Comparing apples to oranges

Throughout the Great Recession, a lot of businesses were perplexed about how to make lemonade out of the lemons they had been given. Unable to influence the amount of money coming in (revenue), it only made sense that companies would focus on the amount of money going out (expenses). Many enterprises went into “survival mode,” where cost control was the name of the game... and every expense was on the table, from reducing inventory to cutting payroll. Ultimately, many consumers noticed—and accepted—that a reduction in selection and service would be a natural by-product of the Great Recession.

Now, as the recovery gains momentum, it seems like more companies are going on “offense” again… with advertising campaigns and marketing efforts designed to ensure that, “If consumers are going to start spending again, we better darn well get our share.” If the car business is starting to pick up, each dealer wants to make sure they get their share of car sales. If home improvement is beginning to improve, then each hardware store, lumber yard and contractor wants to make sure they are considered for that purchase. In other words, many companies have gone from thinking about lemons they’ve been dealt… to standing-out among the bunches of other contenders in their category.

I’m thinking about something else.

There are residual effects that are likely to last far beyond the recession that gave rise to them. I’m not just talking about the now-cliché concept that, “the new frugality could stick.” I’m referring to the specific issues that drive that frugality. For example, the credit market is still tight, and more consumers are avoiding debt even if they qualify for financing; that means more people will be living, literally, from paycheck to paycheck. Also, the job market has not fully recovered; a household that had two incomes in 2006 might be living on 1.4 incomes right now. (Or, a person that had one great full-time career might now be living on two or more part-time jobs… and that might include stepping a rung or two lower on their corporate ladder.)

Household incomes are still amazing, when compared to most of the rest of the world. But ultimately, these conditions (and others) have led many consumers to this epiphany:

“I can still afford to buy almost anything. It’s just that I can’t afford to have everything.”

Implication:

Get ready for consumers who will be comparing apples to oranges.

Right now, many consumers are moving ahead with one purchase, knowing that it means a number of other purchases might have to wait. So, should the family move ahead with the new appliances, or the major home improvement? Should they pull the trigger on a new car, or put that expense off for a while and instead replace the tired furniture in their living room? Would it be smart to plan a family vacation this summer… or is that money better spent sending one of the heads-of-household back to school, so as to gain skills that would be more attractive in the current job market?

In a nutshell, consumers used to think in terms of “one of each.” Now, they’re thinking “one or the other.” That means, if you’re a furniture store, you don’t just compete with other stores that sell furniture. If you’re an appliance store, you don’t just compete with other stores that sell appliances.

It means that, in addition to worrying about competitors in your category, you might find it necessary to think about other categories you compete with. The “consideration list” might not be limited to other providers of the product or service you sell. It might look more like a set of diverse and competing priorities.

In some industries, it will be like comparing apples to oranges.

Mike Anderson