Has U.S. Consumer Buying Behavior Changed Forever?

Consumers aren't buying like they once were. I know it's a shocker, but I just got up feeling controversial this morning (hang with me). While it may not be news that a recession means consumers cut back, it is news if those changes become the norm; and there is some recent data that indicates that may be the case.

For those of you who spend much of your time in the B2B world, you may be thinking that changes in the consumer's mentality do not really affect you. But they do - even if you don't sell directly to consumers, your customer probably does and that makes it very important to monitor changes in their sentiment and buying behavior.

The consumer buying behavior study conducted over the summer by Chadwick Martin Bailey (CMB) and iModerate Research Technologies (iModerate) interviewed over 1,500 U.S. consumers to determine where they had made cutbacks because of the recession and where they were beginning to add dollars back as they looked toward the recovery. The study included both interview-based, open-ended inquires as well as closed-ended questions, resulting in some interesting insights into the consumer's current mentality.

While the majority of consumers have shifted out of their full "bunker mentality" of 2008 and 2009, the buying behavior study shows that over 75% of those surveyed are still either charting new, reduced spending patterns or continuing with the patterns they developed during the depths of the recession.

When the researchers asked where the big cuts had been made and where the cuts were tapering off, they saw some interesting correlations between different product categories. They proceeded to group the trends into four basic categories:

1. Things that I don't think about – These are the products or services based on subscriptions, like satellite TV or broadband Internet or a gym membership. Also, pre-arranged experiences such as music lessons for the kids or a weekly bowling league would fall into this category. These items are already built into the budget and, for the most part, survive the spending trim much like the staples of food, clothing and transportation.
2. Investments in my life – Experiences that improve overall quality of life or provide an escape from day-to-day realities dominate this category. Examples include home improvements or new furnishings to improve a residence that in other times might have been sold, or vacations and eating out to preserve family relationships strained during the recession. When looking for places to add back some spending this is a prime category for consumers trying to get the most value out of things that now seem like luxury items.
3. Things that entertain me – As would be expected, this is where new electronic devices such as game systems or smartphones fall, as well as books or recreational activities. While this category is not as quick to get resources reallocated to it as the "Investments in my life" category, there are still gradual gains to be made here when an item requiring a relatively low, one-time cost can address a pain point of boredom that is building within the consumer.
4. Guilty pleasures – Here lie some of the toughest products to move among all those but the independently wealthy. Jewelry, designer clothes or shoes, and specialty coffee epitomize this category. While the highest income consumers will always keep such companies as Rolex and Armani in business, don't expect the "aspiring affluent" to be making statement purchases any time soon.

• The publishers of the study have provided the data and graphs for review.

For those of us who find our product, or our customer's product, in one of the latter three categories, what can we as marketers do to overcome some of this reticence to spend? CMB and iModerate put together a number of recommendations in their report. One that I think deserves particular attention is redefining the value equation.

When we are faced with a consumer that suddenly views past essentials (e.g., eating out, the latest smartphone, etc.) as the new luxury items, we have to adjust the value equation we present our customers. Obviously, the quickest way to reset the value equation in the eyes of the customer is to lower the price or start giving more for the same money, but that is almost always the tactic of last resort – and if the recession drags on long enough, deflationary pressures will take this step for you.

A better approach is matching the value your product can offer as closely as possible with the new priorities of the consumer. This means looking at the kind of studies discussed above and determining how your product or service can be viewed as an investment a consumer should want to make in their life right now. It also means talking with your customer about what pain points they are experiencing, so you can determine how your product or service can be customized to give them relief right where they are now, not where they were before the recession or where you thought they would be after the recession.

Are there any other ways you are changing the value equation for your customers as they shift their purchase behaviors? Have you been seeing some of these same trends in purchase behaviors among your family and friends? I know I've cut my Rolex purchases back sharply.