It is nice to arrive at work this morning to find that the economy grew 2% in the third quarter. Details will be seen in most national news reports today, but here’s one version from the Washington Post (click to link).
Implications: My enthusiasm for this good news is tempered a bit by the reality that these are “overall” numbers, and might not be felt by all consumers nor all companies.
Working with colleague Stephanie Downs and a team of marketing pros at the Palm Beach Post, we conducted an Elm Street Economics workshop for a few dozen companies in the Palm Beach/West Palm Beach area on Wednesday of this week. And that group agreed with this consensus: Just as the recession impacted every household in different ways and to different degrees, not every household will benefit from the recovery at the same time or in the same way.
We were also reminded, through man- and woman-on-the-street interviews with actual consumers, that some of the habits people picked-up during the recession might stay with them for some time to come. And that while most people think they are more frugal now, they are still open to making "exceptions" to their generally more prudent lifestyle.
Embrace this great news, and carry on with the work of understanding the customers you have, the additional target consumers you seek, and the benefits they deeply desire when they purchase the product or service you sell.
Mike Anderson
Friday, October 29, 2010
Tuesday, October 26, 2010
On the other side of the mortgage meltdown: Thrifty folks benefit from low rates
A recent story from the New York Times put the mortgage meltdown in a different light, by focusing on people who had not participated in the land rush of the early 2000’s… but who had stayed put, and paid-down debt on a less extravagant home. Click here to read the story.
Implications: I was struck by this particular quote from one of the folks who stayed in their modest, affordable house, rather than buying a bigger or more fancy home during the real estate rush: “There were times during the housing boom when I felt I was missing out on a big party,” the homeowner said, “Now I’m getting my reward.”
This is further evidence (if you needed any) that not everyone suffered through the same recession.
Mike Anderson
Implications: I was struck by this particular quote from one of the folks who stayed in their modest, affordable house, rather than buying a bigger or more fancy home during the real estate rush: “There were times during the housing boom when I felt I was missing out on a big party,” the homeowner said, “Now I’m getting my reward.”
This is further evidence (if you needed any) that not everyone suffered through the same recession.
Mike Anderson
Monday, October 25, 2010
Many banks cashing-out of free checking (and other free services)
Banks make money, generally speaking, in one of two ways: Net interest income (the difference between the lower interest they pay on deposits and the higher interest they charge on loans), or fees for service (ranging from mortgage origination fees to paid investment services). One of the more lucrative service fees they’ve been able to collect, until recently, is the penalty for an overdraft. But with the recent passage of new banking regulations, a banks’ ability to charge for overdrafts has been significantly limited… so they’re looking for new ways of creating revenue, as well as new ways of reducing expenses.
As this recent article from USA Today points out, free checking accounts will be way that banks accomplish both higher revenues and lower expenses. Click here to read the story.
Implications: Free checking was, in a way, the same kind of “lost leader” that a grocery store might offer when it’s having a sale. The grocer doesn’t want to lose money on the sale item, but realizes that other products will be sold at a profit when the grocer uses a lost leader to coax the customer into the store.
The same principle held true for “free checking.” Banks never wanted to offer it, but knew that in doing so, they’d be in a position to build other more profitable relationships with their customers. And when overdraft fees were allowed, it made sense for the bank to have as many open checking accounts as possible.
Now that the “deals” on checking accounts have been ruled-out by regulators and legislators, how will the consumer feel about paying for things—in other ways—they used to think of as “free?”
Mike Anderson
As this recent article from USA Today points out, free checking accounts will be way that banks accomplish both higher revenues and lower expenses. Click here to read the story.
Implications: Free checking was, in a way, the same kind of “lost leader” that a grocery store might offer when it’s having a sale. The grocer doesn’t want to lose money on the sale item, but realizes that other products will be sold at a profit when the grocer uses a lost leader to coax the customer into the store.
The same principle held true for “free checking.” Banks never wanted to offer it, but knew that in doing so, they’d be in a position to build other more profitable relationships with their customers. And when overdraft fees were allowed, it made sense for the bank to have as many open checking accounts as possible.
Now that the “deals” on checking accounts have been ruled-out by regulators and legislators, how will the consumer feel about paying for things—in other ways—they used to think of as “free?”
Mike Anderson
Upscale unemployment: The new face of job hunting
The extent to which economic turmoil still exists in parts of our economy was revealed to me in a recent email, which came from a friend who was attending a media conference back on October 1 in our nation’s capitol. His note explained that he had, “…picked up a copy of the Washington Post this morning, and noticed that there were foreclosure notices for more that 400 properties. A quick check of the Employment classifieds page found just one.”
I had to respond to his note for clarification: “One page of employment listings? Or do you mean just one job listing?” The answer was: One job listing.
Another reminder of the severity of the current unemployment picture was broadcast last night on 60 minutes (CBS). I found the piece compelling because it gives a face and a voice to an issue that is too often viewed as a statistic. See it by clicking here.
Implications: It’s easy to think of “the new frugality” as a decision that people have made. But in households where incomes have dropped due to the loss of one or more paychecks, frugality is a behavior which has been imposed, not selected.
It is critical for companies to realize this. A significant share of the population is trying to make ends meet under very difficult circumstances. The value shopper should be treated with respect… not like a person who is simply trying to be cheap, but as someone who is trying to reconcile their budget with a very harsh new reality.
Yes, for a significant number of consumers, “frugal” is a new fashion statement. For others, it is a survival tactic. How can you help?
Mike Anderson
I had to respond to his note for clarification: “One page of employment listings? Or do you mean just one job listing?” The answer was: One job listing.
Another reminder of the severity of the current unemployment picture was broadcast last night on 60 minutes (CBS). I found the piece compelling because it gives a face and a voice to an issue that is too often viewed as a statistic. See it by clicking here.
Implications: It’s easy to think of “the new frugality” as a decision that people have made. But in households where incomes have dropped due to the loss of one or more paychecks, frugality is a behavior which has been imposed, not selected.
It is critical for companies to realize this. A significant share of the population is trying to make ends meet under very difficult circumstances. The value shopper should be treated with respect… not like a person who is simply trying to be cheap, but as someone who is trying to reconcile their budget with a very harsh new reality.
Yes, for a significant number of consumers, “frugal” is a new fashion statement. For others, it is a survival tactic. How can you help?
Mike Anderson
What do you mean by "sustainable," exactly?
This morning, a story from Marketing Daily cites Mintel online research to explain that many people haven’t the foggiest idea what some eco-friendly advertising claims mean, much less why they are relevant. Click here to read the story.
Implications: It is easy for marketing folks to get caught-up in the fashionable language of the day… not realizing that they’ve been exposed to a lot of environmentally-friendly nomenclature for much longer than most consumers. While there is a vocal minority who understand what you’re talking about when you say, “fair trade,” a majority of consumers might appreciate having you explain specifically what you mean by that, and why it’s important.
Mike Anderson
Implications: It is easy for marketing folks to get caught-up in the fashionable language of the day… not realizing that they’ve been exposed to a lot of environmentally-friendly nomenclature for much longer than most consumers. While there is a vocal minority who understand what you’re talking about when you say, “fair trade,” a majority of consumers might appreciate having you explain specifically what you mean by that, and why it’s important.
Mike Anderson
Friday, October 22, 2010
Gen Y: You had your reasons, and I have mine
I’m cleaning-out the newsletter inbox this morning, and glad I caught this story before deleting yesterday’s Marketing Daily. There was a story about some research by Levi’s designed to better understand Gen Y. Click here to read the piece.
Implications: Maybe we should stop calling it Gen Y, and start calling it “Gen Why.” Because this is a cohort that seems to do very little with the justification that, “this is the way people have always done it.” They seem to want a personally relevant reason for every decision they make and action they take. Not why something has been important for years and years… but why it is relevant now.
(This group is different. Sound like a group of folks who came of age in the 60’s-70’s?)
Mike Anderson
Implications: Maybe we should stop calling it Gen Y, and start calling it “Gen Why.” Because this is a cohort that seems to do very little with the justification that, “this is the way people have always done it.” They seem to want a personally relevant reason for every decision they make and action they take. Not why something has been important for years and years… but why it is relevant now.
(This group is different. Sound like a group of folks who came of age in the 60’s-70’s?)
Mike Anderson
Trend watching with J.D. Power
The headline on the Marketing Daily story was about minimalist tendencies, but the story actually covers other trend topics, too, such as cost/quality priorities and shifts in the way people expect to move through life stages. But it’s a strong article about emerging trends, so I thought I’d share a link to it at Media Post Marketing Daily. Just click to read it.
In fact, I thought the MD teaser was strong enough that I chased-down the original press release at the J.D. Power Associates website. Here it is, if you'd like to review it.
Implications: I particularly enjoyed the way this story articulated opinions about life stages, particularly that many folks have begun to re-define retirement. With the biggest consumer generation in history moving toward retirement like a pig through a python right now, that trend will impact a lot of companies sooner rather than later.
Mike Anderson
In fact, I thought the MD teaser was strong enough that I chased-down the original press release at the J.D. Power Associates website. Here it is, if you'd like to review it.
Implications: I particularly enjoyed the way this story articulated opinions about life stages, particularly that many folks have begun to re-define retirement. With the biggest consumer generation in history moving toward retirement like a pig through a python right now, that trend will impact a lot of companies sooner rather than later.
Mike Anderson
More on innovations from credit card companies
Another story on credit was published this morning, this one in the New York Times.
Implications: This industry seems to be putting all the bells and whistles they can think of—literally—into their effort to woo customers back to credit cards. The advancing use of wireless devices and other tools to engage in credit activities (mentioned in the story) lead me to wonder whether the plastic card, itself, will ever return to the prominence it once had. Another fun issue to watch.
Mike Anderson
Implications: This industry seems to be putting all the bells and whistles they can think of—literally—into their effort to woo customers back to credit cards. The advancing use of wireless devices and other tools to engage in credit activities (mentioned in the story) lead me to wonder whether the plastic card, itself, will ever return to the prominence it once had. Another fun issue to watch.
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
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
Thursday, October 21, 2010
Trends related to 2010 holiday season offered by NRF
Studying consumer trends has to be one of the most fun parts of my job. (As I often say, humans are fascinating people.) So it was fun to review this list of 2010 Holiday Trends from the National Retail Federation. (Click to link.)
Enjoy.
Implications: If this set of conclusions turns out to be correct, this holiday season could look different than the past two. The trends suggest that people are still feeling the effects of the recession, but they’re tired of it and will indulge in some “want” gift items instead of sticking to the “staple necessities” like core clothing and other common-sense items. Also, it would seem that people will take advantage of holiday sales to pick-up a little something for themselves… a trait that, if it returns this year, will be ending a conspicuous two-year absence.
Mike Anderson
Enjoy.
Implications: If this set of conclusions turns out to be correct, this holiday season could look different than the past two. The trends suggest that people are still feeling the effects of the recession, but they’re tired of it and will indulge in some “want” gift items instead of sticking to the “staple necessities” like core clothing and other common-sense items. Also, it would seem that people will take advantage of holiday sales to pick-up a little something for themselves… a trait that, if it returns this year, will be ending a conspicuous two-year absence.
Mike Anderson
The economy's anticipated impact on holiday spending
This week, the National Retail Federation released survey results about how much consumers plan to spend this holiday season. While still not back up to pre-recession levels, the research indicates a rise in spending compared to last year. (Click on the image to the right to see a larger version of the graph.) To see the online version of the NRF release, click here. Perhaps more importantly, the NRF is developing some ideas about what kinds of priorities will drive purchase decisions this year. (See the follow-up article posted immediately above on the Elm Street Trends blog.)
Implications: The words, “pent-up demand” come to mind. If the recession officially started in December, 2007, then folks will have had about 36 months worth of news about economic turmoil just as the holidays approach this year. Perhaps folks are just tired of denying themselves a little fun… and the holiday season provides just the rationale they need to enjoy life a little.
Mike Anderson
When you work hard for the money, is your purchase priority saving time... or saving money?
A story in this morning’s Media Post Marketing Daily seems to suggest that convenience is still key in the American kitchen. Click here to see it.
Implications: Under difficult economic conditions, people like to save money. But one should not infer that to mean they don’t like to save time. The two are not mutually-exclusive.
Would your customer rather save time, or money? Does your company, product or service force them to choose one or the other? Does your marketing message?
Mike Anderson
Implications: Under difficult economic conditions, people like to save money. But one should not infer that to mean they don’t like to save time. The two are not mutually-exclusive.
Would your customer rather save time, or money? Does your company, product or service force them to choose one or the other? Does your marketing message?
Mike Anderson
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