Economy Makes Consumer Behavior Erratic

If marketers and retailers are feeling at loose ends about how to adapt to consumer behavior, there's very good reason.

Consumer attitudes are shifting noticeably within short time frames, heavily influenced by key events such as the financial meltdown of early October and the presidential election, as confirmed by week-by-week data now being released in reports by Experian Simmons.

To provide marketers with faster trends data, the researcher--which moved to quarterly reports in June 2008--is publishing select preliminary data from its latest three-month wave of the Simmons National Consumer Study (Fall 2008) as the data comes out of the field. Because the data is not yet weighted (fully projected to) the U.S. population--absolute percentages are not claimed to be exact; however, the relative percentages are indicative of trends across time.

For example, in a just-released report, the researcher tracked by-week attitudes related to consumers' financial confidence levels for the period spanning Aug. 18 to Dec. 8 last year. Changes in the weeks preceding and following the "meltdown" week of Sept. 30 to Oct. 6 revealed trends including:

  • The proportion of people who felt they were better off financially than 12 months ago was fairly stable until the meltdown, when a steep decline began. The decline lasted until around the start of the Christmas shopping season, when the numbers began to recover.
  • Those in the highest income bracket ($100,000+) showed the largest post-meltdown drop in the percentage reporting that they felt better off a year ago (declining from 26.6% to 19.8%). The percentages of those in the middle range ($40,000 to $99,000) declined from 20.2% to 14.8%, while the percentage of those in the lowest range (under $40,000) declined from 16.3% to 12.1%.
  • Overall, despite the not-exactly-rosy economy prior to the meltdown, the percentage of consumers who said they expected to be better off financially in the next 12 months was rising until the meltdown week. The subsequent drop-off continued until shortly before the week of the election, then rose and plateaued in mid-November, staying stable through early December.
  • The middle-income group showed the largest post-meltdown drop in the percentage that believed they would be better off financially in 12 months, declining from 36.1% to 29.9%. "This seems to indicate that Barack Obama and John McCain were right on the mark in focusing their campaign strategies on appealing to the middle class," notes Max Kilger, chief behavioral scientist for Experian Simmons.



Those at the lowest income level actually showed a post-meltdown upturn in the percentage expecting to be better off in 12 months, from 31.4% to 34.4%. These consumers may have felt relatively secure because they were less affected by stock market losses, or "may have been more swayed by the government's assurances that steps were being taken to soften the economic downturn," note the researchers.

The highest-income group showed only a small decline in the percentage believing they would be better off in a year, from 36.2% to 35.5%.

  • The election had a marked--albeit fleeting-- effect on how consumers perceived the U.S. economy as a whole. The percentage that believed the economy would improve within the next 12 months was relatively stable until just after the election, when there was a steep upswing in optimism. This post-election halo effect lasted a couple of weeks, then began an equally steep decline before leveling out.
  • The largest post-election increase in confidence that the economy would improve occurred among the lowest-income group (rising from 21.6% to 28.9%). Among the middle-income group, the percentage rose from 20.8% to 22.6%, and among the highest-income group, from 21.6% to 28.9%.
  • Again, despite the slowing economy, the number of consumers who expected to buy a big-ticket item within 30 days was increasing prior to the meltdown. (Experian Simmons notes that this more likely reflected intentions to buy tech or consumer electronics items, like large-screen TV's, than cars.) Post-meltdown, these expectations dropped dramatically for about four weeks, but then began to pick up again. This may also have reflected a desire for consumer electronic products, combined with the post-presidential election halo effect, the researchers note.
  • Post-meltdown, the percentage of middle-income respondents who expected to make a large purchase declined most--nearly 31% in relative terms--from 8.2% to 5.6%. The percentage of lower-income consumers with this expectation declined least (from 6% to 4.9%), while the percentage for high-income consumers declined from 11.2% to 9.4%.
  • For medium-ticket items, purchase intentions dropped between mid-August and early September, then recovered for several weeks before taking a four-week plunge that extended into the post-meltdown period. Purchase intentions recovered for several weeks just prior to the election, then plateaued for three weeks before showing a steep recovery in late November--presumably reflecting holiday shopping season.
  • The low-income group was nearly stable in medium-ticket-purchase intentions pre- and post-meltdown (10% versus 9.8%). The middle-income group actually showed an increase in purchase intent (from 9.7% to 10.7%)--again, presumably due to a surge in holiday shopping. But despite the holidays, the high-income group showed a dramatic decline in medium-ticket purchase intent (from 19.4% to 15.3%)--possibly a reaction to losses in the investment markets, the researchers note.
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