Winter 2008 Newsletter: by Kevin Meldrum, B.Comm

If You Sell To Consumers... Your Marketing Strategy for an Uncertain Economy

Consumers generally have become increasingly concerned about job stability and retirement savings. October 2008 numbers from the Conference Board of Canada show consumer confidence at its lowest level in 25 years, and consumers feel they will be even worse off six months from now.

That means people will make changes in their values and in their purchasing. Here are a few issues to keep in mind:

Change Your Selling Message
Consumer values are about to change dramatically. Remember that consumer purchases can be rational or irrational.

Rational decisions focus on value. People may choose to spend more on furniture that will last 20 years, or alternatively choose cheaper furniture that will get them through the next three years. It's a case by case decision, but the point is that you can expect people to put more thought into their purchases. This impacts your selling message, because a sofa may no longer be an impulse buy. People may shop around while considering price and quality. Your selling message must address the need for good value and not just style.

Irrational decisions in a recession often stem from the need to feel safe and secure. People will still want to reward themselves and feel like the world has not changed. Some people will treat themselves to specialty wines. Other people will purchase a new gym bag to more fully enjoy their workout routine. The purchase is intended to enhance their self-identity. Consider how your product is relevant to a consumer's desire for self-worth and security.

Provide Credit
It's difficult to change human nature, and the consumer population in general will still have a tendency to seek credit rather than save for purchases.

Financial institutions will be stricter with credit cards and lines of credit. Your customers will have less cash to spend. Consider offering credit or third party financing to your best customers. Be creative, such as renting product to your customers that would otherwise be unsold inventory.

Connect with Family and Home
After times of crisis, people adopt a cocooning behaviour and want to stay close to the security of home. They take fewer holidays because they instinctively want the protection of family and community. Products that enhance home life are valued, which means choosing a hot tub over Hawaii.

As a business owner, the challenge is to work with these trends. For example, a travel agent should consider how people would feel more comfortable with a holiday closer to home or to a country with a similar culture (Australia versus Indonesia).

Work with the Basics
When times get tough, people gravitate to fundamentals. They will do more research, ask more questions, and negotiate harder, with less interest in added bells and whistles. For example, if you own a heating-and-cooling company, you can expect your service technicians to spend more time on each service call explaining repairs or maintenance that may be required on a furnace.

Manage Your Brand
Your brand is your reputation. With fewer consumers in the market, companies will have to differentiate their brand image from competitors. For example, times will be tough for home renovation contractors as more people do the work themselves to save money. One option is to present a brand image that strikes a chord with why that consumer is making the purchase. If the consumer is in a cocooning phase, contractors would benefit from describing their company as specializing in family recreation rooms.

Trusted and proven brands also become more important. People may be less likely to seek new products or new methods when times are tough.

Revise the Product
Don't make changes just to be different. Consider what your customers want to buy. This will evolve with economic conditions. For example, everyone needs to eat, but the products people buy will change. The 'luxury' food items in your customer's shopping cart will be replaced with basic staples and comfort foods.

When times are tough, factors such as packaging, delivery methods and quantities will have considerable importance in some industries. Perhaps offering bulk will provide both convenience and per-unit savings to the customer. Perhaps changing your product packaging can lower your total product cost by 5%. Such minor revisions may be your key competitive advantage.

Increase the Value
Increase value to the customer - you may need to make only minor changes. In a recession, consumers look for warranty terms, service options, and long-term operating cost (such as the energy efficiency of a furnace). This doesn't have to decrease your margin, because often customers will pay a small premium for the additional features that are relevant. Also, clearly point out all the benefits, such as warranties, rather than assuming your customers will know.

Keep Pricing Relevant
These days, simple price cuts will work better than complicated savings schemes. People may not pick the lowest price in the market, but they focus on feature versus price comparisons. Make it easy for people to understand what you offer.

- Kevin Meldrum is a Consultant with Banda Marketing Group

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