As consumer spending and ad budgets continue to decrease, it’s not unreasonable to think we may be entering a “post consumption economy,” as Ed Cotton of Influx insights describes it:
This latest downturn, recession, depression, or whatever you like to call it has gotten people scared.
There’s simply no way to see ahead to work out when this is all going to be over and life and business will return to normal.
However, there’s certainly an expectation from most people that things will eventually return back to normality, with the only question being when this will happen?
What if their expectations are wrong?
What if we are going through a giant “RESET” and there will be no return to normal, just a new post-depression era.
There are some signals already that suggest this might be the case; the shift from negative saving for US consumers, to the current 5% of income, is a big change that might not be temporary. The fall off in credit and the push to saving means a lot less disposable income floating around the system and therefore a much more challenging time for brands trying to chase these dollars
While it’s definitely not business as usual in these times, before we get too far ahead of ourselves down the “post-consumption” rabbit hole, it’s useful to remember that the underlying socio-psychological desire we all have to express our identities has not in any way been dismantled recently. We may be spending less and saving more, but we nevertheless still seek ways to express aspects of our selves, and the things we purchase still serve to fulfill that desire. Of course, the way we make purchase decisions now is changing, and for brands, adapting to this more challenging consumer landscape requires a more attuned understanding of consumers’ needs, and more strategical approaches to connecting with them. To that end, here are five directions I think brands should focus their energies and resources towards in the current climate:
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1. SOCIAL MEDIA STRATEGY
Forrester Research Senior Analyst, Jeremiah Owyang, writes:
In our latest research: Social Media Playtime is Over, we found that 53% of marketers are determined to increase their social media budget during a recession, and 42% will keep it the same, a total of 95% of marketers bullish on social media marketing. Why? The reasons are obvious to some, it’s inexpensive and the opportunity to benefit from cost-effective word-of-mouth, are promising.
The problem revealed in the research findings, however, according to Adage’s B.L. Ochman, is that many brands “Are not integrating social media into their overall marketing strategy. Instead, they are ‘experimenting’ with isolated tactics and hoping that they will take the place of long-term strategy. Furthermore, social media is [considered] more of an after-thought than a marketing line item.”
Since new media budgets have generally been small to begin with, (three-quarters of marketers surveyed have $100,000 or less budgeted for social media marketing), it’s not surprising they are easier to sustain, and even expand upon in this economy than a behemoth ad spend. But the big difference between the traditional advertising model and social media is that the latter does not really function as an isolated “campaign.” Social media strategy is an ongoing process that is integrated into the brand’s overall messaging and a defining aspect of its identity. In a time when consumers are becoming hyper-conscious of finances, all the advantages of social media (that are not offered by advertising) become more pronounced. If we now need to be much more discriminating about how we spend our money, personal endorsements (or denouncements) from real people (and particularly those in our social networks) will have much greater influence on our purchase decisions. So will the way a brand handles consumer engagement. Understanding social media as a strategy rather than a gimmick or “add-on” will go a long way to extending reach, impact, and customer retention in the recession.
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2. BRAND MEANING
Wired columnist Clive Thompson writes in the current issue about the Revolution in Micromanufacturing:
Last summer I spent weeks shopping for an anniversary present for my wife. I searched all my usual retail sources but couldn’t find anything that hit just the right note. Then I went to Etsy—an ecommerce site where artisans sell unique handmade goods—and found the microstore of ClockworkZero, a woman who turns old electronics gear into steampunk accessories. Presto: ClockworkZero’s stuff was both gorgeous and geeky, precisely the vibe I craved. I came away with a necklace made from a vintage vacuum tube.
The economy may be cratering, but people are stampeding to handmade goods. Why? The Etsy guys attribute their success in part to customers tiring of cookie-cutter products. “The ’90s were the period of wearing big-box names on your chest,” says Adam Brown, who heads up Etsy’s cooperative advertising program. The site’s popularity may also be a reaction to the slightly sour, rummage-sale feel that taints eBay, progenitor of the modern microbusiness.
As Virginia Postrel wrote in her superb book The Substance of Style, Americans have become more discriminating over the past few decades. In the ’60s and ’70s, we worried about getting good-quality stuff, she says, because mass-market manufacturing was often of such poor quality. But most products these days are decent: the bargain-basement TV you get at Best Buy will last 15 years. So now we’re focusing more on aesthetics, beauty, and uniqueness.
And we are also focusing on personal meaning. We don’t just want a beautiful and unique product, we want a personal story. NYU Sociologist Dalton Conley writes about the very importance of having a story to tell about the things we own (like the one Thompson recounted about his search for his wife’s present) in his book Elsewhere U.S.A.:
Individuals are led to try to give their totemic objects of choice a personalized spin, embodying them with particular knowledge or histories that bestow status on the owner. It might be the handbag fashioned by garbage pickers in Manila’s slums: The fashion statement rests both in the political stand, of sorts, taken by the owner and in the pleasure of telling how such a bag was obtained (especially if one cannot yet order them online). Or it might be the ability to talk about wine “intelligently.” Or maybe the simple wooden table that was serendipitously purchased at a roadside house sale when your rental car broke down in New Hampshire, that comes with a great story about the old lady who sold it to you while being pestered by a presidential candidate seeking her vote in the 1992 primary. Or the willingness of the Prius owner to boast about the greatest mileage per gallon she has ever achieved with her hybrid car that she hacked in order to be able to recharge the battery from a wall socket.
Often the social value rests in the aura around the product with which we imbue it.
If you’re thinking about brand development during the downturn that last sentence is gonna be crucial. “Consider the numbers,” Thompson writes. “Etsy has 2 million users buying nearly $90 million worth of stuff annually. Its sales have increased twentyfold in the past two years.” When all products are of equally good quality, and custom-made objects are both affordable and easily accessible, it’s the brands that can offer us the most meaningful and distinctive story that will provide the greatest “value,” and as we are forced to deliberate our purchases ever more stringently, they’ll be the ones we’ll choose to buy.
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3. SUPPORTING COMMUNITY
(This is also part and parcel of #1.)
When everything else is uncertain (and nothing says everything’s uncertain like putting the word “global” in front of the word “crisis”) the comfort of community will matter even more to us. More important that pushing consumers to connect to a brand, is creating ways for consumers to connect to each other through a brand. Working in lifestyle events and music festivals for 10 years, I’m intimately familiar with the incomparable role social gatherings play in reinforcing community ties. Many events can, themselves, become identity-defining brands, motivating attendance not just by the promise of a good time, but by the opportunity to share an experience with friends and establish belonging within a greater community. In talking with South By Southwest Festival organizer Hugh Forrest, Owyang writes that attendance to the event’s Interactive portion is up approximately 20% this year. It is a testament to the the appeal of community-reinforcing experiences that this can be the case in a recession.
MillerCoors is among the companies currently seeking to increase their investment in event strategy, according to Adage:
That stakes-raising strategy paid off two weeks ago, when MillerCoors sponsored a U2 Day for Emmis’ XRT radio station in Chicago to promote the release of U2’s new album, “No Line on the Horizon.” For the month leading up to the event, MillerCoors and Emmis ran a co-sponsored mobile campaign where listeners could send text messages to win a chance to score tickets to an exclusive U2-hosted event. Ms. Luegers said the promotion was the perfect opportunity to establish a database of avid MillerCoors drinkers in the Chicago market and re-market to those consumers in the future.
Plus, the U2 contest delivered the ultimate success metric for both advertiser and media partner: “Fans got the feeling of, ‘Wow, I’m in a secret underground society where the average person walking down the street doesn’t know about, but I’m here because I’m an avid listener,” she said.
For brands, providing environments that reinforce community ties means not only a much deeper connection with consumers, but also a platform to jump start the “network effect.” If everyone else in your community is into something, you’ll feel compelled to be into it too because it’s a part of the lifestyle that defines you. Think about how this impacted the spread of Twitter, American Apparel, or Harry Potter, for example. .Just as the brands that offer us personal meaning will be the ones considered to provide more bang for our buck, so too will the ones that offer us a deeper community connection and shared experiences.
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4. ADDRESSING CONSUMER REALITY
Same as we seek to counteract our anxiety in tough times with the buffer of community, we’ll gravitate to brands that offer “Certainty in Uncertain Times,” As Hjörtur Smárason writes on “Why Hyundai is Winning the US Automarket”:
It’s a recession and it isn’t easy for the car makers. In January sales dropped 37% in the US (which is pretty good compared to 88% here in Iceland). The American producers are leading the drop with 55% (Chrysler), 49% (GM) and 40% (Ford). But Hyundai didn’t drop. They increased their sales 14%!
Why is Hyundai growing while everyone else is losing? They are playing their cards according to the situation. These are uncertain times. People don’t know how the economy will develop. More people are going to lose their jobs, and no one is safe. At times like that, people hesitate to make big commitments, like buying a new car. So to overcome that, Hyundai started their Assurance program: If you lose your job or income, you can just return your car. They'[re] even offering to pay for you up to three months if you can find another job within that time.
Brands that are genuinely able to address the needs and prevailing sentiments of the current consumer reality may even be able to undermine brand loyalty as deeply embedded as the Mac Vs. PC dichotomy. Back in October, Steve Jobs announced that Apple doesn’t “Know how to make a $500 computer that’s not a piece of junk, and our DNA will not let us ship that.” Which is why the nascent Netbook market is dominated by the PC. While the computer industry overall is going through a rather tough period, the Netbook segment of the market has shown a growth of over 160% quarter-over-quarter. With that kind of growth, there’s no doubt loyal Mac users are being swept up in the Netbook tide. Whether it’s figuring out how to make a $500 computer that’s not a piece of junk, or allaying people’s car-shopping fears, or just seeking to provide certainty in uncertain times in general, genuinely addressing the current consumer reality is going to be the deciding difference between growth and decline during the economic downturn.