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The critical fourth-quarter season is approaching rapidly and there are growing signs of economic uncertainty. Discussions of a “double-dip” recession are increasingly widespread and there appear to be significant disagreements both domestically and internationally over whether the best path to economic recovery is through spending cuts or more economic stimulus.
I am not an economist, nor do I intend to espouse one political philosophy over another. What I do know is that, as a consumer, when I’m unsure about my future financial prospects I tend to spend less. The old sofa looks a little less ratty, the worn non-stick on my frying pan is slippery enough and that beat-up knife is good enough to get through one more trip to the sharpener.
The current recession is already working to reshape consumer purchase habits. Consumers are more price-value conscious than ever and are more willing and more able— thanks to the Internet— to comparison shop than ever before. You’ll note I say price-value conscious, not “price” conscious. It is becoming increasingly apparent that while many consumers want the “best” price, for a growing number of shoppers that does not always mean the “lowest” price.
A recent study of Millennials— consumers born between 1980 and 2000— by Albing International Marketing (AIM), revealed a generation of shoppers whose attitudes toward price and brand are more akin to their grandparents than their Baby Boomer parents. For these shoppers, for example, brands are less about status than a confirmation of reliability. In fact, according to the study, Millennials ranked product reliability as the “most” important factor in their purchase decisions.
For these first-time householders, status is conferred less by the brand they buy than by the deal they get when purchasing that brand. These first-time-householders take pride in their ability to ferret out good deals and according to the study’s author, Robin Albing, have an “insatiable need to further educate themselves prior to any major (or minor) purchase for the home.”
The study reveals clearly that this generation of consumers are ad-savvy, market-savvy shoppers who have the skills and the desire to find value. Describing the adaptations they will make to current economic conditions, 27% of Millennials said they, “will still look at product quality but will more often accept lower quality to get a good price,” and an additional 30% said they will “shop more frequently for the lowest price.” As noteworthy, is the fact that the largest single group of respondents (32%) said they will not change how they shop, potentially the result of this generation’s already established focus on the price-value relationship.
Now you may ask, what does all this have to do with the upcoming fourth quarter? The answer is everything.
The results of this study correspond closely to growing evidence that consumers across all demographic segments are developing a new view of the price-value relationship; one that puts a greater premium on product longevity and performance, and takes a more negative view of disposability. Correspondingly, consumers today are increasingly savvy when it comes to determining the real value of a product offering; one that is explained in terms that produce a clearly understood benefit. Claims of “longer lasting,” “outperforms,” “faster,” “more durable” are far more likely to resonate than laundry lists of product bells and whistles.
In simplest terms, this year it’s about benefits, not features.
At the same time, price remains an issue and sharpening the pencil to give the consumer a measure of savings over the prices they’ve seen throughout the year could separate the winners from the losers.
This does not mean that your margin requirements should go out the window in a fit of price-matching frenzy. It does mean that keeping prices on key items close to the competition is going to be key and that whenever possible your ability to strengthen the value perception of items on which you may be a little higher than the local big box, could make the difference between making the sale or not.