35 years after the US personal savings rate peaked at 14.6%, the personal savings rate has recently settled in at 4% in May 2010 (after turning negative in 2005). The Federal Reserve released data that showed credit card balances dropped $8.5 billion during April 2010, the 19th month in an unprecedented stretch of declining credit card debt. Reacting to the recent drop in Consumer Confidence, Lynn Franco, director of the Conference Board Consumer Research Center said ”Increasing uncertainty and apprehension about the future state of the economy and labor market, no doubt a result of the recent slowdown in job growth, are the primary reasons for the sharp reversal in confidence.” Is it possible that a culture of savings is slowly emerging? Coke’s “Hard Times” advertising featuring the Simpsons is on strategy: if you’ve got a savings mindset, then it’s appealing to open happiness for $1.
Marketing advice as consumer saving increases:
If the muddle through economy continues, or worse yet a double dip, consumers will continue their current march to demanding more for less. A quick way for consumers to save is to use coupons. My Dad wisely said that using coupons was like printing money. And with salaries and job prospects stagnant, printing your own money is one way to keep moving forward. To see this in action, look no further than Groupon which recently raised money at a valuation north of $1 billion. Rumor has it that Groupon is sold out for up to 6 months in some markets. Yes, there is that much excess capacity in the system, and that much interest from cosumers.
Make your offer stand out by becoming hyper-relevant. Netflix and Amazon were early leaders with algorithms that could literally read your mind. Apple Genius and Pandora have followed suit. While Amazon is sporting revenue growth of 25% +, Macy’s is in the 1 to 2% range for same-store sales, and JC Penney is negative. Isn’t it amazing that offering consumers what they are looking for in real-time is a successful model?
With an eye towards saving, consumers are looking for lasting value. Sustainability now has a double meaning: built for the long run and environmentally friendly to avoid waste. A survey of 766 CEOs worldwide by Accenture and the United Nations Global Compact, reported that 93% regard sustainability as important to their companies’ future success. The reality is that many “green” initiatives also save their companies money. Leaders have recognized that some environmentally inspired acts can also positively impact the bottom line. Remarkably, Whole Foods profits nearly doubled last quarter. Some joke that Whole Foods is “Whole Paycheck,” but all jokes aside, consumers are willing to pay up for a healthier and more sustainable life. Our recent consumer discussions shows that if given two equivalent options, consumers will almost always select the sustainable option. Our advice for the green dreamers: bring your product offering to parity and then distinguish it as sustainable.
The bottom line is that consumers expect a great product at an affordable price that is relevant to them, and is sustainable. With the current state of the market, this mandate will likely grow stronger through the rest of 2010.
Image by sanja gjenero from Stock.Xchng