Boston, MA (August 3, 2010) -In a recent study on consumer spending in the wake of the recession, it’s clear many consumers are either sticking with their “new normal” or are still forming their new spending habits and don’t plan to fully return to their old spending habits. The study of over 1500 US consumers by market research firms Chadwick Martin Bailey and iModerate Research Technologies found that although 24% of consumers only made minor cutbacks to their spending during this economic downturn, another 33% who reduced their spending plan to continue with their new slimmed down budgets even during an economic comeback. The largest group is in the 43% of consumers who reduced their spending and have not yet decided if or to what extent they will go back to their old spending habits, presenting great opportunities for brands who can speak the right language and provide the right services.
“It is clear that consumers are still forming new spending habits, and the companies that are likely to thrive are those that are in tune with those new habits and focusing on the market share that is still up for grabs,” comments Jon Giegengack, director of Chadwick Martin Bailey’s eCommerce and retail practice. “Deep customer insight and segmentation are key to identifying and understanding what motivates customers today,” Giegengack continues.
Recovery Varies by Product Category
The study showed four groupings of product categories, some seemingly closer to rebounding than others:
1) Investments in My Quality of Life (vacations, home improvement, dining out and home furnishings): There is no easy substitute for these items. Some tend to be more of an experience vs. a possession therefore they are more resilient: less likely to be cut back, and more poised for a rebound as people feel their financial situation improve.
2) Things I Don’t Think About: These include activities for children and subscription services such as cable TV/Internet and magazines. People are less likely to cut back on things that they need to “opt out” of, as opposed to purchase decisions they need to make every time they buy. They are also less likely to cut back on experiences (especially for/with their family) than things.
3) Things that Entertain Me: This category includes spending on video games, books and electronics. In the end, people still have time to fill. In many cases they are looking for more efficient ways to fill it: best balance of utility (i.e. fun) and price.
4) Guilty Pleasures: This category includes spending on items such as jewelry, designer clothes and shoes. Items seen as “frivolous” purchases—particularly those where consumers can’t rationalize a tangible value—face the most difficult road to rebound. This trend was consistent across income levels: even more wealthy people need better reasons to buy. However the aspiring affluent are particularly vulnerable, people with expensive tastes, but with incomes that aren’t large enough to be recession-proof.
The Things I Don’t Think About category faired the best out of the group. Items in this category like cable TV and subscription services saw the least reduction in spending mainly because they were expenses consumers had already “opted into” and were thought of as part of the core budget, therefore they were less likely to take action to “opt out”. On the flipside the hardest hit category of Guilty Pleasures seems like it will be the slowest to rebound. It is clear that consumers are re-thinking purchases that are seen as frivolous. These purchases which are hard to “rationalize” will continue to have a difficult time rebounding.
Consumers Have New Perspective On What They Need
Many consumers reported changes in shopping behaviors and being content with their new spending habits. While many say they will not return to their ‘spend at will” habits many look forward to some financial breathing room to ‘splurge” every once in a while.
Some consumers said:
“I used to buy whatever clothes and shoes I wanted. Now I only buy when I need something…like clothes for summer and trying to use as much as I can from previous years” – Female 35-39
“[I’m] mostly cutting back on the more frivolous purchases and saving money for the important things…I’m just content with making smarter choices when it comes to things I want versus things I need.” – Female 25-29
“When the economy picks up and I am making the money I was before then I will be able to go out to dinner and get clothing and electronics.” – Male 50-54
About the Study
A detailed report with additional findings from this study is available as a free download from Chadwick Martin Bailey. There are also video interviews available with Jon Giegengack, director of Chadwick Martin Bailey’s eCommerce and retail practice on how brands can tap into the new spending habits of today’s consumer.
Data was collected from 1,504 adults (aged 18 and over) via a nationally representative online survey questionnaire within the United States by Chadwick Martin Bailey between April 19th, 2010 and April 22, 2010. In addition, iModerate Research Technologies conducted one-on-one qualitative sessions to more fully contextualize their spending habits.
About Chadwick Martin Bailey
Chadwick Martin Bailey is a custom market research and consulting firm who works with many of the most successful companies and best known brands in the world to help them acquire, maintain, and grow their customer base. They have recently been listed on the Honomichl Top 50 and continue to demonstrate their thought leadership at numerous conferences worldwide. Founded in 1984 by John Martin and Anne Bailey Berman, the company has corporate headquarters in Boston, Massachusetts, serving clients in more than 30 countries around the globe. Chadwick Martin Bailey focuses on using leading-edge research techniques to collect and translate the data into simple, business decision-focused deliverables. www.cmbinfo.com
About iModerate Research Technologies
iModerate Research Technologies listens, connects and digs deeper with consumers online to provide the research story organizations need to win in the marketplace. Years of research and development by veteran field experts, as well as analytical specialists, produced the concept, methodology and software that have allowed iModerate to help Fortune 500 companies, large and boutique research firms and prominent organizations strengthen their research results. Focused on providing customized qualitative solutions, iModerate is broadening online research capabilities by delivering essential qualitative insight. iModerate is based in Denver, Colorado. For more information please visit www.imoderate.com.