The global financial crisis of 2008 and beyond has shaken countries, markets, and individuals, in turn causing increased pessimism, angst and even anger. And yet, for those wishing for things to “return to normal”, a new survey argues that we’re in the “new normal”. What are the lasting impacts of the so called “Great Recession” and how should marketers respond?
Almost every consultant hates the phrase “paradigm shift.” And in effect, because of the recent global financial crisis, it is easy to see how consumer and business sentiments have changed quite radically. At least for now, the days of freewheeling risk taking, unabashed materialism and wanton spending have been replaced with frugality, caution and spending cutbacks.
PIMCO bond king Bill Gross, would agree that “thrift” is a new mainstay. In an Atlantic article, Mr. Gross suggests that as a result of the global financial crisis there’s something different regarding investor outlook:
“Risk taking went over the edge. We are inventing something new. We’re very afraid. We know from the Depression that people who lived through it didn’t change their mentality for the rest of their lives. They were sewing their socks. My sense is that it will take 10-20 years to find that kind of risk taking in people again.”
A recent survey conducted by Money Magazine validates Mr. Gross’ positions. Polling over 1,200 Americans, the survey discovered:
• 54% report they are worse off now than a year ago
• 89% say they’ve changed how they manage money
• The top three new habits are: eating at home more often, looking for discounts and cutting back on luxury purchases
• New attitudes are emerging with 88% surveyed saying they will be more frugal, 81% playing it safer with investments and 74% ignoring advice from Wall Street
• Men seem more pessimistic about the economy than women
• 73% said in the future they will play it safer with money and focus less on materialistic gain
To be sure, the results of the survey—at least for Americans—present a new prototypical consumer who is less trusting, a bit more conscious of his or her finances, and one that is getting “back to basics.”
Whether we are permanently in a new paradigm—or not—these statistics paint a new reality that marketers must take into account. Most companies have accepted this new reality and are baking marketing strategies accordingly.
But many company executives anxiously sit on the sideline, hoping that market conditions get “back to normal” so they can raise prices, increase capacity and worry less about operational efficiencies.
In statistics, reversion to the mean indicates there are driving forces towards the average, and that outliers will eventually join the “normal”. Perhaps however these changes in consumer and business sentiments are permanent—and in effect, the mean has moved.
• Longer term (in the next four years) will you be better off than today? What’s your outlook—optimistic or pessimistic?
• Target commercials show your home patio deck as the new vacation spot, a “Slip and Slide” as the new water park, and playing with a Wii as the new dance club. What do you think of these commercials? Does Target have their messaging right?
• Do new attitudes of frugality and safety have staying power? Once the recession ends—and it will—is it back to the past, or is this the new reality for consumers and businesses?