The recession that began in 2008 continues to inflict pain on many consumers and businesses even though some economic indicators suggest that it has ended. The effects of the recession will last well beyond the time when economists say the economy is better. A great article in strategy + business by Matthew Egol, Andrew Clyde, and Kasturi Rangan makes the case that buying behavior has been significantly modified among many consumers. The core position of the article is that many consumers will continue their frugal shopping behaviors adopted during the recession, even after the economy returns to greater prosperity.
If the trend predicted in the article holds over time, it will trigger major shifts in marketing strategy. The pre-recession mantra of many marketers was more product benefits = higher prices = greater profits. Those were the good ol’ days! Going forward, marketers must look for opportunities to provide value in ways other than peripheral product benefits or rely on the power of their brand to justify charging price premiums. One point made that I believe is on target is that marketers need to create clear distinctions among products at different price points. In other words, sellers must have a good understanding of customers in order to develop products that serve the needs of a value conscious segment (i.e., low price), a premium customer segment willing to pay a higher price to receive greater benefits, and perhaps a segment of customers that fall in between.
It could be said that the recommendations made by Egol, Clyde, and Rangan are hardly new. The need to understand customers has always been critical to a firm’s success. However, a major, permanent shift in buying behavior has occurred among many consumers. This shift makes it necessary to evaluate how we build relationships with customers. The impact of the new consumer frugality goes beyond the design and pricing of products. It will affect how we communicate with customers, too. Brand messages emphasizing “you deserve it” will be replaced with efforts to build community and encourage socially responsible consumption. In the final analysis, the most important takeaway from this article is a reminder that a marketer’s work is never done!
strategy + business – “The New Consumer Frugality” (requires free site registration)