Branding Strategy Insider

Consumer Behavior: From Trading Up To Trading Off

The opposite of trading up is not trading down. In fact, there is no opposite of trading up; shopping behavior is more nuanced than that. When shopping hit the skids after the financial crisis, there was a lot of talk about a new normal of frugality, as if the only thing possible after a decade-plus of trading up was a generation to come of nothing but trading down. It’s clear now that those prognostications were flawed, not to mention overly pessimistic.

This is not to say that consumers aren’t buying less. Indeed, they are. The drop in discretionary consumer spending from the pre-recession peak to the recessionary trough was 6.9 percent, more than double the next largest post-WW2 decline during the second dip of the early 1980s double-dip recession. Since hitting bottom, spending has been growing, but on a trend line below the pre-recession trajectory. This so-called output gap is the shrinkage in the size of the economy that is playing out most problematically as high, enduring unemployment. Clearly, consumers have cut back.

The proper issue is not whether, but in what way consumers are cutting back. One way in particular is under-appreciated. More than trading down, consumers are trading off. Squeezed by tighter finances, many consumers – most, in fact – are not walking away from the things that matter most. Instead, they are prioritizing those things then trading off everything else to afford them. Brands suffering from trading down have simply done a poor job of making themselves a priority worth trading off to get.

Brand Attraction And Consumer Orientation

What consumers fear most nowadays is not failing to reach the top but tumbling down to rock bottom. The possibility of losing everything is a palpable peril in an economy wracked by high unemployment, weak growth, volatile stocks, disarray in Europe and gridlocked leadership. Most consumers have little if anything to fall back on should the worst happen, so it’s hardly surprising that they are thinking more about avoiding the worst than getting the best.

It wasn’t too long ago that consumers compared their personal situations to those with more, and worried about how they stacked up. This pull and tug of the top fueled the frenzy of trading up. Brands that offered more had a powerful attraction.

Lately, surrounded by others who have lost it all, or overwhelmed by such stories, many consumers now compare their individual situations to those with less, not those with more, and worry about how to avoid winding up like that. What is shaping their behavior is the repulsion of the bottom not the attraction of the top.

More and more consumers say to pollsters that they have slipped out of the middle class. Even many consumers with income and assets that secure them from any risk of ruin have also answered that they feel under threat. The context of the marketplace has refocused almost everybody on looking down with dread rather than looking up with aspiration.

Brand Building Requires Empathy For The Customer

You’ve all heard the timeless advice “know your customer”. Most marketers agree knowing the customer is fundamental to serving the customer. Basic stuff right? But I wonder how committed brand managers are to really knowing their customer? The very term “brand manager” implies something less that “brand builder”.
In my opinion, to be a brand builder requires empathy for the customer!

Empathy is a powerful tool for gaining richer insight into your customer’s experience at every step in their value chain. Really knowing what influences and drives customer behavior requires one to walk a mile in the customer’s shoes. You can’t build empathy with your customers sitting behind the glass in a focus group, or putting them through long complex surveys.

Live the Customer.

Do you live the customer?  Is your marketing organization driven to deeper action toward sharing the customer experience first hand across all touch points.  Marketing organizations that have an empathy-driven culture are brand builders, not brand managers. This is an important distinction, and one that has a profound effect on your brand’s competitive advantage. How you get to know your customer, from insight building and evaluative testing, to how you communicate with them in earned and paid media, at shelf, and how you engage with them in post-purchase- are all touch points for engaging customers with greater empathy. You can’t pay lip service to this idea. Empathy must be a core value of the promise your brand makes.

Keys To Renewing Interest In Your Brand

As consumers, our attention spans are getting shorter and shorter. We are inundated by brands – on the shelf, in print, on television, on our phones and computers, on coffee cups, napkins, billboards, trash cans, t-shirts, cars, just about everywhere we turn. Most of us have become desensitized pedestrians in this ad-blanketed world that we need to be visually stimulated to keep our attention, even for a few seconds.

Did you know?

On the record, we are becoming more inattentive, over-active, and impulsive. It is becoming harder and harder to catch and keep our attention. The Center for Drug Control (CDC) estimates that 5.3 million, or 8.6%, American children age three to 17 have been diagnosed with Attention Deficit Hyperactivity Disorder (ADHD). And, it is estimated that 4.7% of adults in America currently live with ADHD. These numbers are growing each year.

To further exasperate our shorter attention spans, we also have a lot more stuff to choose from. In the US, we have over 400 different types of cereal, 1000 types of potato chips, 240 types of toothpastes, and over 800 types of shampoos. The average, American visits the grocery store at least twice a week, that’s a lot of product to choose from and a lot of decisions to make!

Finally, when we are home, we can’t escape brands and their messages. According to the Nielsen ratings system, the average length of commercials in the U.S. today is 30 seconds. Commercials take up approximately 18 minutes of airtime from one-hour programs. That’s about 36 commercials an hour!

So ask yourself...

In this age where consumer’s minds are skipping faster and faster from one thing to the next, how can marketers keep their brands top-of-mind and in the cart? Look at your brand and ask, Are we still fresh? Do we stand out on the shelf? Are we capturing the attention of the consumer? Are we connecting with the consumer on multiple levels? And ultimately, are they buying our goods? If you pause to think, it’s time to Look, Listen and Connect.

Net Promoter Score Defined

If you are a good marketer you've heard of the Net Promoter Score (NPS). If you are a very good one, you know what your NPS is. If you have no idea what I am talking about, read the definition at the bottom, and then meet me at paragraph two.

NPS is a rather bold little calculation. Its inventor, Fred Reichheld (pictured above), argues that a single question and its resulting score is the only metric you need to measure satisfaction. He also claims a correlation between a high NPS and future revenue growth.

And the metric has taken off. Online forums have sprung up, full of managers keen to discuss it. High-profile chief executives have publicly praised NPS and added it to their management systems. Even finance people have taken note, with several institutional investors asking for the score as part of their due diligence. But two audiences are genuinely unhappy with NPS.

All Consumers Are Not Created Equal

Academics rarely get out much. So it is perhaps no surprise that one of the major conferences for marketing academics, the European Academy for Consumer Research Conference proved so popular.

Two Hundred marketing professors from around the world convened in Dublin to spend three days presenting and discussing their research and then drinking heavily and falling over in the evenings.

One of the prime locations for the latter activity was Temple Bar. Dublin's pre-eminent, city centre location for nightlife is as famous an Irish venue as Trinity College or the Guinness Brewery.

I still tenderly cherish (but only vaguely recall) a long, boozy weekend I spent there a decade ago. And what a place it was: local Irish pubs filled with character and a mixed crowd of young Irish people on the brink of experiencing the economic windfalls attributed to the 'Irish Tiger'.

But the past ten years have not been kind to Temple Bar. Many of the authentic independent bars, forced out by sky-high rents, have been replaced by generic chain pubs. The clientele has changed too. Many of the more discerning Dublin drinkers now avoid the area and it is filled at the weekends with stag parties, foreign students and tour parties. A survey published by the Royal Institute of Chartered Surveyors actually uses Temple Bar as a case study in understanding how an area changes from "buzz to bland" and how a once-admired area becomes "inauthentic". The survey concludes that British cities can learn much from these mistakes.

Ironically, while many in Dublin place much of the blame for the demise of Temple Bar on the "marketing men" who have over-commercialised it, a true marketing vision for the area could have been its saving grace.

The Power of the Super Consumer

I was working last week with the marketing directors of a multinational biotechnology company. It manufactures a device that alleviates the symptoms of a commonly occurring affliction.

We were running five groups of patients to identify whether the device was working to their satisfaction and to learn more about their perceptions of the condition. But it was clear from the outset that something was very, very wrong with our focus groups.

Our trained moderators lost control of the groups within minutes. We expected, indeed hoped, that the groups would set the agenda, but this was ridiculous.

Each group was interrogating their moderator about the company, its planned products, business strategy and, in one instance, a recent corporate acquisition.

Even worse, despite the fact that our moderators were all company employees with years of product experience, many of the patients appeared to be much more knowledgeable than them. Within 20 minutes most groups were on the verge of breakdown.

It was only later that evening, as I reviewed our recruitment strategy for the groups, that I was able to confirm the problem. We had invited participants to attend from a list of patients supplied to us by a leading charity and inevitably this list and those who responded to our mailing were skewed away from typical patients and toward lead users. Lead users are 'super consumers'. They occur in every market, usually arriving at the head of the adoption curve. They have a much greater degree of product expertise and develop stronger brand relationships with the manufacturing organisation. They also have an incredible influence on the rest of the market, which tends to perceive them as experts and values their opinion higher than any other source of information.

The Power of Breaking Consumer Compromise

I believe “breaking consumer compromises” is one of the most powerful concepts in business today.   Introduced by George Stalk, Jr., David K. Pecaut, and Benjamin Burnett in a Harvard Business Review article in late 1996, it states that the best way to create breakaway business growth is to identify all the ways in which a business has made compromises with the consumer and then break them all so that that consumer gets exactly what he needs and wants.

CarMax and The Used Car Industry
A powerful example they use is CarMax and the used car industry.  An industry outsider (Circuit City) carefully analyzed the very large and profitable used car industry to identify all the consumer compromises – limited variety at any one place, no maintenance records, limited knowledge about the car’s history, high pressure sales tactics, perceived lack of honesty, etc.  By breaking all of these compromises, Circuit City gained a substantial market share very quickly with its CarMax business.

The Greeting Card Industry
Another example is the greeting card industry.  Most of the major greeting card companies raised their card prices much faster than the rate of inflation over several years until the average price of an individual card exceeded $2.  This invited deep discount card shops into the industry.  Factory Card Outlet (selling all cards for under $1) and others have gone from a zero share of market to over 20% of the market in less than 10 years. (These stores have introduced other compromises, however, which will limit their long-term share to about 25% of the market – unless they can keep on reinventing their successful business formula.)

Another greeting card industry example is share shift from card shops to the mass channels.  As more and more women entered the workhorse (the vast majority of working age women today), the convenient hours of grocery stores, chain drug stores, and Wal-Mart broke the compromise consumers faced in card shops (with their traditional 10 am to 5 pm hours, which they have extended more recently).

Building Emotional Connections with Research

 
The most compelling brands usually connect with consumers at an emotional level. Their benefits are often experiential, emotional or self-expressive.  Certain types of research can help marketers understand which benefits will have the greatest emotional impact.

Following are some of the types of research that one could use to identify these sources of emotional connection:

Laddering – this helps one understand the following links: product or service features and attributes → functional benefits → emotional benefits → underlying consumer attitudes and values →  self-image → self esteem (“I feel good about myself.”). The researcher leads the research participant from brand or product features and attributes to self-esteem through a series of “why” questions. The most powerful levels at which to communicate with the consumer are at the emotional benefit, attitudes/values and self-image levels.

Projective techniques – these help the marketer uncover brand associations that the average person cannot or will not articulate unless asked indirectly. Typical projective techniques include:

o    Sorting (into two piles: “This is the brand,” and “This isn’t the brand” or “This is the brand’s consumer” and “This isn’t the brand’s consumer”) – can be done with the products themselves, images, colors, flavors, textures, sounds, etc.
o    Analogies, including “If the brand were an animal, what kind of animal would it be and why?” or “If the brand were a car, what kind of car would it be and why?”

The Future of Consumer Behavior

A typical 21-year-old has played 5,000 hours of computer games, exchanged 25,000 emails, SMSs and chat messages, has used a cellphone some 10,000 times and spent 3,500 hours online. Surprised? Well that’s your future consumer.

When I conducted the ‘BRANDchild’ research for my book of same name – the world’s largest study on kids and their relationship with brands - one of the results which took me most by surprise was the number of channels kids are able to handle at the same time. Where adults are able to manage 1.7 media channels at the same time, say, watching TV and reading a magazine, kids can give attention to an astounding 5.4 channels at the same time. To illustrate this multi-tasking, they can watch TV, send SMS messages, surf the net, chat on MSN, listen to music and even devote 0.4 of their simultaneous communications repertoire to homework.

But even more surprisingly, when I recently repeated the study, three years on, not only had the number of channels kids handled at once increased by 0.2, but adult capacity for dealing with multiple channels had increased by close to 0.1. It seems, therefore, that the ever-evolving media environment is not only influencing the younger generation. It is affecting us all and we are all making adaptations to it. This leads to this question: what behavioral changes will we see in future generations vis-à-vis communications strategies and media use?

The answer is straightforward. A lot. But here are two key developments you can expect to deal with in handling future generations of consumer behavior: