Should you be targeting by term of residency?

Trend Observation:  Once upon a time, it was not unusual for an advertiser to target consumers on the basis of an age or gender (i.e., adults 25-54, women 18-49, men 35-64, etc.)  But if you sell home improvements, electronics or furnishings, is that the best method of zooming-in to your target market?

Recently, I spoke at a conference of respected home furnishings professionals at the annual ART conference in New Orleans.  I was able to obtain some interesting research in advance of that talk, courtesy of Scarborough Research in New York.  Specifically, I was provided some data from Scarborough USA+ 2011 Release 2, and here is the information I was looking for:

New to the neighborhood:  28% of adults are living in a home they’ve been in for less than four years.  This is an attractive target group, wouldn’t you agree?  After all, they’ve just moved into a new place, and they’re doing all the things one does to make a new house their home.  Of this “new to the neighborhood” group, 40% are owners.  That means they didn’t just buy a new home… they got a great bargain on it!  After all, they purchased after the real estate bubble burst and home prices fell.  You’ll find a lot of first-time homeowners in this group; folks who likely moved from an apartment with sparse furnishings, who need a lot of goods to fill up their relatively spacious new home.  56% of the people in this group are renters.  While the foreclosure crisis has received a lot of press over the past few years, there is also a tremendous share of this group that could be called habitual renters… people who move around a lot and therefore prefer to rent, rather than own.  This transient lifestyle is also a frequent behavior of young adults who haven’t decided where they want to settle down, or haven’t the financial means to buy just yet.  (By the way, 4% of “New to the Neighborhood” residents could be classified as “other,” neither renters nor owners.)

Burned by the bubble.  20% of adults are living in a home they’ve been in for more than four years but less than eight years.  That means they bought near the peak of the real estate bubble.  But don’t write them off as a marketing target (see the marketing implications below)! Think about it this way:  While the number of foreclosures got a lot of press over the past few years, there are far more people who may have negative equity in their property but are not at risk of losing it because they remain gainfully employed.  When the bottom fell out of the market and their home equity vanished, it is likely these folks went through a period of outright anger.  But at the national level, the recession has been over for more than three years (at this writing).  After what might be called a financial grieving period, many of the folks in this group have decided they can’t stay angry with their home forever; they’re talking about what kinds of improvements might make this a place they can love again. 

Long-term homeowners.   More than half of U.S. adults—52 percent—have been living in their current home for eight years or more.  That means original equipment is starting to require repair or replacement, and original furnishings and features are beginning to look dated.  For the purveyor of home furnishings or home improvement, it’s the perfect storm… and it comes with a target consumer that is more likely than most to still have some equity in their home.

Marketing Implications: 

New to the Neighborhood.  If someone has been living in their home less than four years, they’re doing a lot of home improvements that could be classified as cosmetic and aesthetic.  Think paint, wallpaper, window coverings, rugs; anything that, in terms of décor, makes their new house their home.  If they were previously renters but are now homeowners, they are likely to have a lot of needs, along with plenty of money to spend on those new home furnishings and improvements.  If they were previously homeowners but are now renters, it is likely they had to shed larger furnishings, but are now in a position to re-furnish their new rental with smaller, more mobile goods.  If you’re talking to renters, position home furnishings as “home improvements you can take with you,” because renters seem to re-locate more frequently.

Burned by the Bubble.  If they can’t afford to sell (because they likely owe more than the home is worth) and move into their next dream home, they’re talking about the kinds of things they can do to make this house the home of their dreams.  So this group is an attractive target for what we refer to as experiential home improvements and home furnishings.  Think granite countertops, outdoor kitchens and patio fireplaces, hardwood floors, and home theatres.  Having gone through a financial reconciliation, these folks are living within their means… but that more pragmatic spending style is likely to include investing in a home they know they’ll be spending more time in, enjoying family and entertaining friends.  They now recognize their house as a place to… live.  Can you help them with that?

Long-term Homeowners.  The headline for this group:  Infrastructural Home Improvements.  When you’ve been living in your home for eight years or more, home improvement is more than a new throw rug from Pier One.  Think windows, siding, roofing, HVAC and more; the stuff that stings.  The good news:  These folks are likely to be among your most qualified buyers when it comes to credit-driven, big-ticket purchases.  They might not have as much home equity as they did five years ago, but they still have some value in their home.  If you sell home furnishings or décor, this is a group that is often tired of the overall look, and might still consider buying rooms of furniture at a time.

Summary:  Does your marketing message (from advertising to the way you talk on the sales floor) still target people based on age, gender or income?  It might be smart to talk with your biggest customers, and determine whether term of residency plays a role in the way they set purchase priorities for home furnishings and improvements.

[Editor’s note:  Our thanks to Deirdre McFarland, Haley Dercher, and Scarborough Research for providing the statistics that inform this perspective.  For more information, visit Scarborough.com, or contact them at info@Scarborough.com.]

Mike Anderson, for The Marketing Mind consumer trends blog, service of The Center for Sales Strategy.  

McKinsey: A progress report about the deleveraging process

Trend Observation:  Today’s newsletter from McKinsey takes a look at consumers’ progress in pairing-down their debt, a process widely known as deleveraging.  Click here to see the story.

Marketing Implications:  According to this analysis, consumers in the U.S. are getting a handle on their debt faster than some other parts of the world.  However, the study indicates that roughly 70% of mortgage debt and 80% of this deleveraging has come from default.  In other words, much of this “progress” has come from lenders writing-off the amount, rather than debtor’s paying-down the balance.  Further, up to 35% of defaults could be described as “strategic decisions,” where the debtor elected to walk away from a financial obligation.

The McKinsey paper seems to suggest that our deleveraging process will continue into the middle of 2013, but it might be over-simplifying the situation to suggest that means our storm of credit issues will be over.  Just because a consumer has little or no outstanding debt on their personal balance sheet does not necessarily make him or her a good risk; it could mean that someone else had to write-off an obligation that consumer once held.  If you sell big-ticket items where some form of credit often facilitates the purchase, this matters to you… and it makes qualifying your customers more important than ever.  (A process that can begin with the marketing message you create.)

Mike Anderson, for The Marketing Mind consumer trends blog, service of The Center for Sales Strategy

UPDATE on “Merged Households”

Trend Observation:  Let me revisit the story I published just a few moments ago [see “Merged Households” immediately below].  The Washington Post story I cited goes on to include this observation:  “Economists estimate that there are more than 2 million fewer occupied homes in the country than there would have been had Americans continued forming households at the rate they did before the recession. The slowdown has lowered demand for housing as well as for furnishings and appliances, placing a further drag on the economy.”

Marketing Implications:  Let’s focus on the fact that the story is talking about Census data with a window from 2007 through 2010.  So I’m wondering:  What happens when people living in a merged household decide their financial house is in sufficient order that they are ready to once again move out on their own?

The pent-up demand for home furnishings, home improvement—indeed, homes—could be amazing.

Are you watching the real estate market where you live (sell goods and services)?  If you sell appliances, home furnishings, or almost anything else that might fit into the traditional American home, you should be.  I may be stating the obvious, but jobs and housing will be a harbinger of sales opportunity in a lot of categories.

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

Rents on the rise in many cities across the U.S.

Observation:   Many homeowners are feeling the frustration of the recent real estate meltdown.  But in many markets across the U.S., renters are feeling a bit pinched, too, as demand for apartments—and rent costs—rise.  Click here to see a recent New York Times story on the matter.

Implications:  Could high rents be one of the stimuli that cause renters to make a move toward buying?  How long will it be before the pendulum swings back toward home ownership?  Or will apartment building development resume, therefore creating more supply for this impressive demand for rental units?  As another source of rental housing, many investors have snapped-up single-family houses only to rent them to families who lost their homes through foreclosure.  Is that a long-term trend, or will those homes be sold-off again when housing supply and demand gets back into balance?

If you sell home furnishings, appliances or improvements, this range of possibilities affects you.  If you sell furniture, the goods you sell to an apartment dweller will be smaller that the goods you sold to the big homeowner.  If you sell to a former owner that is now a renter, your transaction is more likely to be in cash rather than credit terms.  Do your goods and offers reflect the current set of realities that your most important customers are facing?

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

About two-thirds expect a tax refund, and more folks intend to "save" it

Observation:   A recent story from Marketing Daily indicates more than 66% of respondents to a BigInsight survey expect a check from the government this tax season, and 43.8% say they plan to save it.  Click here to see the story.

Implications:   My question is, “Save it for what?”  Are they saving it for retirement?  Or are they simply planning to spend it more strategically on one of many big-ticket needs that has gone un-sated over the past several years?  They could be saving it until May when they buy a new car, or until Fall when they buy a new suite of appliances.  To many folks, “saving” money might just mean not squandering it immediately, instead spending it thoughtfully on something they might be able to afford with a regular paycheck.

What is your company doing to convince consumers that your product or service is worth their investment, whether it be using their regular income… or the extra boost their tax return often feels like?

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

Consumer credit grows (a testament to increasing confidence?)

Observation:  A recent story from Bloomberg suggests that consumers may be feeling more confident about their future prospects, and therefore more comfortable with the idea of borrowing money.  Click here to see that story.

To see an interactive chart about credit trends, click here.

Implications:  If you sell big-ticket items—or loans—this is great news for your category.  Have you planned a messaging strategy that speaks to this increasing confidence (or at least, a greater willingness to borrow)?

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

Generational Economics: The Age of Acquisition

Marketing Observation:  Generally speaking, the Age of Acquisition refers to the collection of people are between the ages of 18 and 34.  (Therefore, at this writing, we could loosely refer to this group as The Millennials.)  Acquisition is a great moniker for this life stage, because their appetite for consumer spending seems insatiable.

I realize the term “Acquirers” can sound a little cliché, just like so many other terms the advertising industry has invented for itself.  So to fully appreciate the true significance of this group, think about this line of questioning: 

• Did you own your first NEW car on the day you turned 18?  Did you by the time you turned 34? 
• Did you have a place of your own by the time you were 18?  Did you by the time you were 34? 
• Had you filled that place with furniture when you were 18?  34? 
• Did you have a spouse or significant other by the time you were 18?  But by the time you turned 34? 
• Did you have children when you were 18 years old?  Did you by the time you turned 34? 

This line of questioning helps illustrate just how little you had at age 18, and just how much you had acquired by the time you turned 34.  That’s why we call it the Age of Acquisition:  People in this life stage seem to be consuming everything in their path.

Not everyone will answer these questions precisely the same.  But generally speaking, at age 18 we’re often born into consumer adulthood with virtually nothing, except that which our parents let us take from home.  And by the time we’re 34, many of us owned at least one copy of almost anything it takes to run a typical household.  (And some stuff you don’t need to run a household!)

In addition to those young adults who will leave their parents home, go off to college and then venture off to start their own life, there is a large and growing segment of young adults that are having difficulty with this move, or are purposefully delaying it.  Often, this hesitation is in response to the post-recession labor market.  Often unable to find a full-time job in their chosen field after graduating from college, many twenty-something adults return to their parents’ home until their income can match the cost of striking out on their own.  Think of them as return-to-nesters.  By the way, this can still be a very attractive target group, as they often earn an income that is not going toward a rent or house payment (if they are living in a home that is paid for by someone else).  That leaves a lot of discretionary income for things like entertainment, clothes, electronics, etc.

Marketing Implications:  Serving people that are in the Age of Acquisition is no small challenge.  Yes, with all the spending they do, one might be tempted into believing “this’ll be easy.”  But adults 18-34 are busy building families (although later than ever), climbing their corporate ladders, and still drawn to engaging in a highly active social life. 

Millennials are doing things differently, right down to the homes they live in.  Where there may once have been a living room, there is now a game room (equipped with at least one game console and a plasma flat-screen).  Where there once was a formal dining room, there might now be more of a social center, which can be used for homework (career or college), entertaining, or board games with the family.  They’ve never known a world without very advance personal computing, and they’re driving the break-neck speed of innovation in smartphones, tablet computing, and more. 

The Age of Upgrades is ready… to spend with companies that have upped their game.

Mike Anderson, for The Marketing Mind consumer trends blog, service of The Center for Sales Strategy.  

Home furnishings industry regains footing... and opportunities

Observation:   A recent story in the High Point Enterprise suggests that 2011 was a year of stabilization for the home furnishings industry.  While it may not be what one could call a robust recovery, 2011 saw increases in orders, shipments and employment, and that trend seems to have momentum going forward.  Click here to see the story.  HPE is a publication serving the home furnishings industry.

Implications:   Just a few years ago, it seemed like many people were buying and selling houses they same way they would trade-in their car every few years.  But that cycle was snapped, for many consumers, by the real estate meltdown.  Upside-down in their property, in terms of equity, a lot of folks have come to accept that they won’t be moving into a new-and-improved McMansion anytime soon. 

So, like many business categories, the home furnishings industry finds its customer base in a state of reconciliation.  In effect, once people accept that a new Dream Home is not in the cards, many begin taking steps to make the house they are in the home of their dreams.  From home improvements to home furnishings and accessories, they’ll be looking for ways to be happy with their current home.  Are you speaking to this new benefit… sought by so many consumers?

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

Trade-in value: It's not just for cars anymore

Observation:   Back in October, we shared a posting about “Re-commerce,” where more consumers are trying to sell something they own before buying the replacement for that item (i.e., listing a couch on Craig’s List before spending the money for a new sofa).  Click here to see that Elm Street consumer trends story from October 4, which was based on an article from Trendwatching.com.

In today’s Marketing Daily, there is another story of interest to this trend.  It suggests that more women are considering resale value before they buy a product (and we’re talking about everything from clothing to electronics, no just cars).  Click here to see that story.

76% of the women surveyed indicate that they participate in a site where consumers buy or sell from each other.

Implications:   Should your company consider adding a trade-in policy for the products you sell?  Should it at least start thinking about the long-term resale value of the products you offer, and talking about those attributes with customers?

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

Is stability the best that U.S. real estate market can hope for?

I dislike this over-used cliché as much as anyone, but there was an important story on CBS News last night, which suggested that the current real estate market might represent “a new normal.”  In the feature—which ran as the lead story in the broadcast—Yale economist Robert Shiller challenges the conventional wisdom of those who are waiting for a real estate recovery.  Click here to see the story, or watch the video immediately below (commercial pre-roll required).

Implications:   Of course, this is not just a story about new housing starts and existing home sales; this issue impacts the home furnishings, home improvement and mortgage industries, directly, and virtually all other retail categories at least indirectly.

Frankly, I liked one of the messages sent by this story:  It’s time to stop waiting to see what happens, and get back to the business of doing business.  If the housing market recovers, great… consider that a bonus.  Meanwhile, the smart money is on regaining a focus on who your ideal consumers are, understanding their needs, and communicating how you can satisfy those needs—at least the most important ones—better than your competitors.

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

Consumers remain somewhat credit-averse

A story in today’s USA Today suggests continued restraint with regard to the use of credit.  Click here to see the story.

Implications:  This is one of the major tenets of Elm Street Economics:  Consumers won’t just buy your product because you offer financing; they will consider financing because they want to buy the product or service you sell.  Sell the value that your product or service will add to the consumer’s life.  Then, if applicable, mention that you have cash management options to help them soften the expense over time.

If you think a financing plan is the most important part of your offer… you may not be on the same page with a significant number of your customers.  It's not that people won't use financing.  It is that they'll use it with considerable caution and deliberation.

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

The changing face (and families) of America

Last week, USA Today published an important story about shifts in the U.S. population that continue to be revealed by the 2010 census.  Among the findings:  We’re having fewer children, and we’re having them later.  Blended families are showing up in big numbers.  And today, more than 40% of babies are born to unmarried moms.

In other words, a family in 2011 is built differently than a typical family of even twenty or thirty years ago.  Click here to see the story.

Implications:    Next week, I look forward to speaking to a group of executives from the home furnishings industry at a conference in Raleigh.  Imagine selling furniture in 2011; it is an era where home ownership, household incomes, and even the definition of “family unit” is, itself, being re-defined.

How is your company, product or service being impacted by the evolution of consumers and their families?  Who owns the decision for the household, when the family living in that household might not be the traditional “married with children” nuclear family?

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc. 

June sees an increase in new home construction

Whether through consumers speculating about the stability of their future, or homebuilders speculating on theirs… new housing starts jumped in June according to this story in today’s USA Today (click to link).

Implications:    Pardon me if I take this opportunity to amplify any news that seems somewhat optimistic.  New homes lead to construction jobs, as well as the sales of home furnishings, décor, appliances, and more.

Generally speaking, people who build or buy homes have reason to be confident in the future.

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

Gas pains continue to affect other spending

A story from the New York Times this week explores how consumer spending is being impacted by higher gas prices.  Click here to see it.

Implications:  There is an inarguable relationship between what consumers are spending on gas… and what they can spend on everything else.  How is your company impacted by the cost (to consumers) of high fuel prices?  How can your company help the consumer manage this challenge?  (More accomplished on fewer trips to your place of business?  Online purchasing or planning?)

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

More people under one roof

This morning’s USA Today offered a story about an important trend in housing:  It appears that more people are sharing the typical residence.  Click here to see the article.  

Implications:   There’s a bit of irony to this story.  It was affluence that led to bigger houses holding few people over the past fifty years or so.  But it was economic hardship that led to the reversal over the past several years.  The recession forced foreclosures and unemployment hardships; people who lost their homes moved in with family or friends, adult children were more likely to put-off moving out of the house, and some college grads were more likely to move back home than strike out on their own.

If you sell home furnishings, appliances, or home improvement, it’s critical to pay close attention to this trend.  Think about your industry or inventory and ask:

Are their accessories that let someone cordon-off their bedroom as if it was an apartment (think home electronics, headphones, personal TVs, laptops, room dividers, dorm-room style refrigerators, etc.).

Are there smaller furnishings that fit more comfortably into a crowded house or apartment?  (Down-sized versions of the recliner, a loveseat instead of a sofa, and perhaps with a pull-out bed?)  I’m having flashbacks about beanbag chairs and futons, here!

Do you offer an escape, when someone simply needs to get away from the crowd?  (I’m thinking about how coffee shops, bars and restaurants could benefit from this issue!)

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

Supply chain shortages ahead?

Saturday, another story from the New York Times explained the stress on supply chains that involve Japan, in the wake of the recent calamities there. Click here to read that story. Where the auto industry is concerned, the theme was echoed in today’s Marketing Daily (link) and Automotive Industry Digest (link).

Implications: It’s not just the cars coming out of Japan that will be in short supply… but also, cars and other products that are made elsewhere, but use parts that might come from Japan.

If a desired part or product is in short supply, does your company, product or service represent a reliable alternative?

And to repeat a theme from last week… if your parts or products could be perceived to be in short supply, should some of your short-term messaging focus on reassuring your customers that it won’t be a problem?

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

Will changes in the mortgage industry alter the American dream?

Many homeowners have taken advantage of long-term loans to purchase their dream home. But in the aftermath of the mortgage and real estate meltdown, some pundits suggest that, eventually, the classic 30-year fixed mortgage could be in jeopardy. For an explanation as to why, see this recent story from the New York Times (click to link).

Long-term mortgages aside, there are other issues that could impact home ownership in the coming years—especially for first-time homebuyers—such as new fees, qualification criteria, and more. To look deeper into those issues, see this story from yesterday’s “Smart Money” section of the Wall Street Journal (click to link).

Implications: I’ll remind the reader that I do not consider myself a futurist or forecaster. But enough things are lining-up here that it might be smart to consider the consequences of a market where home ownership is less widespread—or at least less affordable—than it is now. In a cash-pinched economy, the government is looking for cost savings just like everyone else… and housing subsidies could be an attractive target for the budget ax.

If you sell home furnishings, appliances, home improvement, home entertainment… how will your world evolve, if these changes come to pass? These possibilities might be hard to think about right now. But they’ll be much more difficult to deal with if they start to happen when you’re not paying attention.

If there are more renters, will they all choose apartment/townhome living? Will home furnishings necessarily get smaller? Or will a cottage industry of traditional-home rentals emerge… putting people into the same types of homes, but now as renters rather than owners? What will the tax implications be for homeowners that pay no mortgage interest?

However the market changes, there will be companies ready to profit. Here’s hoping you are among them!

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

The Fuel Economy: How might it impact you?

An article from The Detroit News suggests that steadily rising gas prices are hampering the sale of trucks, just as the major automakers are touting their wares at the Detroit Auto Show. (Click here to see the story for yourself.)

It’s natural to think about the impact of gas prices on vehicles. But it might also be time to think about what it might mean on everything else, too.

Implications: Here’s the good news… we’ve been through this before, and recently. A spike in gas prices in 2007 served to accelerate our entry into the Great Recession, because it hit many households as a shock to pay between four and five dollars for a gallon of fuel.

Next time, I don’t think it will be a shock. Consumers will react as if they have seen this before. (Am I the only one who thinks that the new reasonable floor for gas prices is $3 per gallon or slightly higher?)

That said, if fuel prices go too high, the increase will impact consumer behavior. Either they will try to cut down the amount they drive, or the increase in money spent on gas will have to be off-set with a decrease in other purchasing. Stores that deliver (furniture, appliances) might be more attractive to a household that has purchased a fuel-efficient commuter car, instead of a more gas-thirsty truck. People will likely return to a more multi-tasking frame of mind, hoping to scratch more needs of their shopping list with a single trip. Perhaps home entertainment will enjoy yet another phase of growth (home theatre, video games, alcohol, entertainment cooking, etc.)

As the cost of running a household changes, consumers’ needs and priorities will change, too. Those who best anticipate well will be the earliest to effectively respond.

Mike Anderson

Sears tries a new credit plan, and Target tries a new reward

This morning’s Media Post Marketing Daily offered a story about the new 48-month credit program from Sears. The piece also mentions a recent decision by Target to give customers a 5% discount when they use the Target red card to pay for their purchases. Click here to read the story.

Implications: The Sears plan should help us determine (at least for Sears shoppers) whether people have an aversion to credit, or simply an aversion to credit cards. Credit cards are perceived by many as a debt that is too easy to never get paid off… whereas a credit plan with a finite end lets customers see the light at the end of the tunnel. It will be interesting to see whether that is enough to get people to carry retail debt again, something many have been trying to pare down since the onset of the recession.

The 5% discount could be a tie-breaker for Target, where similar gift items are being considered at similar stores across town. But again, it will be interesting to see whether this reward can overcome the “let’s just pay off our credit” attitude that has been the prevailing mentality among many consumers over the past few years.

Worth noting: The Sears plan seems intended to drive appliance sales (with a minimum purchase of $750), and the Target discount applies to any purchase using their red card.

Mike Anderson

Ironman 2: Helping with the laundry?

On more than a couple occasions, I’ve written about the shifting gender balance in the workplace, and the changes that could occur in how family responsibilities are delegated as a result. (See the stories on employment from as far back as February, 2009, or this note about women in the workforce from September, 2009.)

This week’s newsletter from Springwise included one item that might serve as anecdotal evidence of shifting roles in the household: The traditional clothes iron, presented as a power tool. Click here to see the story.

Implications: Change happens. It’s always fun to see product and packaging innovations that seem to serve as a response to those changes.

Whether due to a less traditional family composition, changes in the traditional roles family members play within a household, or the idea that men are generally more appearance-conscious today than they might have been decades ago… with this product, Philips is offering a response to change.

Mike Anderson