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.