They say it’s always darkest before the dawn. As an inveterate late riser, I have little insight to contribute here. However, if I were to apply the analogy to consumers’ economic behaviour, I’d say it’s as black as your hat out there. And yet the post-recessionary sun is taking an unconscionable amount of time to creep above the horizon.
The evidence I’d cite comes in the form of two research studies which have crossed my desk in the last month. One is from The Futures Company. The other hails from respected research agency HPI. Both show that, far from becoming more positive, consumers are if anything becoming more pessimistic about their future financial prospects.
One figure in particular stands out from the Futures Company report. This month 57% of consumers agree with the statement ‘I find myself thinking twice before making even the smallest day-to-day purchase’. That’s up from 48% in November last year.
The HPI study points to a fascinating dichotomy between consumers’ views on the economy as a whole, and their personal attitudes and behaviours.
In July, 32% of consumers agreed that the Government is doing a good job in its handling of the economy compared with just 17% in February. (In fairness, a hefty 35% remain undecided.) However, six in ten consumers believe the budget and the accompanying spending review will make them worse off.
It’s almost enough to make you less cynical about democracy. For once, people are supporting strong medicine, even though they know it’s going to taste foul.
The cognitive dissonance deepens the closer you look. Significantly more people felt ‘more confident about the overall economic situation in the UK’ in July this year than they did 12 months ago. But when it comes to appraising their own financial and job situation, the pattern is reversed.
How is consumer behaviour changing as a result of this lingering sense of crisis? Caught between the rock of an uncertain future and the hard place of all-time-low interest rates, the answer is that people are waiting and seeing. And they’re doing it in even greater numbers than they were last year.
According to HPI, 36% of consumers are reacting by ‘keeping things flexible with ready access to cash as I might need it quickly if things get worse’. That’s up from an equivalent figure of 27% this time last year.
This is bad news for anyone in the business of parting people with their cash, whether it’s to buy something, or to stash it away in a savings product. And there are more grim tidings to come. Since April last year, HPI has spotted a steadily increasing proportion of people who claim to be ‘taking action to buy cheaper brands and / or going to less expensive shops’.
The man behind the HPI study is Terry Prue, one of those fortunate people who had the good sense to enter market research after a career in planning, rather than the other way round. Following a plannerly hunch, he looked up the historic Google Trends figures for all the UK’s leading comparison websites. Sure enough, since January 2010, web hits on all of them have boomed. This is surely indicative of something, and the argument that it indicates an increasing tendency towards highly considered purchases is as good a one as any.
Both the HPI and the Futures Company reports point towards the emergence of a new, recession-forged consumer mentality. Indeed, 53% of respondents to the latter study agree with the statement ‘this recession will change consumer behaviour forever’, though such questioning smacks a little of leading the witness to me.
More telling for me is the HPI observation that consumers are becoming increasingly intolerant of a certain kind of advertising. In July, 56% of consumers agreed that ‘spending money on expensive TV advertising is irresponsible in the current climate’. That’s up from 46% just six months previously.
I’m sure this isn’t a reaction to all advertising. Indeed, I know from recent focus groups that the rattling of the stick in the swill bucket is at the very least accepted as a necessary evil by most respondents. And some still actively claim to like it.
It’s more a question of what kind of uninvited guest is most tolerated. Terry Prue sifts through more advertising research than is healthy for any normal human. Talking to him, it seems emotional connection is as important as it has ever been. But increasingly, the ads that most strike a chord are those which also provide a rationale for brand purchase. ‘I’m not saying it’s about rationality,’ he says, ‘Far from it. But your case has to include a rational justification, especially for less essential purchases’.
A picture of a rising sun is sometimes hard to distinguish from one of a sunset. Looking at the results of these two research studies, you would be forgiven for thinking the consumer slump is deepening rather than coming to an end.
Last week we learnt the full scale of George Osborne’s Government Spending Review. Consumer reactions to this announcement will give us a good idea which direction the sun is heading in.
Terry Prue tells me that another wave of his study ran last weekend. So either way, it seems we won’t have too long to wait before we know.
This column originally appeared in Marketing Week.
Rare roast beef on good bread, Plymouth Gin, thunderstorms, Autumn, a long sea voyage.