It’s a mixed state of affairs for shoppers and retailers today. Same store sales are up at Macy’s, down at WalMart. Consumers are finally loosening the purse strings or keeping them tightly closed. Commodity prices are trending up (especially cotton) but inflation is still held at bay; there is strong pressure against raising prices. It’s the young, no it’s the old who are driving PL sales.
Now more than ever a marketer has to a have clear understanding of what drives consumers of his particular business: general economic trends will be of limited usefulness in this fragmented world. One implication: Build a 360º understanding of your customer. For many retailers and CPG manufacturers, consumer understanding typically focuses on category-specific attitudes and behaviors, with a smattering of demographics. That’s still necessary, but it may not be sufficient. Digging into the target households’ financial condition is more relevant and actionable now than in the past. Here are some of the variables I’d suggest may be particularly relevant to understand:
- Consider measuring these dimensions of financial health: income, (salary, overtime, bonus); employer contributions and benefits; expected inheritance value; home value; value of retirement assets; non-retirement savings; college savings; debt; job security. These types of variables may have very different impacts on consumer attitudes and behaviors.
- Measure current status, but importantly, measure what’s changed:
- Define the scope of change in households’ financial condition (how pervasive, how many variables have shown declines)
- Assess the magnitude of the changes (how steep a fall)
- Measure where they are now: a small shrinkage of a little pie can drive more drastic change in behavior than a large shrinkage of a big pie.
- Measure the head of households’ confidence about their financial future.
Link these financial measures with measurements of attitudes, and measurements of behavior towards the category and your product. With this more in-depth perspective, a marketer will be able to design more compelling product offerings, promotions, price points, and advertising that speak to the target consumers’ current state of mind and wallet. And, depending on the strength of relationships you find across financial variables, attitudes, and category behavior, you may well have some guidance as to what to expect as that financial status improves.