• by Jack Loechner , Staff Writer @mp_research, November 18, 2009

A new study, entitled "Marketing to the Post-Recession Consumers," by Decitica, addresses the lasting effects of the recession in the way American consumers have internalized the recession experience. It's particularly relevant in developing "positioning" and marketing/merchandising/advertising strategies.

Dr. Val Srinivas, Principal at Decitica, says, "This research... decisively shows that marketers need a fresh lens through which to view consumers in the post-recession world..."

Specifically, this research concludes that:

• The effects of the Great Recession on consumer behavior are so profound that many of the assumptions underpinning consumer segmentation are no longer valid; and
• Marketing strategies that do not fully recognize the diversity of consumers' recession experiences won't have the desired potency in the post-recession world.
• Many have accepted this radical change as the "new normal," and not just a cyclical phenomenon.
• The recession has caused a profound, deep-rooted change in consumers' spending habits in favor a more restrained approach.

There are four distinct consumer segments emerging from the recession according to the study, identified as:

• Steadfast Frugalists,
• Involuntary Penny-Pinchers,
• Pragmatic Spenders and
• Apathetic Materialists.

Steadfast Frugalists are committed to self-restraint, engaging in prudence with unequivocal enthusiasm. They make up about one-fifth of the American consumers, representing all income and age groups.

80% of Steadfast Frugalists say the new behaviors they have adopted will likely stay with them for a long time. This is in contrast to 24% of Apathetic Materialists who feel this way.

The main characteristics of the Steadfast Frugalists are:

• 6 in 10 are women.
• Composed of people from all age groups; however, fewer from Gen X and Gen YThe most disciplined in their behaviors and seriously committed to self-restraint Many of these individuals deemed themselves tightwads even before the recession
• 29% of individuals in this group considered themselves tightwads in this survey

"Marketers will find this group to be the most challenging, as they are the least brand loyal and most likely to discount marketing messages," notes Dr. Srinivas.

Involuntary Penny-Pinchers, about 29% of the population, have been severely affected by the recession, and are mainly made up of households with less than $50,000 in income, with more women than men.

This segment has been forced to embrace thrift like never before. Presently, their actual behaviors do not differ widely from those of Steadfast Frugalists. Where they drastically diverge is in their aversion to expending effort in money-saving strategies. Only 17% find buying store or generic labels to be satisfying, compared to 59% of Steadfast Frugalists.

77% of Involuntary Penny-Pinchers admit to being more scared by the recession, 81% stressed, and 87% more worried about the future than other groups. The main characteristics are:

• 6 in 10 are women.
• Over-represented by people in their 30s and 40s.
• Involuntary Penny-Pinchers are the most severely affected, financially and emotionally, by the recession.
• Their new-found frugality for the most part has been forced upon them. Half have not saved any money for emergencies
• 38% in this group exceeded their income last year, indicating that they were not that disciplined to begin with
• Marketers will find this group to be quite challenging to influence mainly due to their lower/diminished capacity to spend.

"Pragmatic Spenders are the most attractive group for marketers because of their higher spending power," says Dr. Val Srinivas. "While it is true that they have also curbed their spending, they are the most capable, both psychologically and financially, to willfully resurrect their past spending patterns," he added.

This group comprises 29% of consumers whose income has blunted the effects of the recession on this segment. Only 28% of Pragmatic Spenders feel the recession has changed what and how they will buy in the future, compared to 55% of Steadfast Frugalists. The main characteristics of this group are:

• 6 in 10 are men
• Over-represented by people in their 60s, and from the Northeast and West
• Over a third of the people with greater than $75,000 HHI are in this group
• Pragmatic Spenders have the greatest capacity, both financial and psychological, to willfully resurrect their past spending patterns
• Their approach to spending is tempered with caution; they have cut back and are engaging in thrift like others but seem less troubled by the recession.
• Pragmatic Spenders will be the most attractive to marketers given their above-average financial wherewithal

Apathetic Materialists seem least changed by the recession. They have not embraced the new frugality to the same extent as others and get minimal satisfaction from such behaviors. Only about 6% in this group find price comparison to be satisfying, in contrast to 85% in the Steadfast Frugalists camp.

The Apathetic Materialists segment has more men (55%) and younger consumers (72%) are below the age of forty. Only 8% admit to being very focused on value compared to 30% of Pragmatic Spenders and 52% of Involuntary Penny-Pinchers. The main characteristics are:

• 22% in the population.
• Slightly more men than women.
• Over-represented by people in their 20s (Gen Y)
• The least changed in terms of their spending habits and future intentions
• More younger, single people with limited disposable income at the moment
• Apathetic Materialists will be an attractive target for youth-oriented marketers

What makes this research particularly unique, says the report, is the examination of consumers' self-efficacy (the belief in one's abilities to successfully achieve certain outcomes) in practicing spending restraint. Evident from this chart is that Steadfast Frugalists and Pragmatic Spenders are the most confident in controlling spending, resisting the temptation to spend now and worry later, save money and stick to a budget. Apathetic Materialists have the least confidence in successfully restraining themselves,

Satisfaction from Frugal Behaviors and Self-Confidence in Practicing Restraint
Behavior	Total	Steadfast Frugalists	Involuntary Penny-Pinchers	Pragmatic Spenders	Apathetic Materialists
	Percent Who Find each Activity "satisfying"
Buying on sale or using coupons	40%	87%	37%	34%	11%
Buying store labels	22	59	17	15	6
Shopping at discount stores	29	77	24	19	8
Surfing the Internet for coupons and discounts	30	73	24	24	10
Comparing prices before purchase	35	85	32	26	6
	Percent Who are Highly Confident in their Ability toPractice Restraint
Resisting the temptation to spend now and worry later	53	87	46	73	5
Saving money	35	70	18	54	5
Sticking to budget	44	87	46	73	5
Source: Decitica, November 2009

Self-Efficacy Income, Gender and Age Differences

• Age is positively correlated with self-efficacy in controlling spending
• Both men and women 40 years or older, irrespective of income, are significantly more confident about restraining spending
• 40+ women with greater disposable income are the most confident about resisting the temptation to spend now and worry later, indicating they are more long-term focused
• This finding is not good news for marketers whose traditional audience are mainly boomer women

Percent Who are Highly Confident in Controlling Spending
Income Group	Gender	Age	% Highly Confident
>$75K	Females	21-39	37%
<$75K	Females	21-39	42%
<$75K	Males	21-39	43%
>$75K	Males	21-39	47%
<$75K,	Males	40+	57%
<$75K	Females	40+	58%
>$75K	Males	40+	60%
>$75K	Females	40+	61%
Source: Decitica, November 2009

 

Percent Who are Highly Confident in Resisting the Temptation to Spend Now and Worry Later
Income Group	Gender	Age	% Highly Confident
<75K	Males	21-39	37%
<$75K	Females	21-39	41%
>$75K	Males	21-39	41%
>$75K	Females	21-39	43%
<$75K	Females	40+	63%
>$75K	Males	40+	66%
<$75K	Males	40+	67%
>$75K,	Females	40+	72%
Source: Decitica, November 2009

Price has become the dominant consideration in the purchase of all kinds of products, concludes the study. Of considerable significance is the fact that half of Pragmatic Spenders are looking at price before other features and one-third say that brand name products are not worth the extra price, heralding what will likely be a long uphill struggle by marketers to shift the focus away from price, says the report

"I am the kind who first looks at price before I consider other features."
Consumer Segment	% Who Agree
Apathetic Materialists	27%
Pragmatic Spenders	52%
Involuntary Penny-Pinchers	14%
Steadfast Frugalists	66%
Source: Decitica, November 2009

 

"I have come to realize that brand name products are not worth the extra price."
Consumer Segment	% Who Agree
Apathetic Materialists	16%
Pragmatic Spenders	32%
Involuntary Penny-Pinchers	4%
Steadfast Frugalists	49%
Source: Decitica, November 2009

 

Please visit here for highlights of the report.