Consumers See No Signs of Economic Recovery

"Crazy Deals," Shiny Objects, Tech Products - Drive Purchase

NEW YORK, NY, December 6, 2010 – The 2010 consumer wallet is not opening up for big purchases this holiday season, according to a new study by Ogilvy Chicago in partnership with consumer insight firm, Communispace, that documents the holiday shopping game plan of today’s much smarter, budget-minded shopper – 78% of whom say that the recession is not over and 51% who say that economic recovery will take another two to three years.

Over 1/3 of consumers polled  say new technology products are on the top of their must-have lists, but when making purchases they have a price limit, bargain-hunting mentality and are using more coupons. One consumer said they would buy a kindle if the price drops to $119.  Another said they wanted a combo Blu-ray/Netflix player only if the price was “under $125.” The research from Ogilvy surveyed 1,000 individuals nationwide and employed Communispace’s proprietary online communities to engage consumers in dialogue.

Eyes Wide Open 2.0
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“Consumers lust for new shiny tech gadgets is high as these products offer a relatively affordable escape from the reality of a difficult economic climate,” explained Graceann Bennett, Director of Strategic Planning at Ogilvy.  “But paying full price is not realistic.  They want deals that satisfy desires on the things they want.”

As one of the Communispace community members in the study said, “I really analyze my purchases… no more full-priced new video games for me. I have started doing more research to make smarter purchases.” 

Marketing Strategies that Work – It’s All About the Deal

The findings reveal how aggressive new marketing tactics must be used to drive both consumer wants and needs.  To activate consumer desire, deals with time limits are driving consumer purchases say Ogilvy and Communispace. They cite recent creative sales promotions by specialty retailers as evidence of the ticking clock ‘buy now’ game retailers are using to get shoppers in stores.  Some current examples include:

Best Buy: spend $400, get $200 gift card
Gap: 50% until 10 am on Black Friday
Abercrombie: Spend $100 before noon and get $50 gift card
Borders: 40% off IN STORE only, buy before 11/30

“Breaking through the holiday clutter with eye-popping deals that practically scream ‘we’re giving it away,’ is getting consumers into stores,” explained Manila Austin, Ph.D., Director of Research at Communispace.  “The reality, however, is that consumers are exercising a newfound power and control.  While there may be higher traffic numbers, we found that consumers are actually saying they will be spending less this year than last year – when spending was greatly reduced from previous highs.”

2010 Consumer Shopping Strategies

Also on consumers’ shopping lists are food, clothes, personal care and beauty products – items they are planning to buy BUT will do so by spending less.  Bigger ticket buys – cars, computers and home furnishings – are being put off for later and also at lower costs.  Off the list: vacations, with 21% saying they are eliminating vacations this year.

“Consumers today know they have the power,” explained Ms. Bennett. “At the early stages of recession, they felt powerless and confused.  Now the majority have budgets and a plan.  They’ve gone from powerless to powerful. This is a huge transition.”

The Holiday Hold-Outs Research reveals a well thought out game plan for gift giving this year:

52% will buy less expensive gifts
45% are setting a budget
44% are scaling back on the number of gifts they are giving, a 10% further decline from last year’s frugal giving
24% are making gifts, an increase from last year

"I am buying fewer gifts for the kids, focusing on the things they might really like and that will last a longer time than the usual junk they get. I am not asking for much for myself, and plan to do crafts or baking for the extended family this year," said one consumer.

“Big consumer spending trends we see continuing into 2011 are a much higher focus and practice on budgeting, more ‘do it yourself’ activities and a rejection of the having it all lifestyle of the past,” explained Dr. Austin.

This idea is echoed by another consumer who said, “My goal is to get people things that are practical and that they will use.  I’m tired of ‘stuff’ and am transferring that to other people.” 
 
What’s Ahead for 2011

The Holiday Hold-Outs of 2010 will continue their thrifty ways for the foreseeable future according to the research.  Over a third of respondents said that economic recovery will take longer than expected – at least 10 years to fully recover.

The new research follows a study, “Eyes Wide Open, Wallets Half Shut,” that Ogilvy and Communispace partnered on one year ago.  That initial research revealed significant changes in consumer lifestyle choices, their pursuit of the American Dream and their buying and shopping behaviors. 

Among the coping strategies consumers have adopted that will continue over the next year:

52% - cook dinner at home more often
33% - keep a car longer than normal
30% - pay down debt
27% - stop taking a vacation
26% - create and stuck to a budget

What’s a Marketer to Do?

With consumers spending more time shopping and comparing online, marketers must align their online and offline communications. A brand can’t promise one thing online and deliver something different in the store. 

“Marketers have to follow the path the consumer takes, even making sure that if they say something about their brand on twitter, that there is a response,” said Ms. Bennett.  “A website isn’t enough today.  Consumers follow their own circuit from Facebook to Groupon to review sites. A brand has to work much harder to gain trust, loyalty and fans.  But those who do, will be well rewarded.”

Among the new tactics Ogilvy says marketers need to employ:

Dazzle Me with Deals

Marketers have to go beyond coupons and percentage-off deals. Creative, attention-getting offers where the deal itself is the news is what is driving the consumer hold-outs today.  Stores opening at midnight, 3am and other off-hours with limited “special price” offers are getting shoppers in the door.  To get these buyers to look at your brand, marketers must close the sale even before the customer is in the store. The pre-sale is more important than ever before.

Make me WANT You

Selling isn’t just about value and price.  Marketers have to take both a right and left brain approach.  Suave recently moved into the aspirational space with its newly reformulated Salon Professionals line, positioning the brand as one with the quality and desirability of salon products.  This appeals to what the consumer desires.  They already know when they get to the store that Suave is a great value, but now they are buying it because they want the salon experience.  What makes the approach work is that it taps into that emotional side and rational side giving the consumer permission to buy the items that fulfill their wants and needs at a great price.  Brands have to understand the complicated calculus that consumers consider before permitting themselves to buy and that they can't just work on the rational price side of the equation – desirability is more important than ever.

Tempt me with Technology

New innovations at the right price will get consumers spending on “not so big but big enough” purchases that satisfy the need to indulge in a controlled and limited way.  There is pent up desire for shiny new objects.  Consumers are more deliberate in their spending but are budgeting for the tech products that deliver both function and fun.

How the Research Was Conducted

A variety of quantitative and qualitative research was conducted; a nationally representative sample of 1,000 consumers was polled, and several facilitated discussions were conducted in Communispace’s proprietary online communities. It follows the same research the firms conducted together last year of a nationally representative 1,200 American adults through a robust online survey.  


About Ogilvy & Mather
Ogilvy & Mather (ogilvy.com) is one of the largest marketing communications companies in the world. Through its specialty units, the company provides a comprehensive range of marketing services including: advertising; public relations and public affairs; branding and identity; shopper and retail marketing; healthcare communications; direct, digital, promotion, relationship marketing. Ogilvy & Mather services Fortune Global 500 companies as well as local businesses through its network of more than 450 offices in 120 countries. It is a WPP company (NASDAQ: WPPGY). For more information, visit www.ogilvy.com.


About Communispace
The world’s most admired brands turn to Communispace Corporation, the leader in generating game-changing insights via private online customer communities. Founded in 1999, the company has created more than 400 customer communities for industry leaders such as Kraft, Hewlett-Packard, Charles Schwab, Hallmark, Unilever, GlaxoSmithKline and Hilton Hotels Corporation. Headquartered in Watertown, Massachusetts, the company has offices in Atlanta, Chicago, London, New York, San Francisco, as well as San Remo, Italy, and Sydney, Australia. For more information, please visit: www.communispace.com.

Contact:  Toni Lee, 212-237-5090/917-679-7631, Toni.Lee@ogilvy.com

Contact: Toni Lee
Date: December 06, 2010
Office: New York