THE FOREVER FRUGAL CONSUMER
Retailers must adapt to the Forever Frugal Shoppers
A few weeks ago, I read a very interesting piece regarding consumer spending in the Wall Street Journal. According to the article, Frontier of Frugality, many consumers are hesitant to trade back up to their pre-recession shopping habits due to the uncertainty of the future of our economy.
Based on a survey issued by Citibank in August, Hart Research Associates found that 41% of consumers are worried about the amount they pay for necessities like food and gasoline. In addition, this same survey reported that 72% of American consumers believe the economic decline still has a way to go before hitting rock bottom.
More results from the survey show:
• 72% of shoppers are using coupons they receive in the mail, newspapers or magazines
• 62% are reducing the amount of premium coffee and food products they purchase and substituting these with less expensive items
• 44% of consumers are buying more from bulk food stores
• 36% are using special offers found online
Are these percentages surprising to any of you? I can’t say that I’m shocked by these statistics at all. I started my career at the peak of the economic recession so I quickly became a fan of the coupon websites, retailmenot.com, groupon.com and livingsocial.com. Morning Starbucks runs turned into a thing of the past and I only shopped at my neighborhood grocery store because they helped me save money on various products each day as well as provided a discount for gasoline.
The article also mentioned a market research company, SymphonyIRI Group, who reported the following statistics:
• The amount of consumers who use a list when shopping has increased 30% in the last 3 years to 75%.
• Shoppers are also buying about 10% less products that they did before the recession hit.
• 80% of consumers believe that private-label products are as good if not better than the national branded products.
So, what does all of this mean for American business segments?
As a consumer, I believe that businesses need to accept the reality that consumers are becoming “forever frugal” and continuing to shop for necessities while avoiding luxury items. Frugal consumers are looking to get the best value for their dollar so it is important for your business to separate itself from the competition though a strategic competitive advantage and create value for your customers.
How can you differentiate yourself from the competition?
Start with your associates. They are your brand ambassadors that can make or break your company. The more knowledgeable your associates are about how your business works the more inspired and motivated they will be in driving strategic initiatives. By educating associates on your business and the customers who you serve, they will be better equipped to provide superior customer service which will help contribute to the customer’s store loyalty and will bring them back in the future.
Here are a few examples of what your business can do to help adapt to the new frugal consumer:
• Manufacturers — If 44% of people are shopping more at bulk food stores, consider bundling products together to lower the per-unit cost and create agreater value for your consumers.
• Retailers — Establish a loyalty program where customers are able to receive coupons and discounts for certain items or products. Another idea is to offer a credit card that saves consumers a certain percent on every purchase they make in the store. Studies show that customers that use a store credit card with discount incentives are more likely to spend more at the store.
• Services Industry — Utilize social media—Facebook, Twitter, LinkedIn—to promote your business. Offer discounts on the coupon websites, Living Social or Groupon, and allow people to endorse your business through Calyp, a new digital platform from Blue Calypso. Customers get drawn in if the discounted price is significantly less than the actual retail price of the service, and these sites create a sense of urgency to purchase within a day or two so consumers are more tempted to purchase the deal.
• Travel Industry — Promote your amazing vacation package or cruise special on one of the various travel deals websites. My favorites areAirfarewatchdog.com and Travel Zoo. Frugal consumers are looking for the best value so think about combining the flight, hotel and car into one package for a lower cost.
• Credit Companies — Lower the yearly fees or interest rates and offer incentives for purchases. Examples of incentives could be loyalty points that can eventually be traded in for products or services or cash back on purchases.
Does your company have a plan of action for exceeding the expectations of the new forever frugal consumer?
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