Posts filed under ‘economic downturn’
Feeling the squeeze
Andrew Curry writes:
It’s hard to add to the volume of commentary that has followed Wednesday’s Comprehensive Spending Review, but there are relevant observations from some of The Futures Company’s recent research. It is somewhere between a gamble and a large-scale economic experiment, as pundits observed almost immediately, largely regressive (opens pdf), and despite the denials it will increase inequality (from the current historically high levels). If I was the government I’d be most concerned about the likely rise in unemployment, currently nudging the 2.5m mark, and with the government’s own estimates suggesting that 500,000 public sector workers could lose their jobs as a result of the public spending cuts. If the rush of private investment anticipated by some business leaders does not materialise, unemployment could quickly climb through the 3 million mark, which seems to have been the threshold of popular discontent in recent British history (if we think back to the early eighties and again to the early 90s).
Our recent wave of Feeling the Pinch research, which we blogged about earlier this week, also gives us a useful picture of public perspectives on the economy. The research was done in September, and 75% thought the economy was going ‘badly’ or ‘very badly’ – down from 85% in November last year. 39% thought they’d be worse off in 12 months time, and 10% better off – both figures almost unchanged since last year.
The groups who were more anxious about the economic prospects (“Choppy Waters” and “All hands on deck”) were similar to each other (and fairly different from the “Plain Sailing” group). They were likely to have a mortgage, or be renting; they were more likely to have dependent children; and they were likely to be working rather than retired. They are also much more likely to have been affected by debt, and have already changed their spending habits as a result of the recession. These are groups whose attitudes could change quite sharply if people they know start losing their jobs. And there are some clues here as to why the child benefits caused such a sharp public response.
The other relevant analysis was by our public sector team, which produced a short paper, “The Effectiveness Agenda” after the election on how to improve public outcomes in an environment of austerity. We believed that savings could be found in public expenditure, but not the fabled ‘efficiency savings’ which critics always talk about. Instead, there were savings to be found from ‘effectiveness’, which involves looking at the desired public outcomes in a holistic way, and probably across departments. The Total Place agenda is a good example of this at a local level. Nationally, Kenneth Clarke’s plan to reduce the number of short-term jail sentences improves social and public outcomes while reducing expenditure hugely (although cutting the budget of the National Offender Management Scheme at the same time is not particularly holistic). But such thinking needs some time for reflection – and some leadership.
There are still a few places available at our next Feeling The Pinch breakfast seminar on November 9th; if you’re interested in attending, please contact Karen Kidson. The Effectiveness Agenda paper can be downloaded as a pdf from the link below; for more on this, speak to Andrew Curry or Alex Oliver. The icons at the top of the post were designed by Gus Newsam, of the Futures Company’s design team. They are © The Futures Company, 2010.
The Futures Company Effectiveness Agenda 2010 [downloads as pdf]
22 October 2010 at 10:21 am thenextwavefutures Leave a comment
The new normal
Jo Phillips writes:
We are officially ‘out of the recession’, but uncertainty, and even fear, remains. The fourth wave of research in our UK consumer tracking study Feeling the Pinch (which Fran Walton and Eleanor Cooksey launched at a breakfast briefing in London last week) shows that consumers are in the ‘doldrums’ – a place which is both quiet and uneasy, a place where you are stuck. Two-fifths of consumers say they are worse off than last year (the same proportion as in November 2009) and just under half know someone who has been made redundant in the past twelve months.
With Wednesday’s Spending Review ensuring that job cuts are never far from a front page, and rising prices meaning that people need a bit more money to feel like they are staying still, it’s no wonder that consumers remain anxious. But we believe that this new reality is starting to stick. We’re seeing a deeper shift in consumer outlook: welcome to the New Normal.
With the New Normal comes our new acronym, SCANT, to help organisations and brands understand current consumer attitudes and thereby navigate this sea change. Here’s a brief introduction:
- Scepticism: many brands have been so focussed on price through the recession that they have stopped talking to people, leaving a trust void. 77% of consumers agree that the banks serve their own interests, not the interests of their consumers, and 58% now have less faith in the government to tackle the big issues of the day. Brands urgently need to rebuild trust.
- Control: 65% of consumers agree ‘it is important for me to get a greater sense of control in every aspect of my life’ (up a very sharp 13% since November 2009), and 60% feel a greater need to be as self-sufficient as possible since the recession (up 9% from November). We’re seeing people’s relationship with time change fundamentally. Pre-recession, people would do almost anything to save time, including spending money. Now they are willing to use their time to gain greater control. Brands need to help consumers feel in control of their lives again.
- Acceptance: 53% agree that this recession will change consumer culture for ever (up 11% on November), and 45% that ‘some of the dreams I had before the recession are now out of my reach’. Categories that may have been seen as essentials may now be considered to be luxuries. Brands which are affected by this change may need to reposition themselves. Waitrose is a great example of a brand that has found a way to tell a different story.
- New aspirations: 53% agree that ‘Since the recession I have learnt how many things I can do without’ (up 5%). Expectations have been re-calibrated. People are focusing on smaller, everyday treats. One example of a business that has responded: as flying becomes an increasingly unpleasant experience, with security and health concerns, Virgin has positioned its “Upper Class” offer as taking these frustrations out of flying.
- Treading carefully: 60% agree that they have ‘become more likely to consider the potential risks of a decision they make’. People think twice before buying. And so the warranty has become the new battleground for the car industry. Kia opened this up with a 7-year (or 100,000 mile) warranty earlier this year, and Toyota later introduced a 5-year warranty. Since then Vauxhall has announced a ‘lifetime’ warranty (which also turns out to be 100,000 miles). We expect this sort of security to become part of a new relationship between organisations and their customers.
There are limited places available for a repeat of this breakfast briefing on 9 November. To find out more please contact Karen Kidson.
18 October 2010 at 5:40 pm thenextwavefutures Leave a comment
Looking beyond price
Walker Smith writes:
A ‘new normal’ is emerging among consumers in the wake of the financial crisis and the recession: ‘considered consumption’. This trend, which we noted last year, has now been reaffirmed by our latest Global MONITOR survey, which has just been released. One of the consequences is that the focus on price which was so strong immediately following the financial crisis has started to weaken.
Two data points stand out. The first is that 53% of consumers – taking a global average across all 20 countries – agree that ‘price is more important to me than brand names’ (down from 59% in 2009). The second is that 39% agree that ‘it’s best to buy famous brand names because you can rely on their quality’ (up from 34% in 2009).
Although these changes are small, they are notable. It can be easy to lose sight of the fact that consumers who are still tightening their belts also want the reassurance of name-brand quality.
And while there’s been a lot of talk about consumer frugality, what’s actually happening is that they’re practising prioritization. Consumers will stand up for the things that matter to them. But brands need to play their part as well. One of the other trends tracked by Global MONITOR is about interest in brands that practice social responsibility or deliver innovative wellness benefits. That’s been climbing, albeit slowly, over the past three years.
Global MONITOR is The Futures Company’s syndicated insights service. It encompasses an annual quantitative global survey of more than 27,000 consumers in 20 countries; the Global Energies, our consumer trends framework; and Global Streetscapes, our interactive database, continually refreshed, of consumer and brand behaviour. For more information, please contact Jennifer Childs in London or Simon Kaplan in the United States.
Trust plus
Will Galgey writes:
Trust in organisations and brands has been declining steadily as consumers have more information and are more sceptical. There’s also striking evidence that attitudes have shifted, certainly in Europe and North America, as a result of the global financial crisis. But if trust isn’t enough, how should companies respond? We’ve been collaborating with Millward Brown, the WPP company which runs the WPP brand equity research programme BrandZ, to try to answer this question.
Our joint research produced new insights into consumer behaviour and attitudes which should help shape the behaviour of companies and their brands, and new metrics to help gauge the effectiveness of these actions. In summary:
- trust is still essential
- but it needs to be combined with customer recommendation to be effective
- which generates the ‘equation’, Trust + Recommendation = Success.
And since both levels of trust and willingness to recommend can be measured in research, the quantitative wizards at Millward Brown have produced an index, the TrustR score, based on global consumer research, which indicates how effective different companies and different brands are in different markets.
There are some surprises in the data – Pampers tops the chart globally (and is also number 1 in the UK, France and Germany), while China Mobile is in the top 10. And Nokia, which tends to get written off by American commentators dazzled by Apple and Google, is top in 8 of the 22 countries covered by the study. The research shows a strong correlation between TrustR scores and brand financial performance.
The good news is that the TrustR report is free to our clients, and comes tailored for specific markets and specific categories. If you are a client, the consultants you usually work with can arrange for a copy to be sent to you. If you’re not a client, and are interested, please email us at betterfutures[AT]hchlv.com, and we’ll see what we can do.
Struggling towards sustainability
Andrew Curry writes:
Whatever the disappointments about the Copenhagen talks, it’s clear that consumers have fairly strong attitudes to sustainability issues, and these have barely been affected by the financial crisis. That was the view of a recent report on our Henley Planning for Consumer Change [PCC] research in New Civil Engineer. Indeed, politicians seem to be lagging consumers on the question of sustainability.
The managing director of The Futures Company’s London office, Will Galgey, told NCE that “The key thing is that there hasn’t been a significant diminishing of engagement with environmental issues. In fact we see the importance of those issues continuing to rise.”
At the same time, consumers increasingly see the links between environmental behaviours and financial prudence. But not all businesses seem to have registered this.
Frank Price, sustainability director at the engineering consultancy Grontmij, argues in the article, “Some businesses may be tempted to reel in their focus on sustainability, based on a false belief that the finances needed to introduce sustainable practices could be better spent elsewhere. On the contrary, businesses that are looking to save money and reduce costs should be looking at their sustainability measures as a priority.”
The costs of not increasing the level of business sustainability are likely to be measured in business reputation. PCC data show that 79% agree that companies have a responsibility to support the communities they operate in, and businesses are identified by some distance as the group “most at fault for causing environmental damage”. At the same time, trust in businesses continues to decline. Potentially this adds up to a vicious circle in which it is difficult for businesses to increase their credibility – or a welcome opportunity to rebuild trust.
For more information about accessing Planning for Consumer Change, please contact our UK Marketing and PR Manager, Jennifer Childs. The picture at the top of the post is from Australia’s fmcg sustainability institute, and is used with thanks.
What you don’t want for Christmas
Oliver Wright writes:
One of my seasonal ‘jokes’ goes that you can tell when Christmas is approaching by the adverts on TV. Thus, like many others I suppose, I am thrust from my usual lethargy into a mild panic, making hurried calls to my siblings and parents, enquiring what they might want for Christmas, with the implicit fear that the shops might somehow run out of appropriate gifts.
In spite of our recessionary times, the high street in London has done surprisingly well for itself compared to 2008 when the onset of the recession dampened the Christmas (spending) spirit. November sales are up only 1.8% on last year nationally, but in the capital sales are up 13.3%.
Even if we are short of cash, we certainly shouldn’t be short of ideas: most of the major newspaper websites have a glut of buying guides, telling us what we could buy, and for whom. But for every article about ideal presents, one often finds a dissenting contributor in the comments sections, outlining the merits of a presentless Christmas. Capitalising on these frugal sentiments, The Green Thing has created a cunning spoof of the Amazon.co.uk website, delightfully titled Amazero.com, encouraging us to buy their single product – nothing (it’s priceless, of course). With a slightly more traditional approach, Adbusters sponsored ‘Buy Nothing Day‘ on the 26th of November this year.
Both of the above campaigns make the claim that Christmas – or more simply, buying lots of stuff – is bad for the environment, and detracts from the true spirit of the season. However, if you’re more inclined to think that Christmas is a waste of money altogether, then Joel Waldfogel’s book ‘Scroogenomics: Why you Shouldn’t Buy Presents for The Holidays’ may contain some more compelling arguments. Based on US surveys, he suggests that people would generally be willing to spend 20% less on the gifts that they received were they to buy them for themselves. This difference – in economic jargon, the deadweight loss – is worth $13bn a year in the US. He continues:
There’s every reason to believe the deadweight loss is as big elsewhere. That would get you to $25 billion a year around the world in value destroyed through gift giving.
Waldfogel isn’t against gift giving – just bad gift giving. Tim Harford has some useful recommendations based on Waldfogel’s arguments: spend modest amounts (hence reducing the likelihood of a large deadweight loss), or increase the sentimental value of your gift – invest time or creativity into making something personal. In other words, give it value to which you can’t attach a price.
In a neat twist, Waldfogel’s book is out for Christmas. But before you buy it, make sure the recipient wants to read it first.
The Image above is taken from the Amazero.com website, and is used with thanks.
The new era of consequences
Andrew Curry writes:
The shape of the post-recession consumer landscape is becoming clearer. Our latest wave of Henley Planning for Consumer Change [PCC] research, launched to clients at recent breakfast meetings, maps this. The headline is that risk is back on the agenda, and as a result, consumers have found ways of living with uncertainty; they are looking for greater control; and they are considering the consequences of their choices.
Some of these changes were already becoming visible before the recession. As our UK Managing Director Will Galgey pointed out, it has been an accelerator rather than a catalyst.
For our UK business, the launch represents a return to selling an annual trends report containing analysis and data, which we last did in 2001. We’ve been able to do this because of the expertise of some of our Chapel Hill colleagues – formerly Yankelovich – in managing published services.
Some of the data in PCC are familiar. Obviously financial worries are on the up. Confidence in corporations has fallen – the proportion agreeing that “I can trust the following [sectors] to be honest and fair” has fallen across all commercial sectors, with utilities falling even faster than banks. But the research suggests that people are less rattled by the recession than they were a year ago, even though the economy is weaker now than it was then.
This has had some costs. People now feel under more time pressure than at any time since the late ’90s, though not for exactly the same reasons. And people’s desire for more control isn’t matched by their ability to achieve more control in their lives.
The biggest impact seems to be on consumers’ willingness to make connections between their immediate surroundings and the wider world. 50% of the sample, of 2,500, thought it “very or fairly desirable” that “we won’t be able to consume as many goods and services as we have in the past”. 32% think it not at all or not very desirable, while 18% aren’t sure.
Similarly, nearly 60% now think we are at fault as individuals for environmental change – and around the same numbers think that it is both their responsibility to do something about it, and that doing something will make a difference.
From all of this, the Planning for Consumer Change data suggests strongly that new consumer values are emerging around vigilance, optimism, self-reliance, resourcefulness, connectedness, and prioritisation. This is a more complex world for brands to navigate, although the smart ones are doing it already. The good news, though, is that this offers more strategic options (and more interesting options) than a race to the bottom on price.
But as Director Henry Tucker observed at the breakfast sessions, “You’re probably not going to be able to sell the same old products to the same old consumers”. They’re expecting something from you which is more helpful – and demonstrates that you’re in tune with their new values.
For more information about accessing Planning for Consumer Change, please contact our UK Marketing and PR Manager, Jennifer Childs. The ‘era of consequences’ icon, seen at the top of the post, was designed by Tom Warren.
10 November 2009 at 11:48 am thenextwavefutures Leave a comment
Hiding out in the coffee wars
Alex Steer writes:
Starbucks hasn’t had it easy, at least for the past decade. But whether being attacked by Naomi Klein for alleged anti-competitiveness in No Logo in 2001, or more literally attacked by demonstrators during a rally in London in January, Starbucks has always toughed it out. Until the recession, that is.
In late 2008, McDonald’s set up a giant billboard outside Starbucks HQ in its home town of Seattle. Proclaiming that ‘Four Bucks Is Dumb’, it advertised McDonald’s new line of (less expensive) espresso coffees. It was a well-timed campaign, and to judge from its share price, Starbucks spent three months in shock.
Its new strategy, announced last week, suggests that the coffee giant still has the caffeine jitters. It has opened three new outlets in Seattle – without any Starbucks branding. 15th Ave. Coffee and Tea and its sisters look and feel like independents. The muted press release from Starbucks says that the unbranded stores offer ‘new opportunities for discovery, a high level of interaction and a deep connection to the local community’.
But these things – experience, interaction, community – are central to Starbucks’s brand. Hiding the brand suggests a company with an identity crisis. Perhaps Starbucks has been told that, in a recession, consumers retrench to the familiar and local. This may be true, but research from the US and elsewhere suggests that reports of a ‘bonfire of the brands’ are somewhat exaggerated.
The fuller story is that, for American consumers, price matters more. It’s no longer the poor relation to quality and convenience. But price isn’t everything. The brands that thrive in the downturn will be those that offer quality and experience at a fair price and give consumers what they want – for example, acting on the recessionary trend towards going out for breakfast, not dinner (good news for coffee houses).
So four bucks may not be bad – if they come with a little bit more of a bang. Starbucks needs to show its consumers that it understands this. But to build this trust, it needs to keep on being Starbucks.
The picture at the top is of Rob Brandt’s ‘Crushed Coffee Cup’ design, and is used with thanks.
Advertising or bust
Andrew Curry writes:
I’ve been watching quite a lot of ITV4 this month, because of its Tour de France coverage, which means I’ve seen a lot of the current ad for the VW Passat. It’s a curiosity for two reasons; first, it’s clearly been made, inexpensively, for the British market, rather than being a ‘Euro-ad’ with English voiceover, and second, because it has a clear ‘recession’ storyline. Man leaves large bank-type building with his work things in a cardboard box, which promptly sheds its contents onto the pavement, leading to a little cameo story along a closure-laden high street before (at last) he gets to his car, singing all the way (more than a nod to Morecambe and Wise) about the power of positive thinking.
There seems to be a sting in the tail; the cheery sheep, nodding along to the song through the bars of their truck are clearly on their way to the slaughterhouse. With the implication, of course, that our hero might also be on the way to the knacker’s yard.
Strongbow has also been having fun with the financial crash, and has buried a treat or two on the internet. You’ve probably caught their Henry V pastiche in which a Kenneth Branagh lookalike makes a rousing speech to the assembled tradesmen of England (gasfitters, dishfitters, etc). We recently came across a second version in which Henry’s gaze alights on a group of bankers – and he is lost for words. You can see here what happens next.
Avocados, ethics and supermarket histories
Alex Steer writes:
The avocado pear’s name is the product of selective memory. Our word for the South American vegetable comes originally from the Nahuatl word ahuacatl, which means ‘testicle’. This unfamiliar word was borrowed into Spanish, but mishearing and confusion with the easier-to-remember word for ‘advocate’ or ‘lawyer’, avocado, led to this being used for the pear. Avocado was borrowed into English in the late 17th century, and has stuck.
The avocado has in recent weeks found itself at the centre of a standoff between two supermarkets. Sainsbury’s and Marks and Spencer have launched TV adverts – commemorating their 140th and 125th anniversaries respectively – in which they each appear to take the credit for introducing the avocado to Britain. The avocado is now an advocate in supermarkets’ increasingly fierce battle for market share, but it is arguing the case for both sides.
There has been no shortage of ads harking back to the past recently – Sainsbury’s, M&S, Hovis, Persil – and no shortage of commentators noticing this. Most have identified that behind these campaigns lies a perceived yearning by consumers for the securities of nostalgia and tradition. Hovis’s strapline – ‘As good today as it’s always been’ – resonates with wary, recession-weary shoppers who are longing for a little sanity. Nostalgia brands are brands that have stayed the course; brands you can trust.
But Sainsbury’s and M&S are not just saying they are reliable retailers. They are saying they are responsible, ethical ones, and that they always were: employing women, helping the planet, doing their bit for the war effort. These campaigns are histories, written to appeal to the values and good citizenship modern consumers seek from brands.
The demand for corporate social responsibility is relatively new, and it’s hard for older brands not to look like they’re jumping on today’s bandwagon, compared to new brands who have built CSR into their blood and bone. By framing their histories in terms of modern values, retailers are telling consumers that, unlike the avocado, they were always advocates, representing quality and fairness. It remains to be seen if consumers will buy this, or conclude that it’s all a load of ahuacatls.
The picture at the top – a photograph of a painting – is borrowed, with thanks, from Betweenland on flickr.
