Get ready for the recovery: Part 4 – Motivation

The mantra of people who lived through The Great Depression was "Use it up. Wear it out. Make it do. Do without." Many of the folks who lived through the tough times of the 30's stuck with that maxim for life. The present Great Recession may have a similar effect on the people whose jobs, investment accounts and home values have been ravaged by this downturn. In the future marketing may not revert to pre-recession norms.

This recession has been so different than all of the other downturns since the Great Depression that no one can confidently predict exactly what will happen to consumer behaviors when it's finally over.

It’s possible that as soon as the economy bounces back, long pent-up demand and the urge to satisfy deferred gratifications will unleash a spending binge to rival pre-recession levels.

But it seems more likely that the values and buying patterns consumers adopted during hard times may influence their motivations into the future. Whether that future stretches out for a year or two after the recovery or for decades to come is difficult to forecast. Either way, marketers will have to adapt to a reality very different than the one that ended in October, 2007.

Among the consumer motivations that may determine purchase decisions over the next few years:

1. The new frugality. Americans may actually try to live within their means.

According to The Wall Street Journal, the American savings rate declined from 10% in the early 1980s to 0.6% between 2004 and 2007. It was back up to 6.9% this May. That’s an eleven-and-a-half times increase. Goldman Sachs predicts that the savings rate might go as high as 10% this year.

Part of that increased frugality is due to external factors. Credit card lending is somewhere between tight and nonexistent, and consumers’ homes no longer have positive equity against which they can borrow to finance indulgences. Household debt is down for the first time since 1952.

But there is also a significant realization among consumers that their previous spending patterns are simply not affordable. Time’s “America Becomes Thrift Nation” series reports that 61% of Americans predict that they’ll continue to spend less when the recession is over. And 32% say that their new, reduced spending levels will be their norm for years to come.

Marketers will have to fight harder for every dollar consumers spend, since consumers plan to be spending a lot fewer of them.

2. Brand loyalty is so 2007. When Harley-Davidson sales are down, you know brand loyalty is in trouble. And 7.1% fewer Hogs rumbled out of Milwaukee in 2008 than in 2007. It looks as if 2009 will see another 9.4% decline.

If a brand whose loyalists tattoo its logo on their bodies is slipping, what chance does a laundry detergent have?

Apparently not much. P&G has introduced Tide Basic, a stripped-down version of Tide that will sell for around 20% less than full-featured Tide products. The lower-priced Tide is intended to blunt the inroads store brands are making into name-brand consumer package goods sales.

Tide may be fighting an uphill battle. Nielsen reports that private-label (store brand) consumer package goods dollar sales were up 7.4% in the one-year period ended July 11. The private-label package goods products’ share grew 0.7% to 16.9%. In approximately one in four categories, private label products are now #1.

A Digital Research online panel reports that 40% of shoppers have traded down to store brands since the recession hit. The trend is across all socioeconomic categories. Time’s “Thrift Nation” series found that 40% of people who earn more than $100,000 are buying more store brands.

One important indicator: A Food Marketing Institute study reports that 72% of respondents plan to buy the same amount of private label food in 2010, 25% plan to buy more and only 3% plan to buy less.

Advertised brands will have a tough fight holding share against the inroads of private label. A strong value proposition and very effective communications will be essential. Since not many consumers spend a lot of time Googleing or tweeting package goods, TV, the classic – and expensive – consumer package goods standby, may be the only effective medium.

Package goods marketers will have an even tougher time winning back consumers who have defected. In most package goods categories, usage habit is established in three to six purchase cycles. And given the length of the recession, many consumers will have passed that mark with private label merchandise. So they’ll be habituated to a non-branded purchase pattern.

3. Buy American. An ACNielsen Homescan Panel study reports that 35% of consumers are now more likely to buy American than they were in the past.

A Harris poll found that the tendency to buy American-made products increases with age:

● 39% of people age 18-34 are inclined to buy a product advertised as made in America.

● 60% of people 35-44 are likely to be motivated by a “Made in America” claim.

● 68% of people 45-54 are motivated by the “Buy American” appeal.

● 74% of those 55 and older are likely to buy American.

Of course a “Buy American” appeal can be tricky. Consumer preconceptions can be difficult to change, and mere facts are seldom enough to do the job.

U.S. News reports that the Toyota Camry has more American content that the Ford F-150 pickup. But we suspect most good ol’ boys would call the Ford “Detroit iron” and the Toyota a “rice burner.”

According to USA Today, 16% of the country’s beef comes from outside the country, primarily as trimmings to be ground into fast-food hamburger patties. But most folks think that the Big Mac is as American as apple pie. (And apples are increasingly likely to come from China.)

Smart marketers whose products look American but are, in fact, imported can reinforce the home-grown perception with ads and commercials featuring tow-headed kids with baseball mitts playing catch in Norman Rockwell-esque back yards.

The Asian-headquartered automobile manufacturers could do a much better job of communicating their American content. (While being careful not to taint themselves with the low-quality perception associated with American-manufactured cars.)

4. Cutting the frills. If you market cook-at-home food, you’re in luck. Clothing, not so much. Booze or butts, and you’re in trouble.

● 55% now have more meals at home.

● Clothing purchases were down 12% in June, 9% in July and 6.6% in August.

● 28% of all adults have cut cigarette and alcohol purchases.

The recession spawned a wave of frill-cutting. Luxury car sales were off 21% last year, three points worse that the 18% decline in total car and light truck sales. The average size of the few new homes constructed in 2009 shrank 11.2%.

Ben Klein of Leo Burnett says “We’re seeing a shift from a trade-up culture to a trade-off culture.” He envisions a marketplace in which “…a product’s bundle of tangible and intangible attributes [must] reach an optimum balance with price.”

The demographic most impacted by the recession has been the Boomers, previously the free-spending engine of the consumer economy. Their investment accounts have been savaged just as the oldest among them are reaching the end of their working years.

Eric Almquist, of Bain & Co., has observed: “The current Boomer mindset revolves around a nearly universal question: ‘Can I live off my savings and Social Security for the rest of my life?’ This leads to greater risk aversion, obsessive price shopping and an urge to preserve fiscal equilibrium.”

Core values will be increasingly important in brand marketing in the near future. As will product quality, functionality and durability. Flash may not be hot for quite a while. Good news for Toyota. Bad news for Maserati.

5. Going green. The recession slowed – but didn’t stop – the consumer migration toward green/sustainable products and services. Part of the accelerating shift toward environmentally-compatible consumerism is demographic. As noted in an earlier article, Boomers and members of The Silent Generation are the greenest consumers. And these two groups are by far the biggest factor in consumer spending.

In a recent MediaPost “Engage: Boomers” article, David Wolfe, author of Ageless Marketing, noted, “For most, the onset of midlife is accompanied by an ebbing of narcissism and materialistic appetites because the social and vocational aspirations have typically become trimmed. Now, people begin talking about simplifying their lives and putting their lives into balance.”

The same publisher’s “Marketing: Green” blog quotes a UBS survey which found that 66% of respondents reported buying more green/fair trade products over the past year.

As noted in our previous article, “Green vs. Greenbacks,” price remains an inhibiting factor in increased eco-friendly sales. The USB study found that 44% of respondents cited higher cost as a factor in not buying green products.

But as cost comes down – or, as in the case of compact fluorescents or hybrid cars, when long-term economic benefits justify the initial expenditure – green products will become ever more powerful in the marketplace. Manufacturers will certainly be eager to help the 77% of consumers who self-identify as green find affordable and functional green products.

Have other thoughts about motivating post-recession era consumers? Please share them in our comments section. We welcome disagreement, amplification and corrections.

To find out more about marketing in the present economic environment – or in the very different environment that's about to begin – call BrainPosse at 865-330-0055 or click here.