The ongoing COVID-19 outbreak has put us all in a situation we’ve never experienced before. Consumers, communities, and businesses crave facts, information, surety. And yet, unfortunately, we have more questions than answers.
However, an analysis of data from the Ipsos Affluent Survey from 2009-11 yields one key takeaway: Any expectation that things will return to “normal” quickly post-crisis can be disposed of out of hand, with data suggesting the longer term effects of a crisis like this. Here are three reasons why:
1. Economic anxieties likely persist for years. While the economic pain peaked in 2009 and declined in the years thereafter, worry about the economy softened just ≈10% each year, rather than plummeting as the financial outlook improved.
Specifically, a full three quarters of affluents were very worried about the state of the economy in 2009, but 70% were still very worried in 2010 and 65% in 2011. And the 16% that said they were very worried about losing their jobs in 2009 only declined to 15% in 2010. This suggests that anxiety and a healthy paranoia are likely to linger – possibly for a long time.
2) Data suggests that many discretionary behaviors (e.g., style, fashion, home improvement) resist immediate change, but then change/decline gradually over time -- and don’t return to normal immediately upon economic improvement.
For example, in 2009 56% of Affluents said that fashion represents who they
are as a person. In 2010, even as the economy started its rebound, this declined to 52%, and then to 43% in 2011. Similarly, 58% said being well-dressed is important in 2009, but only 54% said so in
2010, and 49% in 2011.
This suggests that early on in the crisis, consumers were still clinging to their attitudes -- but the economic context then caused them to change behaviors. And those behaviors stayed changed even as the economy came back.
3) It’s likely that certain industries will take a larger, and longer, hit than others. Data from the Great Recession shows purchase intent in some categories softened when the recession hit and continued to decline for several years, while other verticals took an immediate hit but began to rebound thereafter.
For example, intention to buy or lease a new vehicle in the next year dropped 20% from 2008 to 2009 -- and then continued a steep decline the following two years. International travel showed a similar trajectory. However, home redecorating/remodeling intent declined only about 10% from 2008 to 2009, and then began a slow return to normal. Similarly, intent to invest in stocks, bonds or funds declined immediately following 2008, but held relatively steady the following two years.
We also can see by expenditure data that personal insurance spending didn’t suffer much if at all during the recession. Neither did personal-care products or alcohol/spirits brands. These are all categories that perform more like necessities during a crisis -- and are likely to behave similarly during the current period.
-- Brand should not “wait for things to blow over” before doing research. Past crises reinforce that consumer attitudes take a long time, post-crisis, to revert. Research that establishes the new baseline will be critical to measuring the effectiveness of rebound measures over the coming months and years.
-- The uniqueness of today’s crisis amplifies the need for understanding starting now. Today’s reality is changing daily -- and what happens in the short term is sure to impact future consumer attitudes and behaviors.
-- Certain categories will suffer more than others. It’s critical for those hit harder to understand the dynamics of demand in order to counteract the downturn. And it’s equally valuable for those less impacted by the crisis to understand how to capitalize without appearing too opportunistic.
Research that tests the effectiveness of messaging and marketing communications is needed to see which are most persuasive and can break through the anxiety levels consumers are facing, and ensure that brands are seen as useful to consumers and not self-serving for their own ends.
The key takeaway, again, is to recognize that consumers are going through anxiety -- which will in turn lead to behavioral shifts -- and this won’t likely snap back to pre-crisis norms post-crisis. It is more important than ever to begin measuring and understanding consumers and attitudinal/behavioral change in real time.
Using the 2008 recession as guidelines for what to expect from the affluent market is probably not a good idea.
The aspirational affluent, those with a net worth under $1 million, were the ones most hurt by the recession. The aspirationals lost jobs, savings, credit availability, and future financial opportunity. They are the ones that cut back the most on luxury purchases.
The true affluent reduced luxury purchases moderately and returned to purchasing true luxury relatively quickly.