Survey Reveals How Consumers and Thinking and Shopping in the Recession
(March 2009)
To help shed light on what consumers are doing and thinking in relation to the current economic climate, Synovate and our sister company the retail analysts Synovate Aztec recently surveyed over 12,000 people across 20 countries. We asked them what they’re feeling, thinking and doing about the economic crisis or whether they even think it’s a crisis at all, and the resultant report is a fascinating insight into what New Zealanders are thinking and doing about the crisis, and how we compare with the rest of the world. This article barely scratches the surface, but nonetheless reveals much of interest to grocery retailers.
As the chart shows, New Zealanders are indeed pessimistic about the local economy, with 55% of the 402 New Zealanders surveyed believing that the economy is going to continue getting worse, and just 1% believing it to be strong. Australians are fractionally more optimistic, although the survey was conducted prior to the infamous ‘buggered’ summary of their economy.
As might be expected, those in the most volatile and exposed economies, the UK and US, are the most pessimistic. Whilst the economic problems these countries face are more entrenched and problematic than New Zealand’s, it’s worth pointing out that these countries have a disproportionately high prominence in our cultural and news coverage, thus spreading their negativity to everyday New Zealanders to a greater extent than would purely financially-oriented business news items. As a result, New Zealanders could be excused for feeling more financially at risk than necessary.
The chart also shows how the financial doom and gloom is not universally felt. People in Brazil, Denmark and Malaysia were notably more upbeat about their countries’ economies.
We also asked people about their personal economic situations; whether they felt things were going to get better, worse, or remain unchanged at a personal level. New Zealanders were somewhat balanced on this issue, with 27% believing their personal situation will improve, and 31% expecting it to worsen. In contrast, those in Australia, the US and UK were notably more negative.
To manage this situation, many are cutting back on their spending, and with 73% of New Zealanders making spending cuts over the last six months, we are more likely to have made cuts than those in 15 of the 20 countries surveyed.
So what are New Zealanders cutting back on as they traverse the supermarket aisles?
We are most likely to be reducing our expenditure on alcohol, softdrinks, cosmetics, dairy and healthcare products. Compared to the rest of the world, we are significantly more likely to be cutting back on dairy and healthcare products.
This does not necessarily mean we are consuming less of these items – quite often the cutbacks have been achieved through switches to cheaper brands, often housebrands. This is particularly the case for dairy products, staple food items, canned goods and cleaning products. Manufacturers and retailers can’t help but have already noticed such changes (29% of the New Zealanders surveyed said that they had already made such changes), but they should also be aware that another 18% of the local market expects to make such switches soon.
This is all confirmed by data collected by Synovate Aztec, whose data in the chart below shows that the meal makers, confectionary and cheese categories have seen the greatest growth within private brand sales.
As well as the changes amongst the types and brands of grocery items being bought, New Zealanders have been found to be food-hoarders – 25% said that they had started storing food in case prices rose even more, compared to 18% of those interviewed overseas.
However there is light amongst the data for those who aren’t in the private label, with 60% of New Zealanders stating that they will always find a way to afford the items that make them feel good. This supports what we have long known, which is that marketers who manage their brands carefully should withstand the pressure better than others. This is because we have long known that brands that win in a recession are those that consumers feel that they can’t live without. Whether premium or value, or in high or low involvement categories, consumers will always be willing to make other sacrifices to continue to buy the brands they feel emotionally connected to. Marketers who have built up the emotional bonds between their brands and their customers are in the strongest position.
Brands most at risk are also those which have failed to differentiate, in markets where commodity options offer just about the same products, at much lower prices – hence the growth of private label supermarket goods. In a downturn, marketing effectiveness is all about maintaining share in a shrinking market, so that when the market bounces back, so too will sales. Brands that go to ground, stopping advertising in particular, or sacrificing sales volumes in order to maintain margins (instead of introducing cheaper pack options) will not only lose in the short term but also the long term, because consumers will find replacements and forget about their old brands when the upturn comes.
So the winners will be the brands that help their loyal consumers (and even the less emotionally committed but nonetheless habitual buyers) keep buying their products, by making it easier for customers to continue using them through the downturn – through smaller packs, for example, or showing how food items can be used in dollar-saving recipes. At times like this, consumers desire the comforting, tried and true brands in their repertoire, but need to see the brands maintaining accessibility. As well as maintaining share, growth opportunities can also be sought by taking advantage of new segments that may emerge. Simple examples are the growth in people staying in and entertaining at home (e.g. people will drink more at home than in a restaurant) and even the well-known truth that board game sales increase during recessions! So focus on comforting, family values that give consumers reassurance, ensure your products remain accessible, and help your customers to keep using you.