The Mental Economy Puts Habit on Hold
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By Robert Wheatley
It Feels Right to Trade Down?
In a November story by Ellen Byron the Wall Street Journal tracks what they characterize as the triumph of frugality over brand loyalty. And there’s plenty of evidence that indeed consumers are swapping out popular brands for equivalent private labels. The Journal profiled a recent Mintel survey of 3,000 consumers that found 40 percent of household shoppers saying they’ve started to purchase store brands, “because they’re cheaper.” Mintel indicated on average store brands cost about 46 percent less than their national brand brethren.
And not just among middle income households: Information Resources’ “Shopper In Crisis” report determined households with incomes above $100,000 are not immune: 41 percent are cutting back on their spending for non-essential groceries and nearly a third saying they’re buying more private label products while foregoing some of their “favorite” brands. According to Nielsen Co. store brand sales of soap and bath products are up 23 percent and skin care items rose 16 percent through early September.
Habit on Hold
Habit has been a mainstay defense for brands in this era of over-choice and too many products chasing pocketbooks. Consumers have shown a remarkable ability to resist change once a brand is selected and, assuming it meets the buyer’s expectations for performance, the relationship can go on undisturbed for many years (assuming nothing dramatic comes along to dilute and marginalize the brand’s value proposition). We simply don’t want to invest the brain time to assess if a replacement is warranted. Yet the economy has quite clearly ridden roughshod over entrenched habit
The Mental Economy
Certainly there are real and justified fears over job losses, credit squeeze, the drop in home values and the tanking of retirement and 401k accounts. Regardless of how close these events get to individuals in various walks of life, what is becoming patently clear is the power and pervasiveness of uneasiness and fear that is impacting behavior in remarkable ways. We are collectively on notice that all is not well in the economy and we have internalized this point of view. The lack of confidence is now showing up in purchase decisions — even among those who can continue to afford more expensive options. We are emotional creatures and our emotions, at the core of brand selection decisions, are now telling us to stop, reassess and cut down. We feel better through frugal acts.
The Branded Pathway Ahead…
Here are some observations about the way forward.
Can your brand align itself with the consumer’s overwhelming desire for home, family and social interaction that acts as a buffer to the uneasiness around us?
Can your brand acquire a mission or purpose that transcends the functional conversation and creates new meaning and depth in your relationship with consumers?
The action is increasingly at the store shelf. What can you do to better tell your story at retail?
Have you given your brand a “compelling value proposition” review to determine if the functional, financial, intangible and emotional values are strong enough to keep your best users in the fold?
Can you segment your product portfolio to cover the price pressures coming from retailer’s increased emphasis and investment in their store brand programs? Are you in a position to help them with their private label needs?
Are you participating in social media platforms where you can a) start a two-way conversation with your consumers and b) listen to them about their needs and concerns?
For that matter talking “at” consumers is dead or dying. How can you build a better relationship based on authenticity, honesty and reciprocity?
What do you think the solutions look like?
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