Of course, most economists will tell you that, technically, we are no longer in a recession. But based on our interviews around the country, technically, people don’t care.
Probing a little deeper with our consumer panels, we ask how life has changed. “What’s different now in your household now, compared to the way it was before the recession?” What impressed me about the responses to this question is that people have to stop and think about how life used to be. But that only makes sense, as the recession technically started a full four years ago tomorrow, on December 1, 2007.
By the way… it is worth noting that the period since the recession ended (June, 2009) has lasted far longer (roughly 27 months) than the entire term of the recession itself (roughly 19 months).
We noticed another pattern in our consumer panels: Many people have accepted and adapted to the financial realities they now face.* Some participants explained that they now shop more carefully before making a major purchase, or that the kids are now expected to earn their own spending money. Some are more conservative about their use of credit, or they’ve reduced the frequency of their visits to a specialty coffee shop. Others are spending more on upkeep so they can hold on to that car a little longer, and some have opted for Netflix in lieu of going out to see a movie.
In a word, consumers have reconciled their spending with their income and assets.
In a recent post, I suggested that frugality might not be simply fashionable for some consumers; it might be more accurate to call it their new operating system. [See the posting 11/14/11.]
Implications: In almost every example of reduced spending, consumers will explain that they’ve come up with an alternative (e.g., spending more on automotive service so they can spend less on a new car payment, or buying a new home theatre to avoid the cost of out-of-home entertainment over the long haul). They’re spending somewhere, just not always on the same things they used to spend on.
In an age when people are more likely to consider alternatives to past purchasing habits, it’s a great time to ask the question: Who are you the alternative to? In what situations might your company, product or service act as the perfect replacement to a previous spending habit?
People have spent four years getting used to the idea of home values that are smaller and job security that feels less secure. Contrary to the official economic status, they feel like there’s still a recession going on… but it doesn’t scare or shock them anymore. They have learned to cope—reconcile—and carry on as best they can. They have lives to live, after all. Does your value proposition—and your messaging—fit into that new lifestyle?
* Please note that I did not use the now cliché reference to, “the new normal.”
Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.