The adverse feedback loop (of marketing)

This week, the Mediabrands division of Interpublic Group is publishing a “proprietary” study of consumer sentiment that uses words like "scary", "dismal", and "depressing." I have not seen the study, but I have read a number of published accounts, published in places like Reuters and MediaPost. Thus, I cannot comment on the research itself… but I am comfortable discussing the parts of it that have been strategically released: To me, it seems less alarming than alarm-ist.

The published excerpts and company sound-bites about this study seem to indicate that, not only is the sky falling, but that it has landed and crushed us all, with such speed and ferocity that most of us are not smart enough to notice that we’re dead. It implies that consumers no longer buy anything that is wanted, and purchase only those items they desperately need. Presumably, the only way to crawl out from under this cataclysmic collapse is to…

I’m not sure. That’s where the publicly-released versions of the report just kind of “end.” I suppose you have to buy the full report… or be a client of one of Interpublic Group’s 90-or-so different advertising-related companies.

Implications: In his semi-annual report to Congress back in February, Fed Chairman Ben Bernanke referred to a phenomenon called the “adverse feedback loop,” in which weak consumer sentiment, an unstable stock market, and contracting job market had essentially become mutually-reinforcing. (See a summary of his remarks at the Federal Reserve Web site, or read one of the press accounts like this one in the Globe and Mail.)

I’m not sure why bad news—like the research mentioned above—seems to get so much coverage. But I do suspect it contributes to an “adverse feedback loop” of consumer behavior. Have consumers begun to re-calibrate their priorities? Absolutely. But have all consumers eliminated all “want-driven” spending? Absolutely not!

Recessions are not equal-opportunity events. The current economy is impacting some folks more than others. In fact, some people (and some companies) actually prosper during an economic downturn. You might not be selling to precisely the same customer you considered your “target consumer” two years ago. And today’s buyer might have different purchasing priorities and buying criteria than last year. The Great Recession is teaching all of us that we need to focus on what the consumer buys and why, rather than what our company might sell.

In our own research, CSS has discovered there are people who think of a new 50-inch television as a need. Others who define a need as going to a movie theatre regularly… because it helps them get away from life for a couple of hours. Are these items considered “foundational” to Maslow’s Hierarchy of Needs? Hardly. And yet, both of these industry categories seem to be doing fairly well right now, thank you. And there are others.

As for me, here’s what I need: A little less sensational reporting (maybe more careful scrutiny of the press releases used as the basis of a story).

Like many consumers, I’d like a little good news. How about the story where gasoline costs half as much as it did last July? Or the one about inflation being under pretty good control? Or the one where tax credits are available for energy-efficient products and first-time home buyers? Or that credit is cheap for those borrowers who qualify? Or that the consumer is diggin’ how there are bargains galore out there, and are taking advantage of this buyer’s market?

It is true that many consumers are re-calibrating their spending habits. But companies would be much smarter listening to some consumers and using that input to redefine their value proposition… rather than spending their time dodging acorns.

Mike Anderson