The Great Resetting: In Control Consumption

Larry Koffler

Now that the worst of what has been officially entered into the AP stylebook as the "Great Recession" is in the rear view mirror, is it safe for marketers to resume pre-downturn programming? What if anything has changed?

Judging by recent headlines (and a couple of short targeted shopping excursions in London and New York), it's clear that consumer spending is coming back and a sustainable recovery is underway. While many marketers seem to counting on consumer mindsets and spending habits snapping back to the good old days of two years ago, history and several initial trend lines suggest a more fundamental resetting of consumer behavior – one where control will play a central role.  

After the Great Depression, the economy experienced one of the greatest growth spurts in U.S. history when the GDP nearly doubled in size between 1940 and 1945. And yet, the experience of living through the Depression impacted consumer behavior for decades to come. My grandmother, who always likes to talk, still rushes me off the phone to save on the phone bill, even after a review of rollover minutes. Aluminum foil is often reused - why waste?

While what we just experienced was not on the same scale as the Great Depression, it has been the longest recession on record, the unemployment rate has been the highest since the early 80s and despite the rally since last March, we haven't seen so much of our wealth evaporate since the 30s. It was enough to give us pause, shake our confidence (consumer confidence had hit an all-time low) and to have a more than fleeting impact on how and why we consume.  

We're already seeing short term impacts which include a sharp rise in our household savings rate, which had been declining since 1975 through multiple recessions and corrections, as well as a boost for house brands. According to a recent NPD study, house brands make up 24% of all food and beverages served in U.S. homes, up from 18% in 1999. Once a staple of lower-income households, they now enjoy roughly equal penetration among demographic segments. In IRI’s December 2009 Economic Survey, 54% of consumers indicated they were purchasing store brand products more often and 82% of those said they will continue to do so.

The longer term impacts are more subtle. Consumers across demographic, psychographic and commongraphics are, to varying degrees, recalibrating what constitutes value and importantly, how individual purchases can help them take control of what matters. In-control consumption does not necessarily mean buying less –  it means we’re buying differently. The decision-making process is shifting as we’re look for ways to reclaim control of our finances, environment and future.

Maslow 2.0

The fundamentals of Abraham Maslow’s theory on the “hierarchy of needs” created shortly after the Great Depression  provide a helpful lens through which to look at the current consumer reprioritization exercise.

As you might remember from Psych 101, the base level of the pyramid is associated with physiological and safety needs, while the upper levels are associated with social/belongingness, esteem and self-actualization needs.  According to Maslow, the higher needs in this hierarchy only come into focus when the lower needs in the pyramid are satisfied, so consumers worried about their job security may not be as concerned with self actualizing. When brand marketers are thinking about differentiators and “reasons to believe”, functional and emotional needs should be at the core of the answer. While the base level of needs e.g. breathing, will clearly never go out of style, it’s interesting to see how some of our necessities have shifted over time.

For instance, the Pew Research Center recently found that from the early 1970s to 2006, the proportion of Americans who considered air conditioning or dishwashers a “necessity” rose steadily, but in 2009 it dropped sharply. On the flip side, you can only imagine what the numbers would be for broadband internet access and iPhones  (and in my case Honest Tea and New Balance running shoes). Even the young Alaskan couple who moved “off the grid” to a Mongolian Yurt in the coastal town of Seldovia with no running water, shower, bath or a working toilet, has broadband.

The fundamental reset is in how consumers are thinking about what they can control at each point in the pyramid and how they are thinking about “spending." Our goodpurpose study found that 83 percent of people are willing to change consumption habits if it can help make the world a better place to live, illustrating the trend away from traditional status markers like big houses and toward identification with social purpose brands.

American Express is doing a good job of adapting to the new consumer mindset by offering features that help cardholders control spending, for example by allowing consumers to pay for groceries with reward points and imposing spending limits on kids with supplemental cards. In addition, they just announced the return of the Members Project – designed to “empower everyone to take small steps to make a big difference” via a partnership with TakePart, a content-driven social action network. The aim of the Members Project is to provide tools and resources to support causes people care about on the higher end of the pyramid – and empower more people to be successful at making a difference. 

The Brita FilterForGood program (client) is another good example - combining savings associated with the most basic of all needs, clean drinking water, with the desire to preserve the planet. The program has empowered consumers, saved more than 180 million bottles and driven double-digit growth for Brita. In both cases, a critical first step towards action is understanding one’s ability to have an impact.

The question we should be asking ourselves as we dive in with post Great Recession programming in the new age of public engagement: how do we help our clients empower their stakeholders to take control of key needs in the hierarchy - to help them feel secure, express themselves, take action, drive sales and in some cases make the world a better place.