Transformers - Colloquy

22
C O L L O Q U Y / Volume 18, Issue 1, 2010
T R E N D S R E P O R T
Dear Prudence
Post-recession consumerism comes out to
play—as simple financial prudence shifts
to include the things customers hold dear
WE DON’T OFTEN THINK OF THE BEATLES
as financial prophets—their “Tax
Man” notwithstanding. In their
1968 song, “Dear Prudence,” the
Beatles invited the star of that
song to greet the new day, and
indeed, prudence has come out to
play. But it has arrived in a form
that marketers may not have
anticipated.
Call it prudence, frugality, thrift,
or austerity—whatever term you
choose to use, it’s clear that as we
greet a brand-new decade, the
wild spending of the pre-recession
seems like just a faint memory.
For today’s consumer, restraint
rules.
B Y S H A R O N M . G O L D M A N
As the unemployment rate continues
to hover around 10%, the rate of
personal savings is growing:
According to the U.S. Commerce
Department’s Bureau of Economic
Analysis, personal savings as a
percentage of disposable personal
income was 4.7% in November 2009,
while in 2006 that number included
a negative sign. While it’s no
comparison to the hefty savings stats
of the era of the Great Depression
and World War II, when personal
savings sat well in double-digit
territory for years, these days
consumers are certainly more
cautious about where their money
goes—and many believe those habits
have dug in for the long haul.
A recent poll from Citi found that a
significant majority of women with
children—about 75%—feel the
recession has changed their spending
and savings habits “forever.” And
survey research from Mintel shows
that many lifestyle changes made
as the recession began in 2008 are
holding steady—for example, in
October 2009, 67% of respondents
stated that they’re cooking more at
home to save money, and 64%
stated that they’re traveling less.
“It boils down to an issue surrounding
decision-making,” says Dr. Robert
Leone, professor of marketing at
Texas Christian University. “As things
change, many consumers begin to
rethink purchases and decisions that
had been instinctive.”
Loyalty marketers have hardly ignored
the drumbeat of consumers searching
for savings and value: Many are using
recession-friendly strategies to
increase loyalty among frugal folk,
such as grocery chain Safeway, which
offers a program in which club
members can virtually attach coupons
from websites such as CellFire and
Shortcuts.com to their accounts,
lowering their bills when a loyalty
card is swiped at checkout.
Other programs are offering double
and triple points to rev up consumer
reward power when spend is down,
including U.K. grocery powerhouse
Tesco, which is touting a double
Clubcard points program that will last
until this summer. Still other
companies are turning their focus
to loyal customers who are willing to
spend, such as Chase’s new Sapphire
card, which offers flexible rewards
and points that don’t expire.
Then there are the financial services
loyalty programs that specifically
encourage savings, pioneered by
Bank of America’s Keep the Change
initiative that rounds up debit
purchases, deposits the round-ups
into a savings account, and matches
the roundups within certain time and
dollar limits. The latest such initiative
is U.S. Bank’s pilot of S.T.A.R.T.,
which allows members to deposit
savings each time they use their
credit card, and to transfer FlexPerks
program rewards into savings each
month.
But understanding the core
motivations behind these
spending/saving shifts—and whether
these are long-term behavior changes
or just temporary deviations—is
essential as companies move beyond
simply surviving the downturn to
working toward investing in boosting
customer loyalty and attracting new
customers. After all, relying on
discounting and sales, the competition
strategy many retailers have fallen
back on, isn’t a long-term loyalty
solution if consumers won’t soon
return to their old spending ways.
That is, unless you are, at heart,
a discounter, such as Walmart or
Family Dollar, retailers that have
fared well in the down economy.
Instead, most marketers must devise
creative ways to target customers in
this new environment.
“The recession has really been a
trigger that affects the way consumers
are behaving,” says Lerzan Aksoy,
associate professor of marketing at
Fordham University and co-author
of Why Loyalty Matters. “And while
perhaps it is a pendulum that goes