Saving money on one thing... to subsidize another

Sure, “frugality is in fashion.” But is it the only thing people are wearing this year? The aggregate of media reports might even lead one to believe that thrift has become absolute.

I don’t think so.

Among my morning mail today, there was a Research Brief from Media Post, noting that consumers have been brown-bagging for lunch at work, and trading in bottled water for tap water with remarkable frequency. The newsletter from Phil Lempert (see The Supermarket Guru site) indicated that if-and-when people entertain this holiday season, they’re more likely to have a pot-luck party, and more likely to use generic or store-branded ingredients when they bake or cook. So people are cutting back at every turn, right?

Not so fast.

The same Lempert report indicates that more than two-thirds of people said they will contribute to a party they attend, just to help out the host.

And this week, a New York Times story cited evidence that retail sales began to rebound in October.

Implications: At first, this set of observations seems to be at odds with each other. But upon further review, I think it is greater evidence that people are more likely to be judicious, deliberate, and calculating when they spend. One might say they are cutting-back in lower priority (commodity) purchases, to subsidize the spending that is seen as more important or of higher priority.

Have you noticed how, recently, when someone tells you of an item they bought, they feel obliged to tell you why it was such a good deal? (Translation: “I’m an astute shopper or negotiator, who knows how to find a great deal.”) Or, when that same friend tells you of an “indulgence” they recently purchased, they’ll justify it by also telling you how they’ve saved in another area of their life, so as to afford the car, trip, TV or other indulgence? (Translation: “I’ve earned this item through self-denial and sacrifice in other areas in my life.”)

Whatever business you’re in, it might be smart to ask, “Is my product or service as the affordable alternative that helps her subsidize a more important purchase, elsewhere in her life?” Or, “Is my product or service the one she is prepared to save for, wait for, or stretch to afford?”

There is no shame in either position. In fact, regardless of the state of the economy, there are companies that will profit in either role.

Before I close this posting, I’ll also ask you to consider how people are talking about their spending, more than ever, amongst themselves. Whether bragging about a long-awaited indulgence, or sharing tips about where they found the latest, greatest deal on something… there’s a lot of person-to-person marketing going on right now. Are you doing anything to harness that marketing power (i.e., electronic coupons that are easy to forward to a friend, two-part coupons--one to use, another to share--that reward one customer for bringing you another, taking a digital picture of the customer with their new product that they can then post of Facebook, etc.)?

Mike Anderson