Wants vs. Needs

One of the macro trends I’ve focused on over the past few years is the concept of “Overwhelming Abundance.” The essence of the trend: Unless she is 76 years old or older (and therefore a participant in the depression or WWII economy), the average American consumer has no idea what it’s like “to do without.” We live in an age of plenty; while we perhaps cannot have everything, most of us can have almost anything, if we consider a purchase to be high-priority, and we’re prepared to forgo other items in order to afford the things we really want.

Overwhelming Abundance is a long-term thing. But just as any other trend is faced with contradictions, the current economy is demonstrating its’ strength as a counter-trend. With oil spilling over the $105 per barrel mark, rising commodity prices, and other cost pressures resulting from intense use of consumer- and sub-prime mortgage debt, consumers are cutting back. (I won’t use the “R” word here, as it lacks relevance to this story. People are spending less freely, plain and simple.)

Small luxuries are often the first to go, as explained in a recent story in USA Today. Consumers are discovering that fewer cups of designer coffee each week can add-up to real savings. And by replacing owned items less frequently, consumers are feeding their desire to “think green” (re-use, renew, recycle) while they save cash by deferring purchases. Being frugal is no longer seen as “cheap,” but as responsible… and an attribute to flaunt, not hide.

But all of this does not mean people will cut-out all of their “little indulgences.” Often, consumers will splurge on isolated luxuries as a reward for having been frugal in other areas. (“We’ve been careful all month, for heavens’ sake. We deserve to take a weekend trip.”) Further, a tight household economy can even cause consumers to upgrade. (“We don’t want to have to replace this appliance again in three years… so let’s spend more to get the better machine.”)

Implications: In what ways can your products and services been seen as delivering on a true need, rather than just a want? If you sell luxuries or small indulgences, does the consumer see you as “the exception” to their new rules for fiscal responsibility? Can your company make a case for quality (i.e., getting consumers to upgrade to more expensive lines as a means of obtaining long-term value)?

Mike Anderson