Download - Credit Crunch Presentation
Julian Rodway
Expressions Planning Limited
416a King’s Road
London SW10 OLJ
Tel: +44 (0)20 7376 3356
Fax: +44 (0)20 7376 3447
Email: [email protected]
February 2009
CREDIT CRUNCH:
WHERE YOUR CONSUMERS ARE AT TODAYE X P R E S S I O N SB R A N D P L A N N I N G
CREDIT CRUNCH CONTEXT
The last quarter of 2008 was a dress rehearsal for 2009
The UK economy experienced record rises in fuel, impacting on:
• Home heating
• Transport costs
• Production costs
Compounding these fundamental costs was the credit crunch
From a consumer perspective the world was changing:
• Mortgage companies were failing
Icons of consumerism were crumbling:
• High street shops were closing
Banks were bailed out:
• Motor manufacturers were looking for economic support
Consumers were experiencing the cold winds of change
Expressions Planning Credit Crunch - 1
A YEAR LONG REVIEW
Expressions conducted 4 pilot groups in January 2009:
• 2 in Birmingham
• 2 in London
In each location one group was conducted amongst:
• Consumers confident about their economic future
• Consumers experiencing recent economic difficulties and concern over jobs
The aim was to understand the current environment:
• Select 8 households for an ethnographical study
The intent is to follow the fortunes of these 8 families monthly over the year
In this base line study we explore 2 status symbol categories - holidays & motoring
• And 2 fmcg categories – dog food & sausages
We invite you to submit categories to be explored during these monthly interviews
This will be a free service
Expressions Planning Credit Crunch - 2
RECESSIONARY CONSUMER TYPOLOGIES
Expressions Planning Credit Crunch - 4Prominence
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Recreational
Reserved
Retrenchers
Not overly concerned about serious economic issues
Recognise situation as an opportunity to review
& reduce household expenditure
Elements of regaining control of expenses
Participation is about cutting back:
- not cutting out
Perceive household as vulnerable to unemployment
Need to be proactive, manage their household expenses
Matter of prioritising expenditure
Cutting back & out without being too puritanical
Experiencing economic difficulties; adjusting & adapting
Desperate measures need to be enforced by many
Optimistic belief means some adopt a
progressive cut back/out policy
Learning to adjust to a different set of priorities
Driven by a need to conform to situation
Conscious that conspicuous consumption is
not socially or politically correct
Selectively join in but will also exploit opportunities
Relatively confident they will not be impacted on
Reality
RECESSIONARY CONSUMER TYPOLOGIES: SUMMARY
Expressions Planning Credit Crunch - 5
Recreational Summary
Need to conform
Selectively join in
Exploit opportunities
Relatively confident
Reality Summary
Experiencing economic
difficulties
Desperate measures
Progressive cut out policy
Learning to adjust
Retrenchers Summary
Vulnerable to unemployment
Need to be proactive
Prioritising expenditure
Cutting out & back
Reserved Summary
Not overly concerned
Opportunity to review & reduce
expenditure
Regaining control
Cutting back, not cutting out
RECREATIONAL MINDSET
Expressions Planning Credit Crunch - 6
Context
Crisis
Voyeurs of crisis; a topic of discussion not an imminent threat
Opportunity for some to carefully and covertly exploit:
“…at least you can now negotiate over prices…”
“…you can now get a builder and at a reasonable price…”
Critical of the ‘doom & gloom’ of economic news; considered an
irritant:
“…the media don’t help, full of depressing stories…”
“…stopped listening to Radio 4…too depressing…”
Economically comfortable; adopt a secure attitude to employment
Typically working in public sector or companies supporting essential
services
Boast about low mortgages or tracker mortgages
Perceive themselves as financially astute
Not prepared to alter their lifestyle but less overt about it:
“…we’re still going skiing but feeling a bit guilty about it…”
RECREATIONAL MINDSET (Cont’d)
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Considerations
Brands
Feel an opportunity to review household expenditure
More about exploiting offers than consolidating:
- minimizing expenditure & getting greater value:
“…Sky are doing some good offers…”
Concern over value of sterling & foreign holidays
For the brave an opportunity for investments:
“…house prices are going to fall…they’ll be some bargains
about…”
Belief in buying brands unshaken; not going to compromise
Conversely, many aware of brands being discounted:
- from chocolate biscuits to BMWs
Resist changing established and efficient shopping habits
Recession more about being seduced to remain loyal to
existing suppliers:
- exploiting an opportunity
RECREATIONAL MINDSET (Cont’d)
Expressions Planning Credit Crunch - 8
Summary
Confident, to an extent complacent
Perceive situation as an opportunity to exploit
Voyeuristic and vulture mentality
Not prepared to compromise on lifestyle
Respect need to be less conspicuous consumers
More likely to buy a bigger car at reduced rate:
- than a smaller more economical car
Crisis is about selectively joining in when it suits them
RESERVED MINDSET
Expressions Planning Credit Crunch - 9
Context
Younger couples, some professionals (teachers, librarian, IT
workers)
Feel relatively secure in job; unemployment not an issue
Focus is on maintaining lifestyle by efficient finances
Concern is about the future and future planning
Crisis
Impact is by association; house prices have fallen
Constraining plans for family improvements:
“…we wanted to move to a bigger house this year…”
Talk about friends and relatives being affected; second hand
experience:
“…my brother-in-law’s badly hit, he’s a builder…”
Period of reconsidering financial situation, reviewing expenses
Sensitive to the plight of others; cutting back part of conformity:
“…you see people buying more economy lines…so you
think you might too…”
RESERVED MINDSET (Cont’d)
Expressions Planning Credit Crunch - 10
Considerations
Brands
Still remaining loyal to ‘icon’ brands (washing products,
butter, cereals, etc):
- switching where deemed less important:
“…I’m not down to buying the economy own labels but
cutting back where possible…it is a sign of the times…”
Challenge mentality towards expenditure:
“…I feel as if I have to justify what I buy to myself…”
Reference the need to budget and consider expenditure carefully
Future plans involving big ticket items or household improvements put
on ice
Holiday plans have become less extravagant & UK based due to the £:
- no longer able to enjoy cheap €
Looking to make savings where possible without sacrifice
Mood of being prepared for worse times:
- preparing a plan to cope
- a phased strategy from cutting back to cutting out
RESERVED MINDSET (Cont’d)
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Summary
Feeling of being prepared
Gaining control of expenditure
Prioritising values
Refreshing attitude to extravagant consumerism
Adopting more family and free entertainment
Turning from consumerism to culture
Need to justify purchases; element of guilt over extravagance
Seeking to compensate when cut back:
- indulgent meal in rather than a night out
Initiating family values and appreciating of money management
RETRENCHERS MINDSET
Expressions Planning Credit Crunch - 12
Context
Crisis
Driven by the need to be prepared
Having a sort of plan, campaign management
Unspoken expectation of at least one partner’s income being
affected
Have often reviewed household finances and cut down and out:
“…we haven’t pared back to the bones …but should it happen
we know we can be more ruthless…”
Concerned about unemployment
Experience of friends, family and colleagues who have been
made redundant
Work in sectors vulnerable to downturn (building related,
catering, manufacturing, etc)
Anxiety about surviving through meeting essential commitments
RETRENCHERS MINDSET (Cont’d)
Expressions Planning Credit Crunch - 13
Considerations
Brands
Some brands non negotiable (coffee, cereal, shampoo, toothpaste, etc)
Perceived as false economy
All discretionary expenses cut back
Experiment with other stores and own label products:
“…I’ve always driven past Morrison’s to get to Sainsbury’s but now I’m
converted…excellent fresh fruit and veg…”
A period of redefining household tastes and expectations
Trading down whenever possible and practical
Staged reduction in unnecessary expenditure and lifestyle
Desire to implement drastic cuts after Christmas:
“…we knew we had to do it but wanted to have a good
Christmas first for everybody…”
All household bills and outgoings reviewed:
- some subscriptions cut out (mobile phones, Sky, etc)
- some services switched to exploit offers (dual fuel discounts, cheaper
suppliers, etc)
- some cut back (basic Sky package, selling 1 car, etc)
Desire to revisit mortgage but concern about ‘opening a can of worms’
Want to be living as expediently as possible; weaning themselves off credit
RETRENCHERS MINDSET (Cont’d)
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Summary
Planning for the worst
Learning to live on a reduced budget
Challenging past consumer aspirations
Acclimatising the family; changing tastes and expectation
Learning different shopping regimes
Seek non extravagant rewards and treats
Family based activities evident
Parental concern on children not being the innocent victims
Prepared to compensate children and family with small shared
indulgences
REALITY MINDSET
Expressions Planning Credit Crunch - 15
Context
One or both partners made redundant or hours shortened
Immediately impacting on household finances and emotions
Take desperate and immediate expenditure decisions:
- driven by necessity
Pride prevents consideration of outside financial planning and help
Reluctance to talk to mortgage provider or landlord
Crisis
Living through economic turmoil
Perceived themselves as victims, want to apportion blame
Government and banks cited as being responsible for ‘the mess’:
“…it’s about people in power playing with our lives…”
Adopt a pessimistic view of the future:
“…I’m 48, I’m not likely to get another job in engineering
again…or at all!”
REALITY MINDSET (Cont’d)
Expressions Planning Credit Crunch - 16
Considerations
Brands
Radical change of life
Minimising expenditure and impact on family:
“…you know there are plenty of us out there and there will be plenty
more but you don’t want your kids to be affected…”
Evident psychological impact
Brands are luxuries that need to be justified:
“…it’s only a few pence more for Heinz and they can tell
the difference even if I hide the tin…”
Challenge is to survive on a reduced budget
Economies are essential, not optional:
“…heating or eating…”
Significant change in shopping and eating habits:
“…now buying more vegetables and cooking from
scratch…found some really good recipes…”
Discount stores now offer a shopping relevance:
“…now go to Aldi first…what I can’t get there I get at Tesco’s…”
REALITY MINDSET (Cont’d)
Expressions Planning Credit Crunch - 17
Summary
Challenges and changes family life
Learning to cope with circumstances
For some adoption of different value systems
Different coping strategies; resignation to optimism
In a changing world brand loyalty perceived as a luxury
Consumers looking for survival strategies
However cheap does not always represent value
Need to treat themselves and family
Distractions deemed important; family outings, gaming consoles
Discovery of a different set of values and consuming
experiences:
- eg swapping culture or exchanging items on EBay
APPLICATION OF TYPOLOGIES ON CATEGORIES: SAUSAGES
Expressions Planning Credit Crunch - 19
Recreational
Believe in buying best they can afford
Avoidance of cheap ‘adulterated fillings’
Attracted to top end speciality, premium offers:
- Finest, Taste the Difference, etc
Served up as ‘economy meal’; entering the spirit
Haggis a topical January dish for entertaining
Demonstration of credit crunch participation
Reserved
Some consideration given to down trading:
- from top end to branded or mid market
Some driven by lower cost attraction
Resistors do not want to compromise on eat
quality; concern over content & health:
“…paying to distance yourself from the bits &
pieces & fat & grease…”
Retrenchers
Perceived as a relative cheap meal with fresh
vegetables & potatoes
Concern over ingredients of cheap sausages
Resist cheap offers as poor value
Pay ‘bit extra’ for reassurance of taste & quality
Make savings up on quantity or on other less
sensitive items
Temptation to serve more regularly
Exploit offers & buy promotional packs (freezer)
Reality
Perceived as a cheap & traditional meal option
Serving versatility to suit family:
- chips & beans or potatoes & vegetables
Happy to buy economy from trusted supermarket
Or look for promotions or discounted offers
Like sausages as no waste; can be eaten cold
Acceptance of economy range & meat content
Will not compromise on cooking; don’t want burst
sausages & reject fatty sausages
APPLICATION OF TYPOLOGIES ON CATEGORIES: DOG FOOD AND CARE
Expressions Planning Credit Crunch - 21
Recreational
Prepared to make savings with family food bill:
- but not cut down on pet care:
“…I’d rather buy one bottle of wine less than
change her diet…”
Still buying treats and snacks
Reserved
Dog virtually ring fenced from cut backs
Changing diet deemed a difficult process:
“…need to find one that suits him…only
something I’d do if he was ill…”
Even resistance to reviewing pet insurance
premium
Retrenchers
Pet insurance payments questioned
Nervous about cancellation vs cost of illness:
“…if we stop it you can guarantee we’ll need it,
then it would be very expensive…”
Consider buying in bulk rather than switch brands:
“…I’m now buying bigger bags from Pets At
Home, it’s slightly cheaper…”
Resistance to switching from mainstream brands
Reluctance to cut back on treats & snacks
Some switching from specialist vet brands
Reality
Dog last to experience cut back for most:
- still buying same mainstream brand(s)
First option is to change buying strategy:
- wholesale rather than retail, promotional offers
Last measure: experiment with cheaper brands
Belief that own brands are interchangeable
nutritionally; concern is digestibility
More likely to make savings on snacks & treats:
- substituting leftovers & titbits
APPLICATION OF TYPOLOGIES ON CATEGORIES: HOLIDAYS
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Recreational
Mild embarrassment over extravagant holidays
Value of £ impacted on European travel
Believe they have earned & deserve a good
holiday
May consolidate 2 annual holidays into one
Looking for bargain holidays, exploiting market
Open minded to look beyond € zone, eg Turkey,
Egypt
Reserved
Many mistrustful of British summer
Believe they need to travel to guarantee sun:
“…stayed in the UK last year, it was expensive &
a wash out…”
Prepared to consider cheap(er) options:
“…French campsites have improved a lot…”
Will travel & compromise to avoid disappointment
Expect to pay less this year despite exchange
rate
Retrenchers
Avoidance of planning too far ahead
Difficult to justify expense of holiday but argue the
need for break for self & family
Some adopt the attitude: family holiday non
negotiable, only severe crisis will prevent
Prepared to consider different destinations
Holidaying abroad cheaper than staying at home:
“…even with the exchange rate it’s cheaper to
enjoy yourself in Spain or Greece than at
home…”
Reality
Accept holiday would be tight, but don’t want to
deny family
Thinking of creative options: camping, staying
with family/friends
Holiday out of peak season; kids missing school
Even home swaps & house sitting
Some argue going away is a cheaper option:
“…we can stay in Spain cheaper than staying at
home”
Exploit cheap flights, packages & hospitality
APPLICATION OF TYPOLOGIES ON CATEGORIES: MOTORING
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Recreational
Aware of attractive offers on new & second hand
cars
Manufacturers desperate to sell
Chance to trade in & enjoy a bargain:
- buy a more economic small car or trade across
or up as fuel prices have dropped
Able to justify new car as helping economy
Vague idea over the cost of fuel
Reserved
Cautious & conservative anxious over fuel price
Adopt status quo mentality
Expect prices to rise with falling £
Could be motivated to invest in smaller car
Economy of running cost now a priority
Less strict about service & authorised dealer:
“…a friend knows someone who can service it &
programme the onboard computer…”
Retrenchers
Debate over need for 2 cars
Opportunity to consolidate
Adopt a pessimistic attitude; low trade in value:
“…wouldn’t be worth much. I’ll keep it for as long
as I can…”
Concern over increasing running costs:
“…the insurance is more than the car’s worth…”
Shop around for deals: service, parts & insurance
Restrict use & use discounted petrol from
supermarkets
Reality
Car a family luxury & a job seeker necessity:
“…sold my wife’s car when she left work…”
“…public transport’s too unreliable for work…”
Valued asset that is selectively used; nurtured
rather than serviced
Becoming aware of alternative service & parts
suppliers:
“…dismantlers have websites where you can get
parts at a fraction of the cost of new ones…”
Appreciate cost of car & its importance
Know how much fuel costs locally & the cheapest
OBSERVATIONS AND ANOMOLIES
For many recessionary reaction did not impact on the household until January
Evident desire to enjoy Christmas before embarking on a belt tightening regime
Possibly due to New Year resolutions and/or job anxiety, there was a noticeable health
undercurrent
Some respondents thought survival of the recession was about being fit:
• Presenting a younger and more active person
• This possibly accounts for the rise in male toiletries and tans
Whilst belt tightening began in January, the sales proved too tempting an opportunity for
many:
• An opportunity to shop and save
• Hence the rise in January of retail sales
Despite banks being perceived as the perpetrators of the situation:
• None had switched banks
View that the economic world may change after Barack Obama’s inauguration
Expressions Planning Credit Crunch - 26
OBSERVATIONS AND ANOMOLIES (Cont’d)
Interestingly green issues appear to have been subjugated by economic concerns:
• Perceived as short term vs long term interests
Seeds of a changing form of consumerism from ‘want’ to ‘need’:
• With some even challenging ‘need’
Signs of entrenchment to home for entertainment
Also exploiting community facilities:
• Museums, libraries, parks, pools, gyms, etc
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PRINCIPAL LESSONS
Economic recession is about a collective consciousness
Individuals will be affected but react differently
Marketing opportunities are about understanding different consumers’ needs and desires
An economic recession need not result in consumer psychological depression and brand
pessimism
Indulgences and rewards are sought as displacements and distractions
Consumers are more open to experiment with different regimes and behavioural patterns
Status quo is challenged by many wanting to make economies and efficiencies
Consumers need to be able to justify paying premiums:
• need greater belief in product delivery, physically or psychologically
Economy sausages and cheap dog food are regarded as false economies by many
Holidays and motoring are high expense items where significant savings can be made
Even amongst the most vulnerable consumers reluctance to be too puritanical
Reluctance to markedly concede family living standards despite their situation
Living through the recession, even for vulnerables, is initially about
adjusting, not abstaining… (yet)
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ECONOMICS AND RECESSION: ACCORDING TO THE CUL-DE-SAC CONSUMER
Expressions Planning Credit Crunch - 29
APPORTIONING BLAME
Banks and bankers
America & George W Bush
UK & Gordon Brown
Empire building entities
Expressions Planning Credit Crunch - 30
Inherent greed of banks
Short term profit at whatever cost
Individuals driven by the incentives of banking
bonus
OPEC
& energy
companies
Lack of regulation & control of banking market
Exploitation of naïve market & investors:
- Bernard Madoff
Bush’s support for oil industry
Courting & lack of control of financial market
UK economy dependent on service & finance
Brown’s denial of the boom & bust economic
cycle & lack of preparation
Specifically oil related companies
Inability to regulate demand & supply &
consequently:
- control retail price of energy
Exploitation of developing economies; Brazil,
Russia, India & China (BRIC)
Moving production & HQs from UK to source &
benefit from cheap production & tax opportunities
PROBLEM RESOLUTION AND CONSUMER REACTIONS
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US & UK Governments bail out banks
Tax payers’ money used to ‘bank aid’ the system
Radical reduction of bank rate to ‘defibrillate’
chronic economic solutions
A sop to the UK consumer with a reduction of VAT
Resentment that perceived catalyst should be reactively
supported
Frustration that first trench of funds not distributed:
- banking paralysis, risk aversion or greed
Perceived as nationalisation of high street finances
Savings & mortgages now state dependent
International, some foreign owned, monolithic businesses
looking for hand outs
Retrenchment of foreign companies perceived as exploiting
UK; workers & government economic hospitality
Perception of companies having lost interest in UK:
- emerging BRIC economies
View these companies were profiteering by escalating retail
fuel costs
Recently confirmed by record profits for Shell & BP
Call for windfall tax on energy companies displaced by
complexity of the economic situation
Banks & bankers
Empire building entities
Energy
companies
BANK AID: TOP DOWN ECONOMICS
Expressions Planning Credit Crunch - 32
Government intervention focussed on:
“…helping the perpetrators…”
“…rewarding the guilty…”
Undermines consumers’ faith in credible solutions
Compounding this mistrust is ineffectiveness of
Government intervention:
“…lent the banks billions but not doing anything
with it…”
“…lowest bank rate for 100 years but I’m still being
charged 6% on my mortgage…”
From a consumer perspective recent measures
have been:
- reactionary and restricted
- ill conceived and executed
Emphasis has been on securing the status quo:
- saving the decrepit system that caused the
problem
Shoring-up the
System
CONSUMER CENTRIC: BOTTOM UP ECONOMICS
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Lack of trust in banking systems & bankers
Concern over security of savings & honouring loans
Disillusioned with structures & regulations
Disappointment of banks parental positioning & control
and exposed management
Resentment over public monies bailing out banking
system
Impact on consumer is to inflate uncertainty & insecurity
Most consumers perceive themselves as victims of the
crisis & still vulnerable to unforeseen events
Causes many consumers to consolidate & reduce
spending:
“…it’s like a rabbit caught in the headlights… freezes…”
Rather than kick-starting the economy the measures
cause consumer economic paralysis
Belief consumers being excluded from economic
considerations – fundamental flaw:
“…we are the economy…”
“…they shouldn’t have given billions to
the banks but thousands to each
family…that’s the way to start the
recovery…”
Re-engineering & gearing