Hot for the holidays: Gifts that satisfy needs, and togetherness

Some families could use the upcoming holiday season as an excuse to buy items they’ve been putting off for a while, according to a story in today’s Marketing Daily. Citing Deloitte's 24th Annual Holiday Survey, the article also suggested that spending will be strong in categories that bring people together (such as entertaining and family get-togethers).

Implications: I keep waiting for pundits to start using the phrase, “pent-up demand.” Perhaps this story is one example of that; evidence that purchasing, for now, will follow (long-term) trends, rather than (short-term) fads.

Have you noticed a more calculated, methodical consumer buying your products and services? Have you noticed that purchasing is motivated less by conspicuous consumption or extravagance, and more by authenticity, experiential value, and the enjoyment of family and friends?

I’d love to hear about any observations you may have from your category of business. Drop me an email, and share your thoughts.

Mike Anderson

The (effect of the) recession is (not) over!

Last night, news reports across America heralded the news: The GDP grew 3.5% in the third quarter of 2009, a signal that the deepest recession since the Great Depression was over. (See the New York Times version of the story by clicking here.) But today, those reports were countered by news that general consumer spending is still anemic… leading to a nasty drop in the stock market today (see the Washington Post version of the story by clicking here.)

In yet another story that supports Elm Street Economics thinking, a video segment from this morning’s Wall Street Journal suggests that consumers and investors lack confidence in what’s happening on Wall Street or Pennsylvania Avenue. See the video here (commercial pre-roll required).

Implications: Not all companies will exit the recession in unison; some companies will begin their recovery sooner, move through it faster, and rebuild revenue higher than others. Whether your company is on the fast track to recovery—or parked on the side of the road—depends on how well your company has nurtured its relationships among its most important customers.

Do you know—for sure—who your very best customers are (the really heavy users of your product or service)? Do you know—for sure—what benefits they hope to satisfy when they buy what you sell? Do you know who else your potential customer might consider shopping… in the hopes of satisfying that set of benefits?

Yes, there are still consumers who are spending, albeit in a more strategic, methodical, calculating way. Whether those consumers will respond to your marketing campaign may depend… on how well your marketing responds to consumers.

Mike Anderson

UPDATE: Is Social Purpose the new social status?

An interesting follow-up to our recent posting about Social Purpose (see immediately below, dated 10/29/09).

In today's "Engage: Teens" column, Media Post suggests that youth, especially, respect companies with a genuine connection to a cause they support. See the piece by clicking here.

Mike Anderson

Is social purpose the new social status?

A recent study of 6,000 consumers in ten countries reveals that 57% of those surveyed have purchased a brand in support of a cause or charity, according to a story published by Marketing Daily.

A majority of consumers assert that they have chosen a brand—even though it wasn’t the cheapest option—because of the social responsibility or cause supported by that company.

Implications: Even in a volatile economy, it may not be enough to fine-tune the values offered by your company; it is always important to consider the values held by your consumers. Which causes are inherently supported by your company’s customers and prospects? In what ways might you support the charities that are near and dear to your customer’s hearts?

Remember, not all cause marketing has to focus on fund-raising or charitable contributions of cash; we suggested that you consider “Experiential Philanthropy” in an Elm Street Trends blog posting earlier this year.

When your company considers its’ value proposition, are you considering the values of the constituents you serve?

Mike Anderson

Giving credit where credit is... making people nervous

Credit has fueled much of the consumption-driven economy over the past several years. But since we’ve entered an age where credit is seen differently—compared to, say, three or four years ago—it might be time to evaluate the types and timing of your credit offer.

I’m thinking about a popular department store that my wife and I visit, occasion. When you first walk in the door, you are greeted by someone whose job is to offer you a credit line: “Welcome to [store]! Would you like to save 15% on today’s purchase by offering a [store] charge card!?” (I’ve actually seen people cowl, slightly, in response to the sometimes aggressive way the greeter approaches.)

Then, if you find something you’d like to buy from the retailer, you get the same offer from the cashier. “Would you like to save 15% on your purchase today… by opening a [store] charge card?” The way the question is asked, one might feel a little stupid for declining the discount (whether you already have a card, or because you don’t want one).

At various Elm Street Economics workshops around the country, I’ve told the story of a little old lady who we saw offered a store charge card… who replied by nearly lecturing the poor clerk behind the counter. Wagging her finger, she said, “I don’t see a lot of customers in your store shopping today. Why don’t you give me a discount because I’m shopping and giving you my money!?”

Whether because of the sub-prime mortgage meltdown, an aggregate credit card balance that currently tops $900+ billion, or because of all the press given in favor of responsible consumption (or against abusive use of credit), the U.S. consumer could be said to have (at least) a mild aversion to credit right now.

Implications: I don’t mean to suggest that credit should not be offered. But I would submit that the current climate of “credit aversion” should at least affect the way financing is offered, and perhaps encourage companies to offer alternatives to credit.

For retailers who offer credit, is it wise to be as aggressive as the (anonymous) retailer I’ve mentioned above? Should “charge card” really be the first and last impression a customer has of your store? I might be more inclined to under-state the offer, knowing that people who really want to finance the purchase will inquire or find the information on their own (would conspicuous point-of-purchase signage be sufficient?).

When credit is offered, I would avoid the “indulge now, pay later” attitude at all costs. It is fashionable to be frugal right now; by extension, it is unstylish to be a spendthrift. Instead, perhaps an offer of financing could empathize with the consumer: “We know you have a lot to accomplish surrounding the holidays, and our [store] credit card can help you make those expenses a little easier to manage.”

It might also be smart to respect that much coverage has been given to the fact that fewer consumers will qualify for financing. With that in mind, does the consumer really want to apply for instant credit, right there at the check-out stand, with a half-dozen shoppers in line behind her, looking on? Retailers would be smart to consider a more discreet area for the customer to apply for credit, where the outcome is learned in a place of relative privacy.

Next, maybe that little old lady had a point: Should you offer an incentive to have people pay in cash? (It’s my job to not overlook the obvious.)

Another possibility: Should you offer alternatives to credit? Last week, Kids “R” Us announced that they were bringing back layaway for big-ticket purchases, according to this story from AOL Money & Finance. I wonder if people would also respond to “Pay now, enjoy later” offers similar to the Christmas Club Accounts that became popular during The Great Depression (see the Wiki-Pedia entry on the topic).

The first credit card was introduced less than 60 years ago (the Diners Club card, 1950). Now, many consumers are learning how to live on less—or without—credit. If your target consumer is among that group, it is critical to make sure you’re doing business the way they want it done.

Mike Anderson

How changing purchase priorities are hitting home (improvement)

Home foreclosures have been a high-profile story in the news over the past 18 months, and rightfully so; it is among the most financially traumatic experiences a family can suffer. But while an inordinate number of people have gone through foreclosure during The Great Recession, even more people find themselves “upside down, but not drowning.” These are people who might owe more on their home than they could sell it for… but who are managing the payments and getting by.

With that in mind, we partnered with America’s Research Group to ask 1,000 consumers some home ownership and home improvement questions during their most recent Consumer Mind Reader™ study. We wanted to understand how the economy might be impacting the categories of real estate or home improvement.

First, we asked these 20 to 59 year-old consumers whether they had postponed selling their home; more than 10% said they had. (According to C. Britt Beemer, the chairman of ARG, this number would historically be as low as 4%.)

Then, we asked whether they had decided to delay some major home improvement. This time, some 15% said yes.

Among those who had delayed a home improvement, we asked, “What kind of home improvement project did you delay?” Their answers, in descending order of volume:
New appliances: 32.2%
Add patio: 16.1%
Replace electrical switches/items: 14.8%
Remodel bathroom: 12.1%
Kitchen cabinets: 10.1%
New Kitchen: 7.4%
Replace windows/doors: 6.7%
Finish basement: 0.7%

We wanted to know what kind of pent-up demand might exist among people who said they had deferred a home improvement. So next, we asked this group, “When the economy turns around, how likely are you to undertake home improvement again?” A promising 53.7% said, “Very likely,” and another 45.6% said, “Somewhat likely.” Only 0.7% said they were unlikely to resume home improvement.

Further, we asked “When the economy recovers, which home improvement project will you seriously consider?” Here are the responses, in order of response volume:
New appliances: 11.7%
Remodel bathroom: 8.3%
New kitchen: 7.4%
Add patio: 7.2%
Replace windows/doors: 6.6%
Kitchen cabinets: 4.8%
Replace electrical switches/items: 3.1%
Finish basement: 1.1%

Finally, we asked respondents what might motivate them to move ahead on a particular project. Here are their reactions:
38.9% replied, “Existing (room/attribute) is dated.”
29.9% said, “Return on investment.”
17.3% responded, “A change in family size.”
12% answered, “The amount of time I (we) spend in that room.”
2% replied, “I don’t know.”

Implications: In many categories, the consumer has been the beneficiary of “deflation” (falling prices). But where home ownership is concerned, consumers are the ones suffering the side-effects of declining values. The recession has obviously caused some to defer their home improvement spending. But many are ready do “jump back in” when the economy turns around.

It looks to me like one motive might be to regain some of the equity their home may have lost during the recent real estate meltdown. (More than 38% of the people who intend to resume home improvement cited the “dated look” of their existing room, and 30% attributed “return on investment.” Only 12% said their home improvement project would be driven by the amount of time they spend in a room.)

The kitchen might be an early benefactor when home improvement resumes. When you add appliances, new cabinets, or kitchen overhaul together, more than 23% of the improvements people intend to resume take place in this “command central” portion of the home.

Special thanks to C. Britt Beemer, the chairman of America’s Research Group, for inviting CSS to contribute questions to be used in the September Consumer Mind Reader™ study. (Many of you will recognize Mr. Beemer as the co-author of best-selling books like Predatory Marketing, It Takes a Prophet to Make a Profit, and most recently, The Customer Rules.) Every other month, America’s Research Group (ARG) surveys one thousand people (age 20 to 59) to gain insights about their shopping behaviors and purchasing intentions. Those findings are subsequently published in Consumer Mind Reader™ studies for the clients of ARG.

Mike Anderson

Me-conomics, continued: Faux Frugality

We’ve all heard that it is more fashionable to be frugal. Well, some people are trying to blend in, even though they’re really not doing too bad, according to this story from Marketing Daily.

Implications: Me-conomics is the idea that some people have basically sat-out the recession. (While the wider economy has been gyrating the past two years, perhaps they live in households where incomes held relatively steady. So these folks might even be in a better position that they were a year or two ago, due to a cost of living that has even fallen in some categories, such as the cost of gas and apparel.)

Even if the widely reported recovery is indeed underway, it is important to empathize with those of your customers who need to be very thrifty. And those who do not… but who might like to appear as if they are.

Mike Anderson

Bank on shifting financial priorities

To say that purchasing priorities and consumer behavior have changed over the past few years would be a gross understatement. That’s why it is more important than ever to “stay tuned” to the customer… constantly evaluating who your best target customers really are, and the deeper benefits those consumers hope to satisfy through the purchase of a product or service. At CSS, we recognize those two issues (Targeting and Benefits Sought) as prerequisite to a sound marketing strategy.

That’s what led us into a wonderful dialogue with C. Britt Beemer, the chairman of America’s Research Group. (Many of you will recognize Mr. Beemer as the co-author of best-selling books like Predatory Marketing, It Takes a Prophet to Make a Profit, and most recently, The Customer Rules.) Every other month, America’s Research Group (ARG) surveys one thousand people (age 20 to 59) to gain insights about the shopping behaviors and purchasing intentions of consumers. Those findings are subsequently published in Consumer Mind Reader™ studies for the clients of ARG.

Recently, Mr. Beemer invited us to contribute a number of questions to the Mind Reader survey that might inform and enhance our Elm Street Economics advertiser workshop. We were happy to oblige.

We decided that one area of focus should be on banking. From the collapse of Lehman Brothers early in the recession to the Toxic Asset Relief Program (TARP) intended to help bail-out the banking industry, plenty of coverage has been given to financial institutions of all sizes during the recent recession. We wondered what affect all that news might have on everyday consumers (the folks who live down on Elm Street).

We started by asking, “Have you made any changes in the past year, with regard to where you bank or where you place your financial investments?” Almost 24% of respondents said they had made such a change.

Next, we asked, “Where would you be more likely to move your checking account?” While 34% of respondents said, “A National Bank,” an amazing 30% answered, “Credit Union.” Another 32% indicated they would move to either a “local (22%)” or “regional (10%)” bank.

When we asked, “Do you feel most banks are pretty secure, and therefore, a safe place for your money?”... 72.3% of respondents said, “Yes.” That might sound like a significant majority—and it is—but according to Mr. Beemer, historic numbers would be closer to 85%.

Given the dramatic headlines of the past several months, we asked, “Do you expect to see some bank failures in the area where you live?” 69% of consumers said, “No.” But nearly 16% said, “Yes,” and another 15% answered, “I don’t know.”

Finally, we asked participants, “How long do you expect the fallout from the mortgage crisis to affect banks?” Just over 24% said “Six months to a year.” 31% said “two years.” Another 30% said “Three to four years.” And more than 13% said “Five years or longer.”

Implications: Every business (and every industry) suffers from customer churn… but 24% turnover sounds very high to me in a category like financial services. I spoke with a banker I know this afternoon, and he agreed, saying that anything approaching 10% would sound very scary.

Speaking of churn, it would seem that bigger is not necessarily better in today’s financial environment. While 34% of respondents indicated they would move their checking account (a primary financial instrument) to a national bank, more than 60% favored a smaller institution (credit union, local, or regional bank). Is that because the customer is perceived to have a voice in the operation? Could it be the customer wants more one-on-one contact (and fewer automated or “telephone tree interactions”) with their financial institution?

Consumers have seen plenty of news coverage about the woes facing the banking and financial services sector. And it would appear that coverage is having an impact on consumer opinion. But those are just my thoughts about what the research suggests. Did other implications occur to you?

Mike Anderson

Thoughts on loyalty

An article in today’s New York Times asserts that, back in the 1980’s, four out of five new car buyers would stick with the name plate of their trade in. If you traded in a Chevrolet, you bought a Chevrolet. If you owned a Toyota, chances are, your next car would be a Toyota.

So far in 2009, only one in five car buyers choose to stick with the brand of their previous vehicle, according to the story.

Implications: This story suggests that a customer will not buy from you today simply because they bought from you yesterday. For some, that lack of loyalty will be a crisis. For others, it will represent an opportunity to meet and serve new people, and expand market share.

Mike Anderson

Recession fatigue: Patience commensurate with compensation

A report in this morning’s New York Times sheds light on the cost of payroll reductions. The article features a couple in a two-income household. She is an elementary school teacher. He is a pilot for a commuter airline, now a first-officer (co-pilot), having been demoted from the rank of captain. His pay, too, was reduced significantly.

I thought the story was important because it illustrates one side-effect of company cost savings: Patience on the part of those employees is also cut. The pilot talks of becoming uncharacteristically “uncorked” when someone makes even the slightest non-positive remark.

Implications: I love to study the interaction between companies and consumers… which still relies heavily on interaction between people, in most cases. Someone is a seller or service provider, often working on behalf of an employer (rather than being a company owner or self-employed). Someone is a buyer (whether it is the consumer of banking, groceries, a car, an airline trip).

When the seller or service provider is discontent with recently reduced pay or benefits, does it show up in the form of frustration that will eventually seep into their interactions with consumers?

It seems impossible to think not. I find myself wondering whether recent customer service experiences on my primary airline—and another with a big-box electronics store—have anything to do with disenchanted employees scattered along those company’s labor chains.

Unemployment and layoffs get most of the big labor-related headlines in this kind of an economy. But it’s not the only story in this recession. The Times article stated that there have been more pay reductions than at any time since the great depression. Is there any relationship between the happiness of employees and that of their customers?

Mike Anderson

Selling upscale when so many have scaled back

Here’s the story in a sentence: Be considerate in your marketing… because your consumer is being more considerate than ever, too, in the way they question how your product or service will add value to her/his life.

Like most marketers, purveyors of luxury are finding this a challenging time. The examples seem to be everywhere. Recently, Condé’ Nast announced the closure of Gourmet and Elegant Bride magazines, among other publications (see this recent story from the NY Times). In an already difficult magazine environment, perhaps few people were eager to window-shop for dining experiences they could no longer afford.

Neiman Marcus recently announced store closures and shorter hours (see this Marketing Daily report), and last month, the Luxury Institute released a survey indicating that the abundance of luxury goods on the market had turned them into a “commodity” (from another Marketing Daily story).

Maybe “lifestyles of the rich and famous” are no longer the aspiration they once were. Luxury, it seems, is not only further from reach for many consumers; it might also be less hip. Or maybe, people just won't buy luxury for the sake of luxury. (Maybe upscale buyers expect upscale value.)

CSS colleague Todd Storch sent me a heads-up on a recent special edition of the Wall Street Journal, titled, “Selling Luxury Goods in the Age of Abstinence.” Lucky for you, I found an online video summary of the story, available here (pre-roll commercial required):


To see the video site of origin, paste this URL into your browser: http://online.wsj.com/video/selling-luxury-goods-in-the-age-of-abstinence/7B6CC7EE-81FB-4842-98FA-CD2987712351.html

Implications: I, for one, do not believe the luxury sky is falling. I think expectations are changing. For the person who buys a fine bottle of Insignia wine—just like the person who buys store-brand canned vegetables—people are more closely scrutinizing the benefit they receive for each dollar spent. The dollar amounts might be different, but the Cadillac buyer will be judicious, prudent, deliberate, considerate… just like the buyer of a Chevy Cobalt.

Instead of simply saying, “This is the luxury you deserve,” purveyors of upscale goods are smart to get specific about how their product or service adds value to a buyer’s life.

Mike Anderson

Recession fatigue: Consumers are ready for the recovery

Whether you listen to the radio, watch television, or read the newspaper—or all of the above—it is amazing how much advertising out there seems to be recession-focused. “When times are tough, we’re the ______ to turn to.” “The economy has hit you hard… but this sale lets you hit back.” “We’re giving you the kind of value that even the recession can’t take away.” And even, “Because of the recession, we need your business more than ever!” (I swear. I really did hear that in a commercial on the radio.)

Next, someone is going to offer the consumer a sale price... on a bridge they can jump off of.

In Elm Street Economics workshops all over the country, we’ve spent the past eight months warning people to beware of “recession fatigue.” In other words, be watching for that point in time when people are sick and tired of all the tough economic news, and are ready to move on.
Finally, there is a story in today’s New York Times on this topic; the article points-out the positive messaging that is currently being offered by General Electric, Bank of America, Levi’s and others.

Implications: It might not be time to start singing “Happy Days Are Here Again,” but it might certainly be time to stop beating the dead horse that is the recession.

Economists and statistics working the way they do, an “official” recovery will not be announced until months after it has begun. So if you’re waiting for that official announcement, you’re likely to be the last one in to the good-news pool.

Does it occur to you that gasoline costs two-or-more dollars per gallon LESS than it did during the summer of 2008? That inflation, for the moment, is completely under control? That the “buyer’s market” of aggressive selling strategies has made the consumer’s dollar more powerful than it’s been in years?

With so much good news to work with—including rumors that a recovery might be underway—why would anyone dwell on the negativity… when the consumer is so tired of it?

Mike Anderson

Is our real-time culture leading to unreal expectations, or even unrest?

I read a fascinating post written by Bob Deutsch in this morning’s Media Post Marketing Daily. In it, he considers the unintended consequences of a world that wants everything “quick.” While his essay was categorized as a “Rant,” I think Mr. Deutsch makes a critical observation, which I will describe this way: If you abbreviate everything, people stop feeling complete, fulfilled, and heard.

Implications: Beyond the important message housed in this story, I left the article wondering about the effectiveness of today’s producer/consumer communication. As I was growing up in the 60’s & 70’s, there was a lot of attention paid to the “Generation Gap.” The issue has enjoyed a renaissance in recent years, as people have compared the characteristics of The Matures, Baby Boomers, Gen X, Gen Y, and Millennials. But in many ways, I think the chasms which might exist between these cohorts are less “generation gap,” and more “technology gap” and “communication gap.” R U w/me so far? Gr8.

There is a growing number of people out there who have learned to read or listen in ways that are entirely incompatible with the way many of us originally learned to write or speak. Perhaps one of the more important consumer trends of our time will force us to ask these questions:

• Does your consumer communication speak to both sides of this digital divide?
• Does communicating by text or Twitter require that you abbreviate your story… or does it simply force you to isolate the most critical part of your value proposition? (Sometimes, there is a very fine line between dumbing-things-down… and wising-things-up.)
• Have you mastered the art of incremental conversation (providing the short-form messages some consumers might prefer, but also giving them an avenue to find “more information” abundantly)?
• By “digitizing” your message to appeal to techno-savvy consumers, do you risk alienating your more analog shoppers? (Or, is the converse a greater risk?)

Thankfully, it’s not my job to have all the right answers. Just the right questions.

Mike Anderson

Rebuilding confidence by assuming the risk of a transaction

I was entertained, not long ago, by an offer I saw at the counter of an Arby’s restaurant. They were attempting to launch the new “roast burger” line of Arby’s sandwiches; a premium product, relative to the price of other items on the menu. But in-store signage—and a coupon that was offered at the counter—the customer was invited to “go ahead and try one… and if you don’t like it after two or three bites, bring it back up to the counter, and we’ll trade it back in for one or two of your old favorites.” Arby’s drove product trial by assuming the risk of the transaction.

Recently, General Motors has been encouraging consumers to give the brand another look… with a money-back guarantee. The offer has been prominent in the company’s advertising, as explained a story in last week’s Springwise newsletter. The theme of the campaign is, “May the best car win.”

Implications: At a time when consumers are spending less in many categories, each purchase is likely to be more carefully thought-out. Instead of thinking of this consumer as "cheap" or more frugal… consider using words like judicious, prudent, and deliberate.

The consumer has gotten back in touch with the value of a dollar. (Remember when money was no object? Now, it’s an object.) And she/he doesn’t want to make a mistake.

Few things create confidence for someone who’s considering the purchase of a product like a seller who’s confident they’ll be happy with it... and prepared to demonstrate that confidence with some kind of a satisfaction guarantee.

Mike Anderson

Who's getting credit for all the bad press?

In case you haven’t noticed, banks have been getting some heavy criticism about their credit card practices. From rising interest rates and late fees to falling credit lines, it has become popular to “charge” financial institutions with abusive practices. In addition to scrutiny, the industry faces the prospect of tighter regulation, according to a story in yesterday’s New York Times.

So, what if you’re not a bank—but your name is synonymous with the credit card business?

VISA is launching a “credit literacy” project in the form of an online video game, according to this recent story from Marketing Daily. They’re promoting the project everywhere from traditional advertising and online channels… to the floor of the New York Stock Exchange.

Implications: I’m not sure whether this “financial football” game will either attract young people in numbers sufficient to meet expectations, or whether those people will be successfully educated about responsible use of credit. But it’s worth noting that the people at VISA know their fortunes and reputation are inextricably linked to the bad press about banking practices… even though they’re not a bank.

Consumers often indict entire categories with their favorable or unfavorable opinion. (With a little help from the media and/or politicians, perhaps.) Think “big oil.” Investment banks. Health care. And now, of course, “credit card companies.” If your company operates in one of these (or many other) fields, you might be getting credit for issues gone awry… even if you don’t deserve to.

Is your company part of a category or group that is suffering from some type of collective bad press? Is there anything you could do to stand apart from others in your category? Think “cause marketing,” consumer education, or other goodwill-building effort. In their campaign, VISA is not likely to make wholesale changes in the way banks—or consumers—use credit cards. Some might see this as a veneer-level public relations campaign, created to help build a case against further regulation. But the company is demonstrating an effort. And for some consumers, that will be enough to sway opinion.

Mike Anderson