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Wednesday, October 29, 2008

Is it still called Consumer Confidence?

Brokers, bankers and pundits have been talking a lot, lately, about when “the market will find its’ bottom.” With due respect to the Wall Street big-shots, I’ve got my eye on a more important bottom: Today (NY Times 10/29/08), “Consumer Confidence” has hit the lowest level on record. (So why aren’t they calling it consumer-lack-of-confidence?)

Now, I’ve never considered myself a futurist. But I am an optimist… and I do think there are a number of reasons to have hope over the next few months. And yes, I realize that this list is composed of largely emotional attributes/events.

This is the week before the election, and there’s all kinds of bickering going on between politicians. It’s easy to get bummed out with so much trash talk flying around.

The election is next week. Setting aside political preferences, one thing is certain: Next week is the beginning of a beginning, with a new administration. There should be a sense of “clean slate.”

The holidays are coming. People seem to have accepted that gift-related spending will be lean. (That is bad news that’s already been reported.)

Energy prices have fallen. At least in the short term, that’s some good news for consumers. And while it won’t likely been seen in price reductions at grocery or other retail, lower gas prices help people manage cost increases in other areas of their life. (Nothing like the threat of a global recession to humble an oil baron.)

A realtor in the Midwest tells me that people are coming back to the housing market again (unable to avoid the bargains that are out there).

The New Year is just over sixty days away. That provides another “fresh start” frame of mind.
Even if there is more grim economic news, the shock value of bad news is beginning to wear off. We have been hearing that the sky is falling for most of 2008—and if you’re a hedge fund manager, perhaps it has fallen. But most people will realize they can adapt, survive, and hopefully even thrive over the long haul.

Implications: Things have been stirred up for a while now… and the water is murky. But soon, people will be yearning for a little good news. Can you provide that hope? Is yours a product or service that will benefit from the concept of “pent-up demand,” once the headlines contain hope? Perhaps “when consumers are spending again,” they won’t be spending as much as they did in the heyday of the post-2002 recession. But spend, eventually, they will.

If you’ve been part of the workforce for more than a few years, you know one thing about bad news and recessions: None of them is permanent. While it’s important to pay attention to business conditions, adjusting expenditures accordingly, it is also important to beware of the early signs of a turnaround. Timing is everything. Being late with a response to recessionary economics can be very costly for a company; but so can it be expensive to recognize too late that a recovery is at hand.

I make that statement not as a prediction… but as a precaution.

You know, it’s funny. I was just about to click “save” on this article… and I got another email alert from the NY Times. The up-and-down stock market is up again, by more than 900 points. Even the speculators are getting tired of it all.

Mike Anderson

Monday, October 20, 2008

Do you take cash?

You’ve heard a lot of slogans from credit card companies over the years. But it might be time to get ready for some counter-point campaigns, coming from none other than The Consumer. “Erasing high-interest debt: Priceless.” Or, “I can leave home without it.” And perhaps, “debt-free is everywhere you want to be.”

Even if you haven’t been a casualty of the recent credit melt-down, you are almost certainly aware of it, and know someone who is affected. For the past several years, a lot of people have over-indulged in signature loans, interest-only mortgages, or too many of the dozens of credit card offers received in the mail every month. Well now, with the (balloon) payment coming due, consumers are highly likely to re-think their use of credit.

Consumers—not to mention an entire global economy—have been shaken by the cost of the buy-now-pay-later philosophy, and the tightening of the entire credit system. For some, it will take years to dig their way out of debt. For others, resolution will come more quickly, but at the expense of foreclosure, repossession or bankruptcy, actions which will leave their mark on a credit history for some time to come.

Implications: If you sell durable goods or high-end products (either as a manufacturer, distributor or retailer), you may have profited from helping consumers arrange financing for the purchase of your products. In what ways can you continue to present financing options to qualified consumers (probably not everyone), in a way that they regain comfort with the idea of owning now, and paying later? Or, just as the consumer has been given incentives to use credit (“Open an [XYZ] account and get 15% off today’s purchase”), can you profit from giving customers some form of discount or value-added premium for paying with cash?
Many consumers are finding favor with the idea of paying down debt… and returning to a mentality of “saving up” for major purchases. Have you thought about how you’ll survive and thrive among those spenders?

Mike Anderson

The fine print filter

It is my privilege to learn from all kinds of experts on consumer behavior, from all over North America. But there is one consumer expert from whom I have learned the most: My wife. Julie is the procurement director of the Anderson household, as well as our chief financial officer. (Okay, truth be told, she’s the CEO.)

She brought a piece of direct mail advertising down to my office the other day, and I was glad to indulge her protest of the campaign’s strategy. The piece was from a health and fitness club. The offer on the front page invited new members to join for just a $19 enrollment fee, and added—in very small print—the phrase, “Details inside.” On the pamphlet’s interior, in even smaller print, the offer was amended to say, “…plus a one-time administrative fee of $75.”

Like my wife, you might be interested in knowing the difference between an enrollment fee ($19) and an administrative fee ($75). She called the number in the brochure, and was basically told that the administrative fee was designed to cover the cost of administering the enrollment. (What!?) Asking for a more specific explanation, the club’s (frustrated) representative finally said, “That helps us cover the costs involved in soliciting new members.”

My wife’s response? “Why should I fund your new membership drive!? And anyway, why wouldn’t you just say… Enrollment fee: $94? It’s not like people wouldn’t figure it out, eventually, anyway!”

Implications: The consumer is living in a world where things—even long-held assumptions about well-known companies—are not always what they seem (e.g., the stock market, the investment bank, real estate appreciation). They’re more likely to consider the downside of a purchase, and they’re more careful to read the fine print.

Are your products, services, and campaign materials designed to survive… in a world of increasingly suspicious consumers? Does your company make an offer to the consumer (in entirety or in part) that it is not proud of? Is it possible that as soon as your consumers see fine print, they might think you’re trying to hide something?

What would happen if you took the small print on the back of the package… and put it in bold on the front? Would your consumer take you off their consideration list? Or might they appreciate your candor?

Mike Anderson

Monday, October 6, 2008

Selling "safe"

Back in April, I wrote a piece for this blog on a topic I referred to as, “Irregulation.” The story cited the perceived failure of regulatory agencies to effectively scrutinize their industries (resulting in unsafe airplanes that were still in the air, recalls of previously approved drugs, tainted products entering the food supply, etc.).

I was reminded of the article recently, when I heard a news story about a local retailer who was selling household safes in record numbers.

Think about that.

The economy is utterly unstable right now, people are worried about their jobs and paychecks, and consumers are cutting back in virtually every retail category. But they’re buying “safes” like they’re going out of style.

Implications: I’m left with a lot of questions on this one. Are people nervous about having all their money in a bank or credit union, despite assurances about how their money is protected from the FDIC or NCUA?

Are people giving “second thoughts” to the jewelry they have in the house, with the recent increase in value of gold and other precious metals? Do people expect an increase in crime, as is often a by-product of an economic downturn? I’d love to be able to say for sure. But as I often say, the best researchers or trend watchers are not always those people who have all the right answers, but rather, they are the people who ask all the right questions.

Even if you do not sell lock-boxes or other security devices… what do you sell, that is, “safe?” Do you have customers that can vouch for your quality, value or reliability? (Don’t be surprised if customers trust the word of other customers more than the stamp of approval offered by some regulatory source.) Do you help your customers network with each other via your web site or a social network? Which regulatory bodies do you depend on for approvals or opinions… which some of your customers may no longer assume to be trustworthy? What alternate forms of assurance can you provide, for customers whose confidence might be shaken?

Mike Anderson

Saturday, October 4, 2008

Me - conomics

If a tree falls in the woods, but nobody’s there to hear it, does it still make a noise?

Likewise, if a recession is going on all around you, but you still feel secure in your job, earning a comfortable household income, and you’ve kept your car payment, mortgage and credit card debt at manageable levels: Are you still having a recession?

Within every trend, there are counter trends. And just as there are folks out there who are feeling the economic pinch right now, there are folks who are doing just fine, thank you. In fact, they might be somewhat better than fine, because of the “sale” signs on the door of almost every retailer, car dealer or housing development. If you’ve got a little extra cash and less debt than most, it’s a great time to be you!

We try to measure economics in regional terms, national terms, or even global terms. But if you’re in business, the economy can change from one prospect to the next, depending on their needs, level of interest, and whether or not they’ve been conservative about their spending over the past five or ten years.

A recent quip in the Iconoculture newsletter put it this way: “A recession is when your neighbor loses their job. A depression is when you lose yours.” When people think about “the economy,” they consider it from the perspective of their own personal balance sheet. With that in mind, consider the number of people who are not in foreclosure, not unemployed, and not afraid to spend.

Implications: If you sell vehicles, housing, appliances or other big-ticket items, it is particularly important for you to realize that the person you’re selling to today might not be the same target consumer you had five years ago (or last year, or last month). Further, the people who buy from you today might buy for different reasons than they did five years ago (or last year, or last month).

Mike Anderson

Are we there yet?

Over the past four weeks, I’ve had the opportunity to visit several cities and speak to hundreds of business people from all walks of life: Car dealers, restaurant operators, retail store owners, realtors, contractors, manufacturers and more. In each instance, this question has come up repeatedly: “Do you think we’re officially in a recession yet?”

This is the answer I have given, every time: It doesn’t matter. As far as I’m concerned, the technical state of recession is of little significance unless you are a television anchor, a financial analyst, or a political pundit. Whether the Conference Board, the Fed, or anyone else thinks we’re in a recession is of little direct consequence; it's what your customers think that matters.

Nielsen recently published a report about consumer attitudes toward recession. It is a global report (not just U.S.) which found—among other things—that 80% of people in North America think that we’re either in or entering a recession. (By the way, the research was conducted in April, 2008.) At that time, the pundits would have told you that we were technically not in a recession. (They’d say we’re not right now, for that matter. But obviously, the pundits and I are not on the same page.)

Folks, if 80% of your customers think you’re in a recession, you’re in one. That having been said, here’s the good news: Perhaps we can stop focusing on the recession, and start focusing on the recovery.

Implications: Even though a “culture of recession” exists in many sectors, the spending isn’t ending; it will simply be changing, in response to changing consumer needs and priorities. If you’re a restaurateur, worried that people will be dining out less, what can you do to earn the dollars they’ll still spend? If you sell appliances or dining room furniture, how can your goods “upgrade the experience,” for a family that finds itself dining at home more often? Perhaps the smart money right now is on some good old-fashioned customer research, so that you’re sure you know what priorities your customers (and prospects) have right now. Are they looking for simply a lower price? Or might they be interpreting “value” as longer-lasting quality? Have the experiential benefits of the product you sell become more important?

A recent Marketing Daily article offered this ironic look at purchasing priorities: Over the past few months, as the economy has tightened, sales of health care and food have fallen, while sales of big screen TVs have grown. Perhaps the consumer rationalizes the plasma TV purchase as a way of avoiding frequent (and potentially expensive) “nights out” on the town. So the big-screen TV maker isn’t just competing with other companies who make the same thing. The manufacturer is now competing with the movie theatre, the nightclub owner, the theme park operator.

Get the picture?

Mike Anderson