Marketing to a “New Frugality”
The “New Frugality” is the behavioral response of Americans to the the nearly $13 trillion loss of wealth since the recession began; their upended confidence in the capitalist system is kick-starting a more cogent move toward frugality. Economists believe that this severe downturn will seriously rewire our mindset and real spending habits in the future, way after the economy finds its equilibrium.
The severity of this downturn may deeply reverberate. “It’s the contagion effect,” Mr. Dhar says, the same reaction that makes people travel less after a plane crash, or those who lived through the Great Depression conserve tin foil for decades. “The longer this lasts, the more it will have an impact on people’s long-term behavior,” he said. On top of that, getting credit is likely to be tougher for some consumers in the next decade than it was during the subprime-lending boom of just a few years ago.
“It’s hard to believe we’re ever going back to the easy credit and free spending of the last 10 years,” said economist Richard Berner of Morgan Stanley. He anticipates consumer spending will grow at an inflation-adjusted 2% to 2.5% annual rate in the next few years, compared with 3.5% in the decade ended in 2007.
A survey by AlixPartners, a business-advisory firm, found Americans plan to save 14% of their total earnings once the recession ends. Fred Crawford, the group’s chief executive, said even if that number is “inflated by the emotions of the day,” companies must “understand and plan for what could be a ‘new normal.’ ” Two-thirds of those surveyed said they plan to buy less in the future, while more than half plan to buy less-expensive things.
You think so? Americans are noteworthy for our poor memories, short attention spans, and insatiable desire for a quick fix. Sure, the pain is real, but will we revert to our free- spending ways when the good times roll?
That’s the behavioral quandary marketers of products must ponder. Do you create products for a new frugality or assume our lust for luxury will be the fulcrum of future success?