It’s a new year, but consumers’ attitudes toward spending and saving haven’t changed much. In fact, the latest U.S. Consumer Sentiment Survey from McKinsey finds that despite a steadily improving economy, Americans’ penny-pinching ways have gotten even worse in the past few years.
McKinsey’s September 2012 consumer survey found that most Americans were optimistic about their futures and spending more freely. But since then, their outlook has “either plateaued or gotten worse,” the study says. Nearly four in 10 consumers surveyed are fearful of losing their jobs, and a similar amount say they live paycheck to paycheck — an increase from 31 percent in 2012.
Not surprisingly, families making under $75,000 annually are making the most spending adjustments. Some 40 percent report cutting spending or delaying major purchases in order to get by. Just 22 percent of those with household incomes over $150,000 do the same.
But no matter what income level they report, the vast majority of consumers aren’t feeling positive about the future. Only 23 percent are optimistic about the economy — even fewer than the 27 percent who felt optimistic in 2009.
The cost-cutting behavior Americans adopted during the recession has continued to hang on. Some 40 percent of consumers report having cut spending in the past 12 months, and 55 percent say they will look for cost-cutting ideas in the next 12 months.
In order to save money, customers are:
- Shopping based on price
- Using coupons or discount codes
- Comparison-shopping for good deals
- Buying products in bulk
- Shopping online more often
- Trading down to less expensive brands or private label products
Trading-down behavior is especially persistent. Almost three-fourths of consumers say they don’t plan to go back to the more expensive brands they traded down from during the recession.
A few bright spots in the economy are food/beverage and health/beauty. Although Americans cut back on dining out and takeout in recent years, the study finds they’ve reached “saturation” with this behavior and are ready to start eating out again. In addition, food/beverage and health/beauty are the categories in which Americans are least likely to “trade down” to cheaper brands.
Still, the reality is that nearly 40 percent of consumers say they “will probably never” return to their pre-recession approach to spending. Almost three in 10 say their attitudes about spending have changed (up from 17 percent in 2010, during the depths of the recession) and 24 percent say their economic situation won’t allow them to spend as much as they used to. Even among those who want to spend the way they used to, most are waiting until they can pay down debt, save money or get back to their old income levels.
How can you counteract this frugal outlook and get your customers buying again? Here are some tips.
Segment Your Market
Baby Boomers are the group least likely to be cutting back or trading down on anything, so they can be a good consumer demographic to target if you aren’t already.
Acknowledge Their Worries
If you’re targeting middle-income shoppers, your marketing message needs to convey understanding of their budget concerns. Emphasize how your products or services help them reach their goals, such as saving money for more important things or getting lasting quality.
To attract most shoppers’ attention, you’ll still need to offer discounts, coupons and deals. Do the work to figure out the discounts that will get shoppers in the door but still leave you with decent margins.
Focus on Upscale Shoppers
Middle-income consumers are cutting back on higher-priced items. If you sell luxury products or services, you’ll have more success focusing your marketing on higher-income consumers rather than the “aspirational” set.
Millennials pay more attention to prices, use more coupons and shop around more than the general population. However, they’re also more likely to splurge in areas such as food, beverages and personal care. If Millennials are your demographic, focus on products and services that matter to them, and emphasize quality—such as healthy, locally sourced ingredients in food.
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