Planning for the Recovery

If your marketing strategy during the recession is to hang on, wait it out, and resume business as usual when the recovery comes, now would be a good time to re-examine your strategy.

Business as usual is not likely to be what you’ll find in a recovery marketplace. While you’re waiting for recovery, a major shift is happening. Consumers are re-thinking and changing the way they spend, what they spend, and why they spend. The change encompasses direct-to-consumer marketing and business-to-business marketing.

Fortune 500 companies are already making changes to deal with what is called the new frugality. The economic and demographic behavioral changes resulting from the recession are providing clear indicators of the trends to come. You should be watching those trends and setting your marketing and business strategy now.

What trends can you expect and why?

Changes About Wants and Needs. With nearly every household in America taking a hit from the recession, consumers have seriously examined what they really need. Instead of a pent-up desire by consumers to spend, their discretionary spending will decline. Consumers are finding they can live without much of the excess they used to consider necessities. The same is true of businesses. If you are in a B2B market, expect smaller more frequent orders as businesses buy only as needed.

An Increase in Savings and Safe Investments. Many financial institutions have eroded the public trust. But financial companies with a clear, safe and sane track record of managing assets and providing smart, dependable ways for consumers to build savings and investments, will be very attractive to cautious consumers who would rather save than spend. There will be extraordinary opportunities for financial businesses and investment products that maintained a good record through the recession.

Downsized Lifestyles. As I write this newsletter, 6 million Americans have lost their jobs. Even more serious is that 16% of ALL employed Americans are now living on reduced incomes, and 57% of ALL companies in America have instituted some type of compensation reduction such as mandatory unpaid work leave and reduced benefits with more expected to follow suit.

The result is that Americans are learning how to live with less. This affects all industries, from housing to clothing and travel to automotive. The years of massive out-of-control consumption will not be back anytime soon. Companies need to be positioned to these changes in spending habits and patterns.

Extended Employment for Boomers. The “about-to-retire” baby boomer generation will stay in the work place. With nest eggs reduced by more than 50%, retirement plans are shifting. For some, retirement isn’t even in the plan.

This may be one of the biggest benefits to the ailing Social Security system. For marketers, however, it means you need to consider how you niche your products, and what the average age really is for your primary consumer. Where once someone 58 years old was considered an “older” consumer, eventually 70 could become the new 50 in the minds of active, still-working boomers. It will change what products and services they buy and when they’ll buy them.

The Rising Millennial Generation. There are 41.9 million Millennials, now ages 20-31. They bring new attitudes to everything they do. Even more, they are close to their parents and wield great influence on their parents’ behavior. Parents often seek advice from their Millennial offspring, especially in areas of technology.

Millennials plan, are less likely to rush into hasty decisions, are fiscally conservative and are being seriously affected by the recession due to decreased job opportunities, lower-level starting salaries, and a slower pace of promotion for those who have jobs.

More important to marketers is that this group is the most difficult to reach. They are more likely to watch media on their computers and not TVs. They download their favorite music on iPods instead of listening to the radio. They’ve never considered subscribing to a newspaper although they do subscribe to magazines that relate to their interests. They are the demographic that created social media but intensely dislike advertising that invades their social networks.

First wave Millennials are now starting to purchase homes. That means they will make all the purchases necessitated by home ownership – appliances, tools, power equipment, furniture, and yard and landscaping products. As they move into their mid to late 30s, they’ll start having families and create spending waves for baby and childhood products and services as well.

Savvy marketers will build campaigns targeted specifically for this demographic to build brand loyalty with them for years to come.

Increased Market Segmentation. America as a melting pot has now become an America with ever-increasing categories of niche markets. For example, if you want to market to households with children, did you know that 773,000 of unmarried (widowed, divorced, etc.) grandparents are now raising their grandchildren? Or if you want to reach the senior market did you know that 12.9 million seniors live with their children?

Types of households break down into new niches based on marital status, gender, presence of children, age, lifestyle, sexual identity, ethnicity, mixed ethnicity, social levels, life stage, geography, income, education, religious beliefs, political ideology and much more. All of it drives how the consumers see themselves and how they respond to marketing. If your message doesn’t relate, they won’t read it or listen to it.

More Concern About Value. During the recession consumers living on reduced means have to be price sensitive to stay within smaller budgets. The same is true of down-sized businesses. This creates a much greater awareness of value that will continue when the economy rebounds. As consumers become more financially stable, they will want to get the best value for the money they spend. It won’t always mean they are looking for the lowest price. Smart marketers will find ways to communicate their value to their customers.

A Less is More Attitude. As consumers and businesses learn to live with less, they are changing their psychology of spending and acquisition. For many this will become a basic pattern in their behavior that will remain after the rebound. A simpler lifestyle also integrates with a greener lifestyle as consumers look for ways to be good environmental citizens. Not only will they consider “green” products, they will put their loyalties with companies who walk the talk when supporting the less is more mindset. When Toyota’s Canadian advertising invited consumers to “buy cars they’ll use less”, they saw a 53% increase in sales.

This recession has hit consumers more deeply and broadly than any since the great depression of the 1930s. Those who lived through that era never forgot their financial struggles. Even as that generation went on to live through great prosperity their frugal behaviors remained. Many experts believe that will happen again when this recession ends. Spending behavior will remain cautious and frugal instead of rebounding to the consumption levels of the 1990s.

A forecast from Moody’s indicates recovery will take more than a year. It is expected to start in just a few states in the 4th quarter of 2009 and then slowly progress through 2010. Pennsylvania, the state where I live, is in the last group of more than 50% of the states not expected to recover until the 4th quarter of 2010.

As you plan and position your business for the recovery, plan for a post-recovery market where purchasing patterns and habits have changed.

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