Upside of cautious economy: Lower gas prices

Trend Observation:  A story in today’s edition of USA Today suggests that gasoline prices could stay low—or fall even lower—between now and fall.  That’s a far cry from what we were hearing last winter, when there were concerns about stability in the Middle East and problems with major refineries.  Click here to see the story.

Marketing Implications:  Some businesses might profit from going after this “commuter’s dividend” of lower gas prices.  Many drivers anticipated the kind of peak gas prices we saw in the summer of 2008, when the average price per gallon hit $4.11.  With each commute costing less, the consumer might feel as if they have a windfall of found money in their pocket at the end of each week or month.

Any ideas about what they should spend it on?

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

Vacations, re-defined (or just re-labeled)

Observation:  Two stories from today’s Marketing Daily suggest that family vacations look different than tradition might suggest.   The first article focuses on the now-cliché stay-cation, caused by higher gas prices and airfares.  The second story gives us a new term to consider, the near-cay. 

Implications:   Whether you call them stay-cations, day-cations, or near-cays, the point is essentially the same; consumers would rather spend money on experiences than on getting to those experiences.  They’d rather find attractions that are close-to-home, and then put their money into activities and entertainment instead of gas pumps and airlines.

No new terminology needed, as the old word works well:  Value.  And this is a great example of where the word “Value” doesn’t necessarily mean “lower cost,” it just means more enjoyment received.

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

For now, the laws of supply and demand rule in favor of lower oil prices

Observation:  A story in yesterday’s Wall Street Journal explains that OPEC is operating at greater than their usual production, which should have the effect of continuing our recently stabilized gasoline prices.  The production was increased in response to geo-political issues such as the uneasy situation in Iran.  Click here to see the story.

Implications:   This winter, I think many consumers had braced themselves for higher gas prices in the foreseeable future.  The recently stabilized situation with petroleum raises an interesting question:  What if you prepare for the worst and hope for the best… and the better outcome turns out to happen? 

Does your company, product or service stand to benefit from the “dividend effect” of households that will spend less on their daily commute?  Again, if the consumer is spending less than anticipated on fuel, they have more to spend on…

Whatever.

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

UPDATE: Bigger vehicles selling well (used, too)

In this morning's New York Times, there is a story that compliments our post from yesterday about how bigger vehicles are moving better since gasoline prices have stabilized (see immediately below).  The Times story suggests that, generally, this short-term trend is resulting in nice trade-in values for owners that are moving from SUVs to more fuel-efficient cars.  Click here to see that story.

The Fuel Economy: How quickly we forget

Observation:  The Detroit Bureau reports that demand for vehicles of higher fuel consumption has regained some ground, as prices at the pump have stabilized.  Click here to see the story.

Implications:   Are you seeing folks a little less bummed-out about gas prices at your place of business?  If consumers "fear" a little less, are you seeing them spend a little more?  If so, good for you!

But it might not be a great idea to bank on low gas prices over the long haul.  The Middle East has never been a terribly stable place… and you never know when conflict might push prices higher without notice.  And with emerging middle-class economies in China, India and elsewhere, we can expect energy prices to climb based simply on supply and demand.

If you’re a business owner, manager or marketer, how are you exploiting lower (or at least more stable) gas prices right now?  What is your strategy for if (when) prices head the other way?

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

Consumers accelerate car sales in response to higher gas prices

Observation:   Once upon a time, the high price of gas contributed to a slowdown in vehicle sales.  This time around, it seems, higher gasoline prices are prompting consumers to trade in their older vehicles for something newer and more fuel-efficient.  That’s according to a story in this morning’s USA Today.  Click here to see it.

Implications:   We’ve been anticipating the effects of higher gas prices for a long time, now.  A more expensive commute could cause some consumer to spend less in some discretionary categories (like entertainment, out-of-home dining, etc.), but more in others (automobile sales and service, energy-saving home improvements, etc.) 

How are higher fuel prices impacting consumers when it comes to your product or service?   How will you message to the consumer so that a purchase with you is one of the last things they delay or defer?  Is there a way you can position your offering as a higher priority, when compared to other discretionary purchases?

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

Prices for fuel-efficient used vehicles are on the rise

Observation:   A press release from Kelly Blue Book this week explains that the price for hybrids, compacts, and sub-compact cars are surging in response to rising fuel costs.  Click here to see it.

Implications:   Rising gas prices will hurt some categories, but help others.  (If you sell fuel-efficient cars, of course, you will be helped.) 

How will changes in The Fuel Economy impact your company?  Will it harm some of your product lines and help others?  How will you message when higher prices at the pump are forefront in your customers’ minds?

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

Price still an important thing, but it’s not the only thing at drug and grocery

Observation:   That’s according to this story from Drug Store News, citing research from SymphonyIRI (click to link).

Implications:   “Value” isn’t always about price.  Consider, instead, how the product or service you sell—or the way you sell it—adds value to the consumer’s life.  I’m banking on more and more digital interaction (especially mobile), concern about The Fuel Economy, and increasing Time Sensitivity as issues that drive consumer trends in the next few years. 

What are you anticipating?

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

Use of mass transit on the rise

Observation:   Today’s USA Today includes a story about the increased use of mass transit in 2011, attributable to high gas prices (people leaving their cars at home) and an improving economy (more people commuting to work).  Click here to see the full story.

Implications:   America’s collective consciousness of higher gasoline prices is becoming evident.  If the price of gas up to or beyond $4.15 per gallon—roughly the price when folks were freaking-out back in 2008—we will have seen the influence of The Fuel Economy on vehicle preferences and other consumer spending. 

But how will higher gas prices affect you?  Can you position your product or service as something that should still be attractive when budgets have again grown tighter?  Have you been talking to your on-floor sales staff about up-selling customers… as a means of helping them accomplish more tasks on a single shopping trip?  Do you sell a bulky product that one might need help getting home (free delivery) because of their inclination to use mass transit? 

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

So far, consumer confidence resilient against gas prices

Observation:   According to the Conference Board’s report on consumer confidence release last week, people are feeling more secure about their financial situation in spite of higher fuel prices.  Click here to see the story as it appeared in USA Today.

Implications:   Consumer confidence is a great thing… and I think this report supports the idea that while prices might be rising—especially gas prices—nobody will be as “shocked” at the increase (at least not like we were during the 2008 energy price spike).  This time, I think it’s safe to say that most of us saw it coming.  Here’s hoping that resilience is strong in over the upcoming summer season, too.

In another interesting story—perhaps an opposing view—the New York Times published an article about the kind of conflict and crisis that could push gas to $5 per gallon or higher very quickly (click here to see that story).

No doubt:  The Fuel Economy remains a very critical component in the emerging recovery.

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

The logic of food (and other) inflation

Observation:   This week, an article from Food, Nutrition and Science magazine explains the USDA forecast for higher food prices in the coming years.   (I found the story through a newsletter from Phil Lempert.)   Click here to see the full story.

Implications:   Greater demand from emerging economies will impact the world’s food supply, as will the use of corn and other crops for the production of bio-fuels.  You and I will compete (at the supermarket checkout) in the complex global auction that food commodities have become.

When (not if) food prices go up, then we’ll be spending more at the grocery store and restaurants.  When (not if) gas prices go up, we’ll be spending more on everything else.  Chances are good that you’ll have to raise prices in your own business—regardless of the goods or services you sell—within the next few years.  Have you begun having that conversation with your customers?  By that, I mean:  Are you doing a good job of reminding your most important clients how you deliver value to their lives?

And just as important, in a world whose real income is likely to be either constrained or contracted in the coming years (when adjusted for inflation), are you positioning yourself to compete for tighter discretionary dollars?

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

48% of convenience store/gas station customers don’t make it into the store

Observation:   According to a story published this week by Convenience Store News, only about 52% of convenience store/gas stations actually make it into the store for a purchase beyond fuel.  Of that group, about one in four purchases a soft drink.  (Click here to see the story.)

Implications:  The C-Store business has done a fairly good job of taking food dollars from quick service restaurants over the past few years, but this report suggests there is still room for improvement and growth. 

What kinds of things compel a person to walk into the store instead of climbing back into their car after paying at the pump?  Point-of-purchase stickers or video ads played at the pump?  Covering the store structure with posters about cheap corn dogs or ice cream tickets?  How about coupons mailed (or emailed) to commuters that live in the store’s neighborhood?  This is not just a question for the C-Store… but one that anyone who sells lottery tickets or beverages would love to answer.  (And I bet a little research on your customers would provide great clues.)

If you’re in the fast food business, how do you re-take some of the food dollars that the C-Store industry nabbed during the recession?  Dare I say “ambience?”  Freshness?   (There’s a good chance that “cheap” alone won’t do the trick.)

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

More warnings of rising fuel prices

Observation:  Several news organizations are reporting that gas prices are projected to rise significantly this spring and summer, to as high as $4 per gallon or more.  Here’s one example of the coverage, from USA Today (click to link).

Implications:   The last time gas prices spiked like this was the summer of 2008, aggravating an already painful recession.  This time around, it seems as if we’re getting more warning; I’m not sure that will make prices at the pump less painful, but perhaps at least they will be less shocking.

If it happens, and consumers restrain spending in other areas to fund their commute, what kinds of messaging could you do to make sure your product or service avoids the chopping block?  In what ways does your product or service add value to the consumer’s life?  Is that value substantial?  Are you explaining it effectively? 

For more on the volatile price of energy, see other stories related to The Fuel Economy by clicking here.

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

With growing fuel prices, shrinking modes of transportation

Observation:   Today’s Marketing Daily features a story about the increasing number of people who are adding a motorcycle or scooter to their family’s transportation fleet.  This is a trend driven less by recreation than hedging the household budget against  the price of gas.  (To sift through all of our postings about The Fuel Economy, click here.)  This story gives hope to cycle shops that were having a hard time replacing their now-aging profile of baby boomer customers.  (To see the full MD story, click here.)

Related to today’s story, the North American International Auto Show was held in Detroit earlier this month, and there was no shortage of news about the futuristic cars of tomorrow.  Again, much of the pitch was related toward higher fuel costs in the years ahead.  Several stories—this one from the New York Times—explained that alternative fuel and hybrid cars are showing up in droves at this year’s auto show, even though consumers are not lining-up to buy them.  Click here to see that story.

Another recent story in USA Today explains that cars have grown in sheer size over the past several decades… and logic suggests the pendulum will swing the other way sooner rather than later.  Click here to see that story.

Implications:   If you’re an auto dealer or motorcycle manufacturer, this issue could have an important impact on your company, products and services.  But what if you sell furniture or any other large, lumpy object?  All of a sudden, will more customers be in need of delivery, absent the truck, van or SUV that allows them to bring that merchandise home on their own? 

What of real estate?  If fuel stands to influence the way we drive, it certainly could influence where we live.  Rather than the suburbs or even x-urban homes which have grown so swiftly over the last several decades, might we see a renewed migration toward the city?

What about the business you’re in?

I offer not answers, but questions to consider… as the long-term effects of more expensive fuel is likely to be felt in a variety of ways.

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

Waiting in the wings: Energy’s influence over the next several years

Observation:  Over the past few years, I’ve written more than fifty postings that have something to do with a body of work we call The Fuel Economy (click here to review the topic).   The over-arching premise is that world energy prices, eventually, can be expected to rise due to expanding economies across the globe, which will almost certainly result in increased demand.  Today, I’m in receipt of a new McKinsey report that seems to parallel that line of thinking, and it’s a very worthwhile read if you run a business.  Click here to see it.

Implications:   Oil prices may have a direct impact on the consumer who frets about the cost of her/his commute.  But energy also impacts the price of anything that is grown, manufactured or shipped… from groceries to home furnishings, from clothing to building materials. 

Have you given any thought to how your business will position itself if or when the prices for your goods and services become more expensive?  How much of that higher cost will you be able to pass along to the consumer?  How much of a price increase will your customers tolerate?  Could higher prices in other business make you a contender in new categories of business that you’re not even thinking about now?

The best response to rising energy costs will come from those businesses who saw it coming years before it happened.

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

Energy choices impacted by world events

Observation:  Two stories in the New York Times within the past month have me thinking about how world events can influence longer-term choices and consumer trends.  Last week, one article covered a renewable energy conference where experts considered the impact of the global economic strife on the alternative energies (click here to see that story).

Another article explained how life in Japan has changed since the Fukushima Daiichi nuclear power plant was destroyed.  Since that event, many of the nuclear reactors which generate the country’s power have been shut-down for inspection, leaving a country that is intensely reliant on electricity in somewhat of a quandary as winter approaches (click here to see that story).

Implications:   Environmentalists who seek to advance policies and practices that reduce greenhouse gases would be smart to consider the influence of economic issues on their cause.  Consumers are likely to “give until it hurts” where environmental protection is concerned, but then revert to their old ways if a new energy alternative becomes too costly or inconvenient.

Ironically, Japan gives us the example of what might happen in a situation where a population is over-reliant on any one energy source… an example that favors the cause of reduced energy use and creating a more diverse supply (beyond fossil fuels).

We have learned that lesson before, both during the oil embargo of 1976, and in the Northeast’s Halloween weekend snowstorm of 2011.

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

UPDATE: The Fuel Economy

A pair of stories in today’s Los Angeles Times explain why gas prices remain high in spite of various attempts to make them fall.  First, Americans are spending more than ever on petroleum; U.S. motorists will spend $491 billion on gasoline this year (click here to see that story).  But also, American oil companies are exporting more petroleum products than ever.  (Click here to see that story.)

Implications:   The law of supply and demand prevails.  With growing demand—both domestically and abroad—the available supply can be expected to rise in price.

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

Japan should depend less on nuclear power, according to new Prime Minister

The PM’s remarks are reported in today’s USA Today, and likely reflect a wide-spread sentiment on the part of Japanese citizens following the Fukushima nuclear disaster related to last spring’s earthquake and tsunami.  Click here to see the story.

Implications:   This is only a consumer trends story because it relates to previous postings about the nearly inevitable rise in petroleum, in response to the growing economies of India and China, as well as the (probable) increase in oil use by Japan.  [See this ESE posting from June 1, 2011.]  The cost of petroleum—and any product manufactured or shipped using it—is likely to gradually increase over the long term.

How will your company prepare customers for this likelihood?  Are your competitors thinking about this issue?  What kinds of efficiencies might make sense in the future (i.e., finding suppliers closer to home)?  Consider manufacturing that was shipped overseas; in a labor market that is seeing wages stagnant—or in some cases, falling—and the cost of shipping on the rise, at what point does domestic manufacturing become a more attractive proposition?

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

Oil reserves released to calm the economy?

A few minutes ago, the Washington Post issued a news alert explaining that Washington was releasing 30 million barrels of oil from the nation’s strategic reserve to help cover the disruption in supply caused by conflict in Libya and other suppliers (click here to see that story). 

Okay, I’ll raise this issue for its relevance in to the topic of consumer trends (not as a politically-motivated conversation):  Isn’t this a different position than we heard earlier this year?

As recently as February, news organizations like CNN were reporting that the unrest in Libya should have little or no impact on the U.S. oil supply—or prices—because the country is not a big supplier to the U.S. and produces primarily the kind of crude that is used in diesel and home heating oil (click here to see that story). 

Implications:  So why did we NOT tap the reserves when I was paying $4.16 per gallon a couple of months ago, but we ARE tapping the reserves today, when gas has dropped to $3.56 per gallon at my service station down the street?

To quote the original George Bush, “It’s the economy, stupid!”

Two months ago, while things felt tenuous, employment reports were good, housing prices had at least flattened, the stock market was steady, and the economic recovery seemed to be (while slow) still making progress. 

Today?  I would interpret today’s move as a sign that the country’s leadership feels like the economic recovery is in a vulnerable state… and they don’t want anything further (like the price of gas) to complicate its progress.

Do consumers feel like they are making economic progress in your area?  Do they feel like the recovery is solid?  Are they (like me) a bit confused by the timing of this decision (to release reserves)?  When it comes to consumers, confusion is often the opposite of confidence.  To restore calm, the best move is to reduce confusion.  (So far, that hasn't happened... at least as far as I can tell.)

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

Higher gas prices did not compel hybrid consideration as expected

During a symposium talk last Friday, AutoPacific President George Peterson explained that, “Small car and hybrid consideration is not tracking anywhere near the rate of the price of fuel as it did in 2008.”

Earlier this year, some hybrids and other small cars were selling at above list prices, driven by climbing gas prices and the fear that there would be shortages of the hottest cars after Japan’s tsunami disaster.

Click here to read more about Peterson’s remarks from Automotive News (subscription required).  He notes that improvement in the fuel efficiency of larger vehicles is one factor that has led more people to remain comfortable with the idea of holding-on to their larger car ways.

Implications:  I’ve written extensively here about The Fuel Economy, fearing that a sustained increase in the price of petroleum could have a domino-effect on inflation.  But for now, that fear seems to have passed.

At your company, are you seeing a windfall of spending in response to falling gas prices this past month?  Are your customers talking about lower gas prices?

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