So we’ve recently been doing some work – like every other agency – regarding how the recession [or as we like to say it, ‘how life is today’] affects consumer attitudes and spending.
However our research has got quite different results to that of the JWT’s, O&M’s of this World …
Without doubt consumer spending has been hit … you’d have to be an idiot not to realise that … however we believe it’s more a case of the redistribution of spend than the complete reduction of it.
In places like Hong Kong, the culture is seemingly hot-wired to spend … so whilst there are a few there who have morphed into the ultimate frugal machine … the majority are still seeking out emotional ‘highs’ from material acquisition each and every day.
Now as I said, because of the economy, people’s choices are being influenced in different ways … however rather than staying at home and putting their cash under beds, the reality is each and every day many people are out there seeking out brands/products that can give them a similar emotional high as they achieved when times were good and they could embrace more ‘big ticket items’.
Ironically, that doesn’t always mean they end up spending less …
What we’ve discovered is that short-term memory plays a very important part in how people define ‘value for money’.
Sticking with HK for a moment …
The price of bread has recently experienced inflation rates not seen since Russia circa 1980 …
Given the price of bread is relatively cheap, these high inflation rates means prices have gone from approx 60 cents to around $2 … which admittedly is alot in percentage terms, but still quite manageable for the average person.
Now here’s the thing …
Because people can still remember when bread was much cheaper, they no longer define it as being ‘good value for money’ so they are seeking out breakfast alternatives that can provide them with both functional and emotional benefits – of which Macca’s breakfasts [starting at $3.50] is proving to be exceptionally popular.
Yes, you read that right … people in their thousands are spending MORE money than they did before [on breakfast] because they see the ‘base level food group’ [ie: bread] as being too expensive when for a little bit more, they can enjoy a breakfast that helps them feel more indulgent and upmarket.
[No, I’m not joking]
I’m sure Freud would claim these are the actions of people looking to delude themselves that they are still successful when all around them the news is acting like its 1929 again … but for brands like Macca’s, this ability to capitalise on the increased costs of fundamental food groups is a boom.
Of course not every person is acting this way …. and their actions and attitudes are continually changing [even down to their behaviour by daypart] … however this recession is proving a boom for the shopaholic culture because now they can now indulge in their favourite activities and actually buy more for less.
Yes brands are claiming their profits are being badly hit … but you only have to look at Amazon.com and see that people are still spending cash … and the only reason this might not translate to an equal rise in profits is because they’ve either [1] already discounted their prices in a sheep-following act and/or [2] people are choosing different types of brand/products to give them their rational/emotional high.
Hell, there is a whole group of people who have never had it so good …
No, I’m not talking about the uber-wealthy, I’m talking about Mr & Mrs Average … the one’s who’ve lived within their means … because suddenly their mortgages are cheaper, their food at the supermarket is cheaper and the petrol to run their 2 cars is cheaper. Infact, if they don’t get made redundant in 09, this economic downturn could be one of the greatest periods for financial stability and advancement in their life.
Don’t get me wrong … times are tough, consumer spending has been hit and hopefully people are getting a better perspective of what really is important in life … however this blanket attitude of commercial doom & gloom should not be applied across all segments because for every car and house industry that is suffering, there is a fast food or holiday category that is booming.
Believe it or not, this post was not written in an attempt to say brands should keep advertising [I find it ironic agencies keep putting out that argument when they openly express they are doing all they can to cut back on their own spending … though I do think they should continue communicating, they just need to do it in new and relevant ways, of which TV ads is not one of the most effective] … it is simply to say there is still money is out there and if companies spent the time to truly understand the changing attitudes of people in the current climate, they may find they can survive without having to automatically rely on price reduction.
Saying that, if you are a car manufacturer, you’re fucked and if further proof was needed, have a look at this …
Yep, some Sydney Police Forces are buying Fiat’s as their squad cars.
Sure it’s funny but think of the poor communities that these Police are meant to protect. You can bet your bottom dollar the crime rates in those suburbs are going to go through the roof because crims will know there’s not a cat in hell’s chance they’ll be caught by some copper in a Noddy car. I’d laugh too if this photo wasn’t taken in the locality of where we’ve just bought a house. ARGH!
Right, that really is the last post till I move countries, so till then … happy new year, though I don’t know how happy we can be about it, not unless you own the Macca’s breakfast franchise in HK, ha!
[PS: Read Faris’ view on the economy … I particularly like [and agree with] his bottom up, not top down approach … though how long that will last is anyones guess]
[PPS: Our full report will be coming out soonish, so if you want a copy, let me know – it has some very interesting findings even if I say it myself, including why ‘recession is good for marriage’, you heard it here first, ha!]
[PPPS: I realise this post conflicts with what I said yesterday. Can’t a man change his mind or is that only the right of the female population, ha!]