A well-researched article in Adweek, Noreen O’Leary’s “Boomers Caught in Squeeze Play,” ought to make marketers everywhere sit up and take notice.
The gist: Consumer reaction to the painful reversals in the economy… particularly that of baby boomers, “who account for more than half of U.S. spending and who traditionally have grown more affluent with age.” Due to the meltdown of the financial sector in recent months, coupled with losses in the stock market and home equity, consumers, especially boomers, are reversing their spending habits and stashing their cash into savings. That could only lead to further contraction of the economy, as consumers change course.
“In one of the most dramatic reversals in post-World War II history, Americans–who in recent years have had negative savings rate–are expected to flip those patterns, with Goldman Sachs now saying the U.S. savings rate could be as high as 6 percent to 10 percent this year.”
“This is a tectonic, structural shift, a global realignment,” according to Havas Media Lab’s Umair Haque, quoted in the article. Dennis Jacobe, Gallup chief economist noted in the article that “a fundamental change is taking place.”
“The last cataclysmic event was 9/11… It was patriotic to get out and shop,” according to global client services director, JWT New York’s Alison Burns. “This downfall is of our own making–greed, mismanagement and all sorts of things much closer to home. Now it’s not patriotic to go shopping. It’s all about being prudent, back to basics, valuing the things we have more highly.”
Question is, will this shift be of long duration or not? And what does it mean for consumer product companies? When spending is cut, so is production, new product roll-outs and potential product innovations.
As boomers who are closer to retirement cut back on their spending, perhaps for good, will younger demographic groups who are accustomed to being “ever more acquisitive in a world of instant gratification and easy credit” as the article aptly states–change their spending habits? And if they don’t, will their spending be enough to offset boomer cut-backs in the larger economy? These are very important questions.
Companies and marketers who perhaps expect a deeper and longer recession than usual, may think they can ride this out. But the new consumer mood may dictate a change in their thinking. New strategies may be necessary to survive in this new environment.
If not permanent, many expect this current trend to be long lasting. Consumers have to spend to buy necessities, of course, but expect them to be wiser and more deliberate about everything they purchase. It’s time for companies to deliver real value–rather than hype or perceived value–to a consumer that will demand and expect to get it. But what does that really mean? Lower prices or something more?
* What are your plans as a consumer? To spend more of your discretionary income when the economy settles down a bit or to accelerate your rate of savings?
* What do you think companies can do to show consumers real vs perceived value in their products or services now?
* What kinds of values merge with your own views at present?
* What companies have demonstrated clear value to you to induce you to spend your hard-earned money right now?
I’d love to hear from you.