Consumers AREN”T Changing!!!!!

If you consume any sort of media you probably have heard something along the lines that “Consumers are reacting to economic hardships by doing this or that…” Generally they take the line that conspicuous consumption is now out and those with money are now spending it in far more low-key ways. Look at this article from Australia’s Sydney Morning Herald titled “Luxury and Wealth Head Underground”

Without wishing to shout: THIS IS WRONG, WRONG AND BEYOND THAT…. ENTIRELY WRONG!!!

Consumers aren’t changing. However the make up of the market has. If you are smart you are going to want to adjust to this quickly as it will very probably be the line between success and failure over the coming years.

The research behind the Fingerprint Strategy clearly paints the picture of a world of consumers split in two:

On one side you have the Traditionals – price driven and brand orientated. When times are good they follow the herd and spend freely (especially if they get a deal) on homes in the suburbs, consumer electronics, cars and an array of high status “branded” products. However they react to economic stress by putting the wallet away, battening down the hatches and only making discretionary purchases if they get such an incredible deal (with a money back guarantee) that they just can’t stop themselves. Worse still, they stay in this mode for a long, long time - until it is clear that it is safe to come out. If you want to sell to these guys in the next 3 years, you have to give them the lowest price, then lower it and even then give them some way of reducing the risk of doing nothing.

On the other side of the equation we have the NEOs and their kindred spirits the Evolvers (who act and think like NEOs in almost every way but just don’t have the same income and purchasing power). These people are always on the lookout for products and services that connect with them on a personal level. This could be through design (iPhones), provenance (local artisan foods), or a whole range of other ways that create individualized personal solutions to daily life. Price is a factor for the NEO, but only one of many.

When economic stress hits, the NEO consumer has a very different reaction. Many see it is an opportunity. They remain entirely NEO, continuing to look for products and people that make their lives richer, easier and more authentic, especially if it involves jettisoning the mundane tasks of life. They may switch consumption patterns a little; such as forgoing the three $10 bottles of Red Truck they may have been buying each week. However in its place is likely to be the $35 bottle of 2005 Whitehall Lane Cabernet that scored 94 points on winespecatator.com. In the recession of the early part of this decade (yes we had one!) a Goldman Sachs’ study showed increase sales of premium wines while overall wine sales went down significantly. This is the NEO consumer at work and the same will be happening now.

What is occurring in the economy is far more complex than most commentators understand. Apple posts record revenue and profits while Dell, who are cheaper at every price point, sees sales crumble. Audi sales remain relatively strong (up 11.9% for 2008 in Canada) while GM and Chrysler slip into bankruptcy. Chipotle Restaurants have 5.8% growth in comparable restaurant sales, while Bennigans stores are shuttered. This subtlety gets explained (or ignored) as an anomaly but there are hundreds of similar examples of companies that appeal to NEO and Evolver consumers that are able to keep growing, making sales and flourish, while the Traditional mainstream withers.

This is the new consumer reality. Consumers haven’t changed one little bit. They are behaving exactly as we knew they would. All that has happened is that the Traditionals have pulled back, saving money, looking for deals as they always do when times are rough (and these are some of the roughest we have seen). The people you see now, who are out there buying unique, authentic goods and services; they haven’t changed one iota either. It’s just now that the masses have cleared out of the way and you can really see them. Get used to it, they are where the opportunity lies.

NEOs – learn them or lose them.

NEOBLOGGER