Americans' Insatiable Need To Spend

Last month, consumer spending rose for the fifth month in a row, a small but significant boost of 0.3% over January 2010 spending levels.

Have we finally come out on the other side of the lingering recession?

Possibly, but increased consumer spending may not be as good a sign as rising Dow Jones numbers would lead us to believe.

Although consumers are more willing to open their wallets, it's not because their bank accounts are growing. Americans' incomes didn't budge last month, and our savings took a hit. We saved 0.3% less of our disposable income than we did in January of this year, registering the lowest American savings rate since October 2008.

Couple that with a 10% unemployment rate that isn't going down any time soon, and it becomes clear that Americans didn't permanently change behavior as a result of the downturn. Are we slipping back into the irresponsible habits that got us into this mess in the first place?

It's not so much blatant irresponsibility as savings fatigue. The truth is, it takes something really scary and catastrophic to get Americans to make fundamental changes. The recession hit in a big way and we changed our habits from spending to saving -- for a while. But when we weigh the threat of a catastrophic event against our belief in brighter futures and capitalistic promises, American optimism and desire for a better future always trumps fear.



We don't want to see ourselves as victims of a financial system gone bad. We want to feel normal again. And part of that normalcy comes from indulging in the simple, quality pleasures we enjoyed before September 2008. A dinner out at a new restaurant that just opened. A pair of jeans that catches your eye even though they're five racks away.

Retailers have helped facilitate consumers' return to small indulgences by stocking lower-cost items that give shoppers an affordable re-entry point to the luxury brands they had to give up. Stephen Sadove, Chief Executive of Saks Inc., explained his store's strategy: "Within a brand like a Prada or a Gucci, [we are] shifting the buy to more of the entry price point. Our customers don't want to trade down brands. They love their brands. But within the brands we're making some changes."

Casual dining restaurants are taking a similar approach to enticing customers who are willing to pay to eat out as long as they're getting quality food. Chili's Grill & Bar recently ended its "3-for-$20" promotion, "focusing instead on a revamped and higher quality menu."

So far, this "pay for quality" approach is working. U.S. retail stores saw February sales rise 4% over their 2009 benchmark. Clothing stores rose 0.6% between January and February of this year and restaurants and bars were up 0.9%.

As marketers, we've been focusing on "need"-based messaging to prove a purchase is necessary. As spending habits return to normal, we must remember to tap into the "wants" of our consumer audience as well.

Marketers, you can acknowledge your product doesn't have to be a discount antidote to the recession to sell. Americans will lay down their dollars (a modest amount of them, anyway) for quality, enjoyable, beautiful reminders of the good old days -- and the promise of better days yet to come.

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