Recession, Retailers Are Changing Your Customer

The current economic situation, along with retailers' strategies for helping shoppers cope with it, are probably doing more to change your customer than your marketing budget. Fortunately, at this point the situation represents both opportunity and challenge.


It's an opportunity because this recession, so different than most of its predecessors, has forced shoppers/consumers to re-evaluate their habits, routines, rituals and behaviors.

Over the past 12-18 months, the average grocery basket has increased about 10%. Bad enough with the fluctuating price of gas, shrinking personal worth, etc. But during that same time period, staples like eggs, milk, bread and pasta have seen price increases anywhere from 20% to 50%. So the "cooking from scratch" solution is not as much of a "stone-cold, lead-pipe lock" (quoting ESPN's Mike & Mike) that it might have been during past downturns. The insight here is that while people are more economically pressed, they don't necessarily have more time for many of the things that can be done to cut costs, i.e., meal preparation, cooking, cleaning, etc.



Recession re-evaluations

A year ago, a consumer might not have thought twice about ordering out for dinner after a long week of work for him and his spouse. Likewise, shoppers would have happily displayed their purchases from Neiman-Marcus or Nordstrom's. No longer.

There's even evidence that women are waiting longer between visits to their hair salon. That's because luxury is now out. Not just for financial reasons, but because "conspicuous consumption" is no longer cool, smart, or fashionable. Cheap is chic!

These are all recessionary re-evaluations consumers and shoppers have made of their own volition. And they are re-evaluations that no amount of discussion, marketing, or other forms of persuasion would have changed 12 months ago.

Research from the Food Marketing Institute suggests that shoppers are becoming more "planful" in their stock-up shopping trips. And a number of IRI studies suggest that shoppers/consumers are rapidly changing many of their behaviors to help cope with the current recession. They are generally in a thoughtful mood and are more open and willing to take action on rethinking and re-evaluations.

Co-opetition Retailers

The challenge comes in several forms. First, retailers are vying for the title of "value retailer" in the minds of consumers/shoppers. To achieve this, they are turning to manufacturers of consumer packaged goods for ways in which to communicate value to their shoppers. Basically, the idea is for the retailer to be perceived as the choice editor and the value guru, rather than the brands. The retailer has become the brand intermediary.

Moreover, as retailers vie for the value merchant title, they are creating "co-opetitive" situations (i.e., both cooperating and competing with the brand manufacturer). To be perceived as the value merchant, retailers are often featuring their own store brands alongside manufacturer brands in an effort to help shoppers manage their expenditures.

For example, retailers are communicating about value in a number of different ways:

  • In drug store circulars, it is not unusual these days to see store brand products (e.g., Walgreens' W brand or CVS Pharmacy brand) offering 10 items for $10 or at 50% Off! - and in the same circular to see national brand health and beauty products on sale as well (e.g., Cover Girl or Olay "buy one, get one free" offers).
  • In other cases, retailers such as Wegmans supermarkets have created more direct comparisons between national brands and their store brand equivalents (e.g., Wegmans O cookies vs. Oreos) to highlight price differences.
  • Another form of value comparison being promoted by retailers is to feature products of two different manufacturers in the same ad (e.g., recent Target circulars feature two different cleaning products: Soft Scrub (Clorox) and Windex (SC Johnson) at "3 for $7"; or Febreze (P&G) and Glade (SC Johnson) at "2 for $9").
  • There are also examples where the retailer and manufacturer work together more symbiotically (e.g., Target's "New Movie Night" or Wal-Mart's "Gametime"). In both of these promotions, the focus is on home, and saving money on a number of products.

These kinds of promotions and circulars make it easier for store brands and manufacturer brands to co-exist; and these trends in co-opetition loom even more importantly today given the emphasis shoppers/consumers are placing on price.

Marketers should be sensitive to these "value tectonics" because both the economy and the retailers have served to revamp the way shoppers/consumers assess value in the short-term - and more importantly because these twin forces have forced consumers to change rituals, routines and habits that will affect long-term behavior.

Such experiments of opportunity don't occur often. Marketers should take advantage of this re-evaluation to reposition their brands.

Editor's note: If you'd like to contribute to this newsletter, contact Nina Lentini.

1 comment about "Recession, Retailers Are Changing Your Customer ".
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  1. William Melnick from SAI Marketing, February 24, 2009 at 11:20 a.m.

    We at Brand Idiomatics, a consumer forecasting and strategic planning consultancy, came to a similar conclusion about 9 months ago. While the sharp contraction of consumer credit initially drove the early changes in consumption patterns, our analysis showed that macro economic forces converged throughout last year to fundamentally change the personal wealth circumstances of consumers and thus force a complete reallignment of consumer outlook and behavior. Specifically, the great majority of consumers saw the collapse of their net worth which was in the form of home equity and financial assets and had been the primary vehicle for savings for more than two decades. In the wake of that event, consumers quickly reversed cash savings patterns from a -1.2% to +3.6% by the end of 2008 to begin to repair their family balance sheets. Aside from real and perceived employment uncertainty, this savings trend has pulled some $400 billion in consumption out of the economy. That number could rise to $800 billion if savings rates return to their historic mean at 8%.

    In the face of this activity, consumers have a greatly reduced amount of discretionary funds for consumption and therefore have begun to prioritize and re-evaluate what constitutes value within a new Consumption Contextual framework. We believe that the new definition of value is perceived as a combination of functionality, durability and price; therefore, consumers are determining that value only exists as a means of supporting lasting benefits in their lives.

    Brand Idiomatics has identified the emergence of a new consumer segment that we call "The Essentials" and has dimensionalized their outlook, beliefs and behavior.
    To find out more about The Essentials, visit for a free download of our whitepaper. If you would like to find out more about how The Essentials will forever change brand marketing, we would like to buy you lunch and talk about it.

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