The recent global financial crisis has affected many of us as business people and consumers. Some of the questions that come to mind are: 1) Exactly what are the changes in customer and consumer behavior that effect our business? and 2) How long will those changes last? Although many changes have not been identified or understood, I think most companies will discover long-lasting changes that will impact their marketing strategy.
In support of my assertion, I recently read an article in the Wall Street Journal where A.G. Lafley, P&G's CEO, was quoted as saying: "In every recession there are hosts of compensating consumer behaviors as they manage a more modest budget. We have to expand our portfolios to serve the needs of those consumers. I think a lot of that is going to last." It is significant that the CEO of one of the most venerated marketing companies in the world and the consumer savvy individual who brought the mantra "Consumer is boss" back into the P&G mindset made this statement. After all, P&G has built its business on creating premium products in low-priced categories. P&G has recognized a change in consumer behavior and thinks it is long-lasting. Part of P&G's response is to develop brands (or a portfolio of brands) with multi-tiered pricing to keep cost-cutting consumers in their franchise.
Anecdotally, my brother-in-law is a surgeon who has two distinct parts to his practice: cosmetic plastic surgery and general E.N.T. Based on the economy, he expected reduced revenues for elective, plastic surgery. What he did not expect was a reduction in non-elective surgeries that were covered by insurance. Surprisingly, revenue in both parts of his practice are down this year. Evidently, the co-pays for surgeries are substantial enough that patients are making do without surgery (or postponing it). Furthermore, fewer patients have been coming into his office for allergies and other common ailments. Again, consumer behavior is changing and he is evaluating how to deal with it.
At first glance, it is difficult to understand why consumer behavior is changing and why so broadly. After all, we have experienced recessions and unemployment in the recent past. The changes we are seeing, however, transcend the numbers. They are deep rooted in psychology and are reminiscent of what occurred during the Great Depression. Consumer confidence in the system has been undermined, the feeling of guilt over conspicuous consumption has taken hold and the fear of "what could happen" has entered the consumer's psyche.
From a behavioral standpoint, the changes in consumer psychology can manifest themselves in different ways. So what should we do as marketers? First, we must talk to our customers to understand how their purchase decisions, product/service usage patterns and media consumption habits have changed. This is particularly important, must be done quickly and must be done within the context of a segmentation strategy. Second, we must go back to the consumer hierarchy of needs and reexamine the hopes and fears of consumers and their highest level emotional needs so that we can reevaluate our value proposition.
Once these two steps are completed, we will have the learning necessary to develop a marketing strategy and plan based on the "New Consumer". Innovation will continue to be important but it will probably be different from what it was in the past. It may take the shape of good value and affordability. For example, a product may be considered a good value but if the pack is large and purchase price high (for example, a club pack), there may not be enough money in the consumer's budget that week for the item. Therefore, value and price points may be important to consider. Again, different strategies and tactics must be based on what we find out about our respective customers -- one size does not fit all. The reevaluation of trends and our "New Consumer" will lead the way.