■ Treats are indulgences whose immediate purchase is considered justifiable.
■ Postponables are needed or desired
items whose purchase can be reasonably put off.
■ Expendables are perceived as unnecessary or unjustifiable.
All consumers consider basic levels
of food, shelter, and clothing to be essentials, and most would put transportation and medical care in that category.
Beyond that, the assignment of particular goods and services to the various categories is highly idiosyncratic.
Throughout a downturn, all consumers except those in the live-for-today
segment typically reevaluate their consumption priorities. We know from previous recessions that such products and
services as restaurant dining, travel, arts
and entertainment, new clothing, automobiles, appliances, and consumer electronics can quickly shift in consumers’
minds from essentials to treats, postponables, or even expendables, depending
on the individual. As priorities change,
consumers may altogether eliminate
purchases in certain categories, such as
household services (cleaning, lawn care,
snow removal), moving them from essentials, say, into expendables. Or they
may substitute purchases in one category
for purchases in another, perhaps swapping dining out (a treat) for cooking at
home (an essential). And because most
consumers become more price sensitive
and less brand loyal during recessions,
they can be expected to seek out favorite
products and brands at reduced prices
or settle for less-preferred alternatives.
For example, they may choose cheaper
private labels or switch from organic to
nonorganic foods. (See the exhibit “
Consumer Segments’ Changing Behavior.”)
IDEA IN
PRACTICE
During a downturn, changing patterns in consumers’ behavior and
companies’ marketing strategies
either propel or undermine performance. The firms that understand
consumers’ recession psychology
and fine-tune marketing efforts and
product portfolios accordingly are
the most likely to prosper throughout the recession and afterward.
Understand recession psychology. Divide customers into four
groups based on their emotional response to the recession: a hard-hit
slam-on-the-brakes segment, which
curtails all spending; a
pained-but-patient segment, which selectively
economizes; a comfortably well-off
segment, whose high-end purchasing continues, if less conspicuously; and a live-for-today segment,
whose spending remains largely
unchanged. Next, assess how each
segment allocates its purchases
among the following categories:
essentials, treats, postponables,
and expendables.
EXAMPLE
Slam-on-the-brakes
consumers will reduce purchases
overall and seek lower-cost substitute brands for essentials such as
groceries, deeply reduce or eliminate treats such as dining out, delay
purchases of postponables such
as dental cleanings, and eliminate
purchases of expendables such as
resort vacations.
Manage investments. Use your
analysis to determine which brands
have the poorest prospects, and cut
them loose. Stabilize core brands by
maintaining or increasing marketing investments, make strategic
brand acquisitions, and launch new
products with care. You’ll also need
to balance the communications
budget, shifting spending to ads
with more-measurable results and
higher ROI.
EXAMPLE In the 2001 downturn,
Smucker’s acquired the Jif and
Crisco brands from Procter & Gamble. These brands were too small
for P&G and not in a core category
but proved to be a good strategic
fit for Smucker’s. P&G, meanwhile,
successfully launched the Swiffer
WetJet to establish a new category.
Market throughout the recession. Drive short-term sales while
investing in long-term brand health
in three ways: Reduce complexity
(such as trivial differences among
models) in product portfolios by
killing offerings, make products
and services more affordable (for
example, with lower thresholds
for quantity discounts), and bolster
trust (by treating customers well
and reinforcing their emotional connection with the brand).
EXAMPLE To build trust, some supermarkets have prepared flyers describing nutritious, low-cost meals.
American Express took a different
tack by inviting card members to
vote on which charity the company
would support on their behalf.
Managing Marketing
Investments
During recessions it’s more important than ever to remember
that loyal customers are the primary, enduring source of cash
flow and organic growth. Marketing isn’t optional – it’s a “good
cost,” essential to bringing in revenues from these key customers and others.
Still, company budget cuts often affect marketing disproportionately. Marketing communication costs can be trimmed
more quickly than production costs – and without letting
people go. In managing their marketing expenses, however,
businesses must take care to distinguish between the necessary and the wasteful. Building and maintaining strong
brands – ones that customers recognize and trust – remains
one of the best ways to reduce business risk. The stock prices
