When will customers be ready to spend on [insert product or service]? As CMOs and senior marketing leaders, you are often business leaders first and marketers second and have a strong interest in the state of consumer confidence as it relates to your industry. How can marketers predict when consumers will be ready to spend more, whether on travel, devices, or premium content? The short answer is . . . nobody really knows. This economy’s challenges are blazing a new and unfamiliar trail.
What marketers can do is look to tangential indicators to try to accurately gauge when, exactly, consumers might be willing to part with their hard-earned dollars and understand what will compel them to do so. The US private sector added 67,000 jobs in August, but while “added” has positive connotations, the fine print has anything but. Columnist Gerald F. Seib, writing in last week’s Wall Street Journal on the jobs prognosis, hardly painted a picture of optimism. Yet 90.4% of Americans are broadly defined as “employed,” and many within that huge cohort still have significant spending power.
John Gerzema, chief insights officer of Young & Rubicam, has said that Americans have shifted “from mindless to mindful consumption.” He cites “continuous turbulence” in this economic environment that has consumers “separating needs from wants.” Even so, sources like the Christian Science Monitor point to recent modest gains in consumer activity that have raised optimism that “the economy may be clinging to a path of recovery rather than recession.”
Consumer confidence can, of course, be extrapolated from any number of leading indicators beyond unemployment, including GDP, retail sales growth, housing, and bulk shipment pre-orders. And while Forrester is not in the business of forecasting consumer confidence, we can supplement marketers’ projections and plans by looking to companies’ behavior across industries for a lens on the wisdom of the crowd. The following links connect to reports that highlight industry-specific insight (client access required). For example, amid a decidedly mixed economic outlook, Forrester sees many companies ramping up marketing investment to meet anticipated shifts in customer demands. One indicator of anticipated increases in consumer spending habits and behavior is that customer experience spending is increasing. Likewise on the B2B tech services side, our analysts predict that “experience and service will replace the product in the customer value proposition.” This will result in more B2B spending, but more on emerging services than on “product-based” services. Marketers will increasingly focus on creating the right “experience bundle” to convince customers that spending with them fits the bill for “mindful consumption.” GM, for example, has honed in on its OnStar communication service as a differentiator that calls out the value-add and safety capability that comes along with spending on it. Retailers, on the other hand, seek to improve the convenience of purchase through new channels and faster checkout to boost sales but maintain a focus on the perception of “value” through discounts and transparency to appeal to increasingly careful consumers. And media companies are striving to rebuild their industry to make their content more accessible, through new distribution and more digital distribution.
What’s your take on when your consumers will start spending again? Which parts of your value proposition are you stepping up (or scaling back) based on shifts in consumer behavior?