumers don’t see that. The country’s in a psychological recession. ”
Scott Hoyt, senior director of consumer economics at Moodys.com, says still–falling home prices and tight credit are among the factors worrying consumers.
“The consumer mindset is ‘improving, but still cautious,’ ” he says. “There’s improvement ahead in 2011, (an indicator is holiday sales were better than anticipated) but limited in the context of the depth of the downturn.”
This, Hoyt says, is “no booming recovery.”
Consumers aren’t buying that the recession over. In fact, they’re still not buying too much of anything. They’re paying closer attention to their needs versus their wants, often cutting discretionary spending to the bone.
“While lenders have marginally loosened credit, lending standards are still extraordinarily tight,” Hoyt says. “It’s hard for consumers to get credit. And this has to be weighed against the consumer’s (lack of) willingness to use credit.”
Consumer confidence remains shaky. A poll from Thomson Reuters and the University of Michigan in early January showed consumer confidence at 72.7, a dip of the monthly index from 74.5 in December. Economists had forecast a rise to 75.4. Some surveys show consumer confidence at its lowest point since the 1950s.
Consumer behavior doesn’t necessarily follow economic forecasts or even data. The Great Recession, which officially began in December 2007, ended in June 2009. But when asked recently on an Internet discussion forum if it feels to them like the recession is over, people responded:
- “With oil prices edging past $90 a barrel and forecast to be in triple digits next year, no, the recession’s not over. If ‘over’ means back to the boom times, then it probably never will be over.”
- “Doesn’t look like it’ll be over anytime soon, no matter what the official media says. Unemployment where I live ranges from 11% to 14% and, of course, that’s just the official numbers.”
- “Not over in my part of Colorado. In fact, it’s worsening. Several friends have lost jobs recently. Prices are going up and/or sizes are going down on groceries.”
- “No one I know cares about keeping up with the Joneses anymore, especially since the Joneses are bankrupt and their house has been foreclosed on. Excess just isn’t a status symbol anymore, at least not where I live.”
Consumer behavior has been altered, perhaps forever, by the Great Recession. In an Advertising Age article “Marketers Fear Frugality May Just Be Here to Stay,” Nat Ives writes: “The heavy betting…is that America will eventually shake off recession but keep saving and spending more responsibly. We’ll borrow only when we must. We’ll pay bills and debts immediately. We’ll save up before we buy big things.”
Sean Snaith, an economics professor and director of the Institute for Economic Competitiveness at the University of Central Florida in Orlando, Fla., also thinks consumers have responded to their loss of wealth and equity in their homes—often their biggest nest egg—by saving more and spending less. But while the recession was bad, Snaith points out that it wasn’t a depression.
“It’s more a mini–Age of Austerity,” he says. (There’s that word again.) Snaith doesn’t expect a continuing economic plunge, rather more of a “drift downward.”
“There will be a pent–up demand to buy—to cut loose a little,” he says.
What does this mean for producers of consumer goods such as mattresses and sleep accessories? Refocusing products and marketing messages to emphasize quality, lasting value and rewards while re–establishing brand loyalty to entice the new frugal consumer.
Today’s consumers have a pent–up desire to shop, especially if given a compelling reason to do so. But they’re skittish, apt to suddenly change their minds about a purchase to chase a bargain, whether it has a lower price or offers better value. The key to unlocking bedding sales: tapping into consumers’ needs and providing them a reason to purchase based on the value and worth of the product.
Henry Mason, head of research and analysis at Trendwatching.com, notes that the changing consumer mindset is part of a larger trend his firm calls the “Expectation Economy.”
“This trend is driven not just by economic conditions, but by the emergence of experienced, well–informed consumers who have a long list of high expectations that they apply to each and every good, service and experience on offer,” Mason says.
This presents challenges to consumer brands.
“Faced with so much choice—and with limitless information—consumers today expect, even demand, the best, whether that be the cheapest, the newest, the most fun, the most luxurious, the most authentic or simply the best value,” Mason says. “Therefore, any brand in any industry that falls short of ‘super’ brands will be at risk.”
Mason points to a companion trend that his company has deemed “Pricing Pandemonium.”
“Consumers have and always will love great deals and discounts, but technology is unlocking new ways for brands to offer these,” he says. “For example, furniture store One Kings Lane offers their members large, exclusive, time–limited discounts on home furnishings via daily emails. Consumers embrace the excitement and exclusivity of these offers, while brands can reach new customers or discreetly dispose of excess stock quickly and efficiently.”
Minimalism goes mainstream
Thriftiness—getting the most value for a dollar—is definitely in. One form the new frugality takes is simple living. The simple living trend is a mature one and was, in its inception, an opt–in lifestyle. People embraced simple living by choice, not necessity. Duane Elgin was among the first to identify and popularize the trend with his 1981 book Voluntary Simplicity.
Because of the recession and remaining high unemployment, today’s simple living often includes an element of necessity. Thirty years after Elgin’s classic book was published, dozens of similar titles have appeared and sell briskly—The Joy of Less: A Minimalist Living Guide, Simple Home: Calm Spaces for Comfortable Living and even Frugillionaire: 500 Fabulous Ways to Live Richly and Save a Fortune.
But even among the wealthy, the idea of simple living is gaining hold, say Paul Flatters and Michael Willmott of Trajectory Partnership, a London–based social analysis and forecasting firm.
“Discretionary thrift is likely to feature heavily in the coming years, as the origination of the trend was based on dissatisfaction with excessive consumption and the personal and practical satisfaction associated with being more frugal,” they say.
Trajectory Partnership’s findings indicate that thrift isn’t a transitory trend.
“A period of cuts in public sector spending (expected to last at least until 2015) will create an austere climate in which thrift will be fashionable,” Flatters and Willmott say. “Ostentatious overspending will clash with this climate.”
Companies trying to capitalize on the idea of simple living might want to include spare, serene images in their advertising. Copy can center on words such as “calm” and “simple.” A mattress maker may want to consider a tag line like “Well–crafted comfort.”
Or consider breaking down for the consumer the cost of a mattress purchase over the lifetime of the bed:
“Wouldn’t you spend $150 a year to ensure comfort, pleasure and restful sleep? Your new mattress: A luxury within easy reach.” (Figuring the cost of a $1,050 mattress over seven years.) It may not be a typical way to sell a mattress, but it may show value in a way that makes sense to consumers today.
The economic downturn and slow, faltering recovery have left consumers wary about their own security—and have them turning inward. For those fortunate enough not be facing “underwater” mortgages or foreclosure troubles, our homes are again the center of our universe.
Faith Popcorn’s Brain Reserve, a trend–focused marketing firm in New York, calls this “retrenching” and defines it as “hunkering down and praying for survival. It’s driven by ‘cocooning,’ a retreat to the home to protect oneself from the harsh, unpredictable realities of the outside world.”
The Brain Reserve argues that consumers place a premium “on brands that demonstrate empathy” and that understand “the consumer plight.”
“The strategy is simple: Be with them when they’re down and they’ll remember you when they’re up,” according to Brain Reserve.
To reach a retrenching audience, use images that show bedrooms as calm, secure places bathed in comforting colors or that make the bed—piled with plush, soft linens and pillows—the room’s centerpiece. Copy might say, “Peaceful serenity” or “Envelop yourself in comfort.”
Economic necessity also is altering how we live together. Adult children are moving in with parents and parents are moving in with their adult children. The trend is fueled by high housing costs, rising health care and assisted living expenses, reduced retirement income and growing college debt.
Sharon Graham Niederhaus, co–author of the book Together Again: A Creative Guide to Successful Multi–generational Living says, “Between 2000–2007, the number of parents living in the homes of adult children increased 67% to 3.6 million. The most recent figures show 6.6 million households have adults and children living together.”
This co–habitating offers interesting opportunities for mattress makers, who can meet the unique furnishing demands that multigenerational living requires.
Mikael Ohlsson, president and chief executive officer of the Ikea Group in Helsingborg, Sweden, is well aware of this trend.
“More families have joined Ikea’s mainstays of students and post–college crowd, especially in the U.S. Many…families are bringing more generations together under one roof. For them, Ikea is offering more sofa beds,” Ohlsson said in an Associated Press article. A strong seller is Ikea’s $599 sofa bed with ample storage.
After years of expanding footprints, the average home size may be shrinking.
“The Great Recession and its effects on young people’s wages will affect how much home they can buy or rent for years to come,” according to a recent Wall Street Journal article, “No McMansions for Millennials.”
The story quotes KTGY Group residential designer David Senden, “Not too many college grads can afford a lot of space in the city. Think lots of amenities with little tiny units.” For example, Senden points to a floor plan for a 350–square–foot studio apartment, “about as big as mom and dad’s great room.”
Manufacturers seeking to take advantage of intergenerational households and smaller living spaces might consider bringing new products market, especially those that are multifunctional. Maybe a new take on beds that pivot, swing or fold away while not in use? Innovations in futons and sofa beds? Improved portable air mattresses? Foundations with plenty of storage but made with lighter materials for easier moving?
Consumers who’ve survived the Great Recession have been changed, in many cases, forever. They’re sticking closer to home, digging in for an uncertain future. They’re frugal, cautious and fickle in their buying decisions. Flexible and innovative mattress makers who meet these new needs and altered lifestyles can find new markets. Crisis is sometimes just another word for opportunity.
Selling to the post–recession consumer
- Thrifty shoppers want lasting value. Market based on product quality and brand longevity. Break down the return on investment over the life of a mattress. Testimonials from satisfied customers help build brand equity.
- Consumers still feel a lot of fear, uncertainty, insecurity and doubt. Craft marketing messages that communicate reassurance and calm. Be empathetic. Position sleep products as reliable and dependable.
- Consumers are fickle, looking for deals and using the Internet to search out product information and testimonials from other purchasers. Establish a strong Web presence to communicate information about your brand’s history and benefits. Develop a social media program to reach buyers.
- Tap the simple living trend and reach consumers who are fed up with too much stuff. Make your ads simple and uncluttered, too. Understand this group’s needs. They don’t want more things, but aren’t adverse to comfort. They will purchase goods that fit their lifestyle.
- Offer products for intergenerational living and smaller homes. Think multifunctional, space–saving and easy–to–move.
Building brand loyalty in the face of fickleness
With access to better information and fewer dollars to spend, consumers have become increasingly agile and fickle, ready to change their purchasing decisions in a flash.
Given this, manufacturers must invest in brand loyalty programs to woo and win customers.
Leveraging brand equity and product longevity is one way. Superior, white–glove customer service and satisfaction is another.
Offer assurances of value and brand excellence and make it clear that saving a few bucks by buying unknown or inferior brands in the short–term will cost consumers money and even impact their wellness in the long term. Customers want to be assured that their decision to buy your product is a wise one. Instilling buyer confidence is key.
A strong Web and social media presence is mandatory as consumers increasingly use such technologies to research and narrow their buying choices. Favorable product reviews from satisfied customers influence consumers. Brand credibility must run through all marketing messages.
A former advertising executive, Patricia Comroe Frank writes about consumer trends, lifestyle and changing social behavior from Beaufort, N.C.