The price of gasoline is starting to gain more and more attention, and rightfully so. For every additional dollar spent on their commute or heating bill, there is one less dollar of their income that could be called “discretionary.”
Many industry experts see $4.00 per gallon as at least a psychological tipping point, if not a financial one. The record price was set three years ago at $4.11 (national average), according to a story from today’s New York Times (click to link). Prices have already surpassed that point in some parts of the country.
While consumers have been driving less, the price of fuel has risen faster and farther than their ability to cut-back, according to an article from the Atlanta Journal Constitution, offered here at AJC.com.
Implications: The rule of discretionary income is simple. How much discretion people apply to their spending is inversely proportionate to the amount they have to spend. In other words, if folks have lots of money to spend, they tend to be a little more carefree. If they have less to spend, they behave more prudently, stewarding their precious financial resources a bit more carefully.
Is your marketing message ready for a day when consumers return to their judicious, careful spending style? Will your company, product or service remain appealing to folks who are being a little more careful with their money? (Sounds like a bit of a flashback, doesn’t it?)
The recovery still seems to be in good shape, and the recession seems to be a distant memory (depending on the region or business you’re in). But even if the fragile recovery continues, one might expect to see recession-style spending from some consumers, once the price of gas hits their personal tipping point.
The same thinking might apply to any other form of inflation, regardless of the commodity.
Don’t just think of the economic climate in terms of recession or recovery. Think of it in terms of, “The Fuel Economy.”