Richard Storey, chief strategy officer for M&C Saatchi, London, suggests that recession is discussed as if it were a singular phenomenon, and that consumers have taken for granted the notion that there is one single, inevitable and all enveloping global crisis. News headlines tend to report macro trends, making bleak reading: slowing economy, falling house prices, rising food and fuel costs, or decreased consumer spending.
The problem, he says, is macroeconomics that would have us believe that the recession is a macro phenomenon with a single, reasonably predictable outcome, but understanding the dynamics that lay beneath these conditions could identify more interesting and effective recession strategies for businesses.
M&C Saatchi‘s ‘Reacting to Recession’ study uncovers the attitudes and behavior adopted by different groups of consumers and finds eight consumer typologies with distinct approaches to spending and economizing. Understanding and adapting to each segment presents opportunities for businesses, says the report.
Through a program of qualitative and quantitative segmentation, the study separated different consumer typologies. Each has adopted a different predominant behavior or ‘strategy’ to cope financially with the downturn and it is this behavior that defines each grouping:
Crash Dieters… 26%
Treaters … 12
As is often the case with this kind of analysis, says the report, the segments or typologies are best understood as attitudes that are particularly defining: approach to risk, short term versus long term focus, levels of optimism, approach to debt, desire to enjoy life and views of the significance of money generally. Demographic factors, in particular income levels, also help understand the different typologies, but one’s financial situation only partly influences which typology you are. You can be relatively well off and still nurse a crash dieting mindset.
The following typologies are ordered by the degree to which their spending is negatively affected by the downturn:
Crash-dieters are the largest segment, representing 26% of adults and the most dramatically affected. This group aims to shed pounds from their weekly budget by identifying and cutting out all non-essential spending until things improve. Crash Dieters are a heavily cash orientated group. Debt clearly frightens them (or is unavailable to them). They live from week to week and when the money runs out they’re forced to take quite drastic action.
Scrimpers, at 13% of the population, are also looking to make savings. However unlike Crash-dieters, Scrimpers want to maintain their lifestyle and are reluctant to make sacrifices. So their strategy is to down trade rather than cut out. They are much more likely to substitute brands with private label, rather than dropping them altogether. They are switching to cheaper stores, and have also discovered that sparkling wine makes a perfectly acceptable alternative to Champagne.
About 15% of the population are Abstainers. Like Scrimpers, this group want to maintain their lifestyle and so haven’t completely stopped spending on day to day items. Their response however has been to postpone big purchases until the situation improves. This group has not started budgeting or chasing the lowest prices, and are relatively unmotivated by coupons and ‘money off’ deals. They are, however, open to anything that allows them to have their cake now, but pay for it later. Interest free credit, nothing to pay until 2010, 0% credit cards and balance transfers are all offers that fall neatly into this camp.
Balancers adopt a slightly different strategy. Like Abstainers, they are reluctant to compromise on quality of life, but recognize the need to balance their budgets accordingly. Their approach is therefore to rob Peter to pay Paul. Balancers prefer sacrifice to compromise.
Just over 12% of the population are Treaters. In many ways they are similar to Crash Dieters, but they aren’t very good at it. They don’t find it easy to cut back, but know they have to. So they reward their frugal behavior with regular small treats. Treaters present an opportunity for businesses that are prepared to think cross-category. So DVD rental and takeaways can profit from decline in the ‘going out’ sector.
At 12%, Justifiers offer perhaps the clearest opportunity for marketers. They are happy to spend, but in the current climate are looking for a good reason to. They’re less interested in huge ‘money off’ deals, but are more motivated by limited offers, new models or added value deals that help them justify the purchase to themselves. This group lined up to buy the iPhone 3G on the day it came out, finding several reasons why they simply had to have one, now.
The Ostrich behavior is self-explanatory and irrational. At 9% of the population, they feel unaffected by the financial chill are spending as normally. Some of them are well paid enough to get away with this, but the bulk of this group are in denial. They’re a younger, more carefree group who are happy to load up their credit cards. This group is a double edged sword for businesses. In the short term, they’re great for the bottom line, but in the long run, many of them may be forced to raise their heads and lower their spending as the crisis catches up with them.
At 4%, the smallest, but most distinctive typology are the Vultures. This group are quite unlike the others in that they love a good economic crash. While others suffer, they’re circling Main Street, making a killing on all the bargains. They eye the property market, looking to profit from others’ misfortune.
The M&C Saatchi worldwide study, conducted from the Fall of 2008 through the Spring of 2009, suggests that businesses first need to identify the profile of their customer base in terms of their recessionary tendencies and then focus. The findings of this study, says the report, indicate that certain tactics that work well among certain segments, would not be as effective against others.
The report concludes that the recession gives marketers an imperative to think outside of their categories, and that the key to capitalizing on ‘the recession’ is to drop the idea that there is simply one recession, but rather identifiable sub-sets.