As the economy lurches toward recovery, consumers are emerging with vastly different feelings about the last 14 months -- and very few of those are rooted in demographics.
At least that's the conclusion of a new study on cost-cutting behaviors by Decitica Marketing Strategy & Research, which looked at how more than 1,000 adults tried to save money in the last year, and how they felt about it.
"What we've found is that basic demographics -- how much money someone earns, age, gender, where they live -- don't fully explain the change in behavior, either in the types of cost-cutting they pursued, or how they felt about it," Val Srinivas, principal and founder of the Chatham, N.J.-based firm, tells Marketing Daily.
"People can be from exactly the same demographic group, yet have very different feelings and plans. Some -- about 20% -- have really enjoyed discovering their new frugality. And for some, it's been miserable. We wanted to look not just at the ways consumers curbed spending, but how they felt about them, and how effective they felt they were."
The research found that people fall into four distinct groups:
- Steadfast Frugalists, about 20% of the population, are the most enthusiastic about all types of cost cutting, whether it's tracking down deals on the Internet or sagely delaying a car purchase. For marketers, Srinivas says, this group will be the most challenging to win back -- they're having too much fun not buying. "These people are shunning the culture of consumption -- and when the economy picks up, they're not even aspiring to go back to brands they once purchased." In fact, 80% of say they won't go back to shopping the way they did before, even when the economy kicks back into full gear.
- Involuntary Penny-Pinchers -- about 29% of the population -- is the group that has been most hurt by the recession, which includes more women and tends to have lower income, with more people earning less than $50,000. Because they have been forced into drastic savings, they like it less. Only 17% find buying store or generic labels to be satisfying, compared to 59% of Steadfast Frugalists.
He predicts they will go back to their old habits, just as soon as their paychecks allow. "It makes sense to me that people who don't like a certain behavior won't continue it for very long," he says, "and people who do, will. It's very similar to something like a weight-loss program."
But for marketers, the problem is that this group will be the slowest to regain their previous levels of discretionary income, and they have been most pounded by the loss of credit: 38% of this group say their spending last year exceeded their income.
- Pragmatic Spenders, about 29% of the population, tend to be more affluent, and as a result, less directly changed by the last year or so. Their approach to spending is tempered with caution, he says. They have cut back and are engaging in thrift, like other groups, but seem less troubled by the recession. Only 28% say the economy has altered their ideas about what and how they buy in the future. They don't like trading down or clipping coupons. But like the Steadfast Frugalists, they have plenty of confidence in their ability to save money, control spending, stick to a budget, and defer purchases.
- Apathetic Materialists, about 22% of the population, appear to be the least changed. They have taken just a few sips of the Tightwad Kool-Aid. They have used fewer frugal behaviors, and they have liked them the least -- just 6% say they enjoy comparing prices, for example, compared to 85% of Steadfast Frugalists. While this group does tend to be slightly more male (55%) and somewhat younger (72% are 40 or younger), what sets them apart is how little confidence they have in their own financial skills. They are the group least likely to believe they can rein in their spending.
While the Pragmatic Spenders and the Apathetic Materialists are most attracted to brand-name products, and most likely to return to them (if they ever left) all marketers have a tough road in the coming months, says Srinivas. "There's no doubt that the average level of materialism has gone down in the U.S., so it will take a lot for the brand market to come back fully."