Posts filed under 'consumers'
Consumer responses to recession
Andrew Curry writes:
We recently launched our second report on changing consumer attitudes to recession – The Reconstructed Consumer. Henry Tucker and Chris Grantham presented to clients new UK data, collected in February, which suggests that consumers are coming out of the hangover stage of the spending boom and are starting to think consciously about how to reshape their behaviour.
In Feeling The Pinch, which we published last August, we found that consumers’ initial response to the recession was to buy things more cheaply rather than change shopping patterns. Now, falls in food and energy prices, and in interest rates, have eased some of the immediate pressure on household budgets – but pessimism has deepened about how long and deep economic recession will be.
Over half now think that things are “going very badly” for the UK economy (the other half merely think that things are gong badly). The data, perhaps unsurprisingly, show sharp declines in trust in banks, and also in CEOs and large organisations. Local independent organisations, in contrast, have seen gains in trust.
There are some interesting findings within the grain of the research, which goes into some detail at category level. One is that people’s attitudes to categories depends on how they classify it in terms of their ‘mental wallet’. We asked people to classify different expenditures by whether they thought of it as ‘Basic’, ‘Lifestyle‘, ‘Sanity’, or ‘Indulgence’. Spending gets trimmed at both ends: ‘basic’ and ‘indulgence’ expenditure gets cut back to pay for ‘lifestyle’ and ’sanity’ spending. Of course, different consumers classify categories in different ways.
And consumers seem to be responding to brands which demonstrate confidence in the face of recession – in particular, the majority think that brands which have cut their prices were probably over-priced to start with. This seems to play better for those brands which were already at lower price points – witness McDonald’s positioning itself against Starbucks in the US with its “four bucks is dumb” campaign, or Tesco struggling to win over enough Aldi shoppers with its ‘Britain’s biggest discounter’ strategy.
The Reconstructed Consumer is available as a paid-for report. For more information please contact Jennifer Kivett on 020 7966 1824.
Add comment 14 April 2009
Recession 2.0
Giles Powdrill writes:
“A powerful global conversation has begun. Through the Internet, people are discovering and inventing new ways to share relevant knowledge with blinding speed. As a direct result, markets are getting smarter-and getting smarter faster than most companies.” So said the Cluetrain Manifesto almost exactly a decade ago. The prescience of the work lay in the authors’ clear understanding of the connective potential of the web and the shift in power from companies to individuals which would accompany its growth.
However, despite witnessing this shift in power, the majority of organisations still haven’t adapted their business practices to embrace the internet. They are not making use of the networks, the empowerment or the easy conversation and collaboration made possible through the social media technologies broadly described as ‘Web 2.0′ to help create new types of relationships with their customers. For many, the internet is still just another channel.
But maybe this is beginning to change: perhaps the current recession, the first of the truly digital age, will be looked back upon as being the spur to growth of new types of online commerce. We are already witnessing the growing success of online shopping, price comparison websites and digital advertising in the downturn, but these are only first steps – doing old things in a new way. The real challenge is about greater engagement; working with and for consumers in an open way. It is about companies demonstrating that they know enough about customers and their behaviours to deliver a benefit. Combining transparency with networked data and new technological infrastructure can create situations where all gain, customers and companies alike, but if companies don’t work out how to use these new networks, they may find themselves bypassed as people decide to do it for themselves instead.
A good example of a company getting it right is Zopa, the social lending site set up by banking professionals on which people lend directly to borrowers online. Borrowers bid for funds, and lenders choose whether to respond. Lenders get good returns, and borrowers get lower cost loans. Zopa makes its margin by charging both parties a fee. Default rates are low and lenders can see their borrowers and follow the progress of the their loan. Zopa has disintermediated the banking business by adding social networking and a human touch. In terms of Recession 2.0 it’s a sign of the times. As the Cluetrain Manifesto said: markets are conversations.
The picture, ‘the garden of Zopa’, is from a digital campaign by the social lending site to demonstrate the benefits of personal involvement and mutual help.
1 comment 26 March 2009
Most recent Henleymail now online
Jo Phillips writes:
The latest edition of HenleyMail (our free regular think piece email) is now available to read online here. There’s a chance to consider responses to the economic downturn in both the lead article by our UK managing director on how brands can adapt to a recession, and a perspective from Yankelovich in the United States on undermining the ‘fear factor’. There’s also an article on some of the work we have been doing on long-term futures – sharing some of the learnings and indeed the challenges that arise when we look to expand our strategic horizons in this way.
After over 60 issues, this is the last edition of HenleyMail – but only because we’re changing the name. As a result of our merger and rebrand, from now on the newsletter will be known as Futureproof. If you’d like to receive it you can sign up here.
The picture at the top of this post is ‘Hard Times’, by the 19th century painter Sir Hubert von Herkomer. From The Victorian Web.
1 comment 19 January 2009
Almost like the real thing
by Giles Powdrill
Counterfeiting has, in all likelihood, been around for as long as currency itself but as the exchange of goods and services has become more complex, so has the trade in fakes. The forger’s business goes well beyond banknotes, art and documents these days. Everything from aircraft parts and microchips to pharmaceuticals and even baby milk powder can be, and is, reproduced for an illicit profit.
Globalisation and the internet means that our exposure to the phony has increased dramatically in recent times (the catchily-named International Anti-counterfeiting Coalition says the problem has grown 100-fold in the past two decades). The Counterfeiting Intelligence Bureau, run by the International Chamber of Commerce, estimates that the fakes business accounts for between 5 – 7% of total world trade, worth around $600 billion a year. And while it’s generally in the interests of such organisations to talk up the threat from fakes, by way of comparison, global advertising revenue runs at around $70 billion a year.
Asia is undoubtedly one of the principal sources of the world’s fake brands, while China is the largest contributor. Counterfeit products could account for a sixth or more of all products made in China, representing 8% of China’s US$2.6 trillion GDP. For the largest global brands it’s a large and growing concern. It’s also quite a tough business problem, since they typically hope to expand in markets which apparently originate much of the imitation merchandise.
And much of the anecdotal evidence suggests that in a post-modern world consumers are getting more tolerant about fakes. A survey last year by a British law firm deduced that one in eight Britons had bought a fake handbag or watch over the previous twelve months. The three most-purchased fake products purchased were Louis Vuitton, Gucci, and Burberry.
These cultural attitudes are likely to be reinforced as economies stall. Louis Vuitton, according to the 2008 brandz study by our sister WPP company Millward Brown, has a brand value of $25.7bn. This is a substantial figure, and only a small dent in this from the sales of fakes is a significant problem. It seems more likely that they’ll have to learn to live with it, as Microsoft did when it tolerated copies of Windows circulating in China because it realised it might build a long-term market for the company’s software. There is some good news on the consumer side: the survey mentioned earlier found that almost a third of the buyers of fakes said that the experience made them more likely to buy the real thing.
Perhaps the lesson to be learned is from judo rather than boxing; to find ways to work with the grain of the counterfeit business, rather than trying to confront it.
The image at the top of the page is from the Chinese site jjunda.net, which has a whole gallery of pictures of fake products.
Add comment 24 November 2008
The future of consumer advocacy
Andrew Curry writes:
Another organisation which has changed its name recently is the National Consumer Council, which became Consumer Focus on 1st November – not just a piece of rebranding, since it took on new responsibilities at the same time.
As part of the planning for the handover, we ran a futures project with the NCC on how consumer advocacy would look in 2020. The report was published by the NCC shortly before the handover.
The analysis and the process are laid out in the report. The work identified four significant challenges for 2020 – some adaptive, some emerging:
- Engaging the less-engaged: How can consumer policy advocacy organisations continue to engage and maintain their dialogue with an increasingly diverse and fragmented population?
- Supporting empowerment: How to provide consumers with the skills and confidence to promote and protect their interests, to ensure that they get a fair deal, and that they have access to the right communication channels to make their voices heard.
- Managing consumption in a resource-stretched world: How will consumer behaviour and advocacy change in a world in which consumption is more constrained?
- Global relations for the benefit of consumers and producers: How to operate at a sufficiently global level to give consumers power over global and international matters which affect their interests.
The report’s not currently available from the NCC site, one of those technicalities to do with reassigning NCC legacy pages to the new organisation’s web site. For the moment, therefore, you can download it via the link below.
And a word about the picture at the top of the page; it’s by Ian Mcdermott, an illustrator who sat in on the futures workshop abd sketched his impressions of the discussions going on around him. The work he produced on the day illustrates the report – a series of visual metaphors, if you like.
You can download the report here:
Add comment 31 October 2008
Choice editing at Rough Trade
From Rashbre Central
Joe Ballantyne writes:
I was browsing in the wonderful Rough Trade record shop in Notting Hill the other day, and I noticed that they’ve started an ‘album club’ service. For a monthly fee they send you a new album, chosen from a selection and tailored around your musical preferences.
At first glance, this looks like a rather counter-intuitive business decision – half the fun of going to Rough Trade is about rummaging around the racks in search of lost gems. If CDs arrive on your doormat every month, even with Rough Trade packaging wrapped around them, there’s less chance of randomly coming across a few titles that you feel you may just have to take home. It also seems quite old-fashioned, in an age when music distribution is increasingly digital and consumers are supposed to be sovereign.
However, the idea of the album club seems to fit into a wider trend we’ve been observing recently – ‘choice editing’. Consumers are exposed to an ever-growing selection of goods, services and brands (and the number of CDs released every year remains high despite falling sales) – but at the same time there is some evidence that we’re less interested in spending time sifting through them. Making choices takes time and energy – both resources which we are short of. The choice editor becomes an trusted (and expert) friend who can cut through the market noise.
Perhaps in future, it won’t be endless choice which is going to be seen as a luxury – but rather, being able to pay others to make our choices for us. But only a few companies have sufficient credentials to earn that trust.
The picture – of Rough Trade West in Talbot Road – is from the Rashbre Central blog.
1 comment 20 October 2008
The ‘five gaps’ around behaviour change
Courtesy of DEFRA
Rebecca Nash writes:
Behaviour change is much talked about, but still not well understood, which is why it seemed a good subject for the IIPS – the Institute for Insight in the Public Services, the think tank jointly run by Henley Centre HeadlightVision and BMRB – to take on in its third breakfast briefing of the year at the ICA in London. The challenge is how to link the ambitions of behaviour change in policymaking with the various levers which can influence it, such as legislation, incentives, taxation, policy, fines and, most specifically, communications.
The event was unique in explicitly positioning policy making and communications within a shared ‘behaviour change strategy cycle’, and approaching strategy planning (top down) and communications planning (bottom up) from a coordinated perspective.
The speakers were Alex Oliver, who’s recently joined the IIPS from the Cabinet Office, who made the connections between behaviour change and Whitehall’s ‘Public Service Agreements’, and BMRB’s Helen Angle, who’s an expert at campaign evaluation.
In their presentations, they identified five key challenges or ‘gaps’ faced by both ‘sides’ of the cycle: the gap within and between policy areas, the gap between high level strategy and implementation, the gap between success factors and evaluation measures; the gap between government action and public reaction; and the gap between incremental insight and strategy.
Bridging the gaps is hard but not impossible. Success requires, among other things, internal coherence, cross-policy alignment, and agreement about common success factors. The panellists, Sam Davis of the Central Office of Information, and Dr. David Halpern of the Institute for Government suggested that behaviour change theory informs both halves of the strategy cycle. And picking up one thought from the audience comments: that the government’s behaviour change efforts should be linked, explicitly, to a broader project of political and social renewal.
For more information about IIPS events, please visit the IIPS website.
Add comment 7 October 2008
Everyday toxins
Rachel Claydon writes:
Momentum around the issue of toxic-free consumption seems to be building. New research released recently by the principal investigator at the Medical Research Council’s Human Reproductive Sciences Unit, Professor Richard Sharpe, provides further evidence of links between the toxic chemicals contained in many everyday products and major heath issues. This recent study warns that chemicals found in many cosmetics can damage the reproductive system in male foetuses, especially during the eight to twelve week stage of a pregnancy.
While the research was based on tests with rats and does not provide conclusive proof of harm, it nonetheless resonates with previous studies which point to a link between infertility problems and testicular cancer, pollution and chemicals in everyday products, and pregnant women are nevertheless being advised to avoid using perfume and scented creams.
Cosmetics are not the only products causing concern. Carpet, bedding, cling film, air fresheners and non-stick pans are among a number of household goods containing chemicals that campaigners believe have not been adequately safety tested. And American research published this week suggested an association between Bisphenol A – a chemical found in plastic packaging for food and drink – and the incidence of heart disease and diabetes, although it is a ‘preliminary’ stidy and it didn’t show a causal connection.
Toxic accumulation has been on environmentalists’ radar since the 1960s, and there is a growing body of regulation to try to tackle it. The issue is increasingly reaching the general public through media coverage of this kind of research – “Perfumes linked to infertility” screamed the front page of London’s Metro in response to Richard Sharpe’s research. Increasing consumer awareness of toxins in everyday goods is an important emerging trend, and we are seeing growing interest in toxic-free products such as Ecover and organic cotton. Producers who want to stay ahead of the trend would do well to check for poisons in their supply chains – before campaigners or researchers do.
Add comment 17 September 2008
Understanding the ‘Aldi effect’
Alastair Morton writes:
The Guardian last Friday splashed pictures of baked beans and ‘Beamers’ across its front page to make the point that consumers’ habits are changing as a result of the credit crunch and other pressures on incomes. In particular, there are some startling statistics about BMW sales (down 40% on last year) and people’s levels of savings (down 48% on last year). In all of this, they suggest that a number of companies are benefiting from the ‘Aldi effect’, meaning that budget retailers and products (such as Aldi, Premier Inn budget hotels and own label foods) are more in demand as consumers tighten their belts.
However, the headline effects of downturn mask some more complex value trade-offs that consumers are making, and will continue to make, as they manage their squeezed finances. Over the last 5 years, discounters (especially Lidl) have added branded goods to their shelves, reaching levels as high as 30% of the product assortment in UK stores (sourced from MVI research). So switching to these retailers need not mean buying different products. Are consumers trading down and buying lower quality, or are they simply looking for the same quality, even branded, products at a cheaper price? Paul Foley, UK Managing Director of Aldi, argues ‘there is no trading down in buying the same quality product. You are just trading down in price.’
In ‘Feeling the Pinch’, a piece of research that we did recently, we were able to dive deeper and unpick the different ways that consumers are managing their money differently. Using a factor analysis, we found eight themes of coping behaviour that consumers are likely to draw on over the coming year, from spending wisely to borrowing to cutting back to reducing ethical consumption. Obviously there’s far more detail in the 70-page report, but a couple of core findings stand out.
First, people’s initial response to downturn is to try to buy the same things cheaper rather than buying fewer or different things. After this they buy less or cut out treats or luxuries. Secondly, levels of anxiety about economic downturn are a strong predictor of consumer behaviour – the more anxious consumers are, the more likely they are to make specific changes to their consumption behaviour in order to save money. Measuring consumers’ anxiety levels about their economic position – and how they’re changing – is the best way to gauge how rapidly consumer behaviour is likely to change.
The ‘Feeling the Pinch’ report is available for £3,500+VAT. Tailored briefings, which explore the findings and their implications for individual companies’ strategies and brands, are available from £6,000+VAT. To find out more, please email ftp@hchlv.com.
Add comment 11 September 2008
Recession and sustainability
Courtesy of the Transition Island Blog
Andrew Curry writes:
We’ve been thinking quite a lot recently about the impact of recession on consumer behaviour, and I was asked by Radio 4’s Beyond Westminster to join a panel discussion about this, which is broadcast tomorrow (Saturday 9th – if you missed it, you can hear it on the website for another week).
The other panellists were Chris Leslie, of the New Local Government Network (and a former Labour MP), and Jeremy Leggett, who runs one of Britain’s largest solar energy companies, solarcentury, and also wrote a fine book, Half Gone, about the end of the oil economy.
It’s difficult to summarise the flavour of a fifteen minute discussion in a few lines, and I wouldn’t want to spoil the programme, but some themes seemed to emerge:
- The upwards shift in oil and energy prices is a step change not a blip (a Dutch energy consultancy recently estimated that the floor price for oil had reached $110/barrel).
- In the short term this is reducing car use, but hurting the poorest hardest, mostly through the cost of their domestic energy bills (the poorest tend not to own cars).
- In the longer term, however, the government has to make a choice between orchestrating a full-scale shift to renewable energy sources, or trying to muddle through with conventional energy (Leggett is a member of the group which wrote the recently published The Green New Deal, which linked energy innovation, climate change response, and financial reform).
- Shifting to renewables will take investment, which probably isn’t going to come from taxation but could – without going into the economic theory here – come from market incentives and from encouraging people to save more, which would be good for the long-term stability of the economy.
Some of the evidence suggests that people are ahead of the politicians here. But it will still take some political courage to act on this – a quality which seems sadly lacking from British politics at the moment.
Add comment 8 August 2008
