The Economy, Online World and Mobile Devices Changed it All

“Then, they took everything about me and put it into a computer where they created this model of my mind. Yes! Using that model they managed to generate every thought I could possibly have in the next, say, 10 years.” – Jeffrey Goines, “Twelve Monkeys,” Universal Pictures, 1995

Depending on where you live on the planet things are good and getting better or bad and getting worse. Let me check my Facebook and Twitter accounts and get back to you on that.

If you want, you can check with the government and the bank but then…

It has been more than four years since the global economy took a downturn.

In the industrialized countries, that’s long enough to let people train themselves into a new way of considering and buying things.

While the BRIC (Brazil, Russia, India, China) economies are growing rapidly, there’s a new middle-class economy in emerging nations.

The two billion plus emerging nation consumers will spend about $7T and it is estimated that this will rise to $20T annually over the next decade.

New Middle Class
If you live in the industrial countries we wouldn’t suggest you pack your bags and move where the action is because you have to keep in mind that their middle class is different from that in developed countries and even the BRIC nations.

The Emerging Middle Class in Developing Countries

Developing countries are Argentina, Brazil, Chile, China, Colombia, Egypt, India, Indonesia, Iran, Malaysia, Mexico, Nigeria, Pakistan, Peru, the Philippines, Poland, Romania, Russia, South Africa, Thailand. Turkey, Ukraine, Venezuela, Vietnam.

New Middle-Class – While you might not consider them to be middle-class by your country’s standards, there is a new middle income population in the developing countries and they aspire to the most luxurious but focus on a combination of practical and status. Source – McKinsey

For example, in China and India about 40 percent of their income is spent on food and transportation, compared to 25 percent in the Americas.

It’s better but still…

While these people are finding a new level of spending freedom, they also share many of the “learned” traits that developed country consumers have learned over the past five years.

Economists and analysts like to categorize the changed habits as a “new frugality;” and with the global advent of mobile devices and online search/research tools available to nearly everyone, the learned habit will probably persist.

As Jeffrey said, “There's no right, there's no wrong, there's only popular opinion.”

And, it is reshaping consumption patterns globally.

New Strategy – Strategies that companies use to influence/persuade consumers in industrial countries can’t be replicated in developing markets and do not achieve results. A solid understanding of the issues, wants and needs is essential--not just in the country, but also in specific regions within each country. Source – Booz & Company

With online couponing and showrooming, there has emerged an odd value consciousness that enables people to make justifiable trade-offs in price, brand and convenience sprinkled with periodic (and justified) indulgences.

New Habits – Even in countries where the economy is robust or simply showing signs of improvement, consumers have “learned” to search for and find the best value, including price, for the products they purchase. And with social media, they share that information more readily. Source – Forrester

The prolonged downturn and slow return to “normal” has had an impact on what we buy, how we buy and how we justify what we buy.

To get things moving Jeffrey hollered out, “Colonics for everyone!”

Brain Ways
Ran Kivetz, marketing professor at Columbia Business School, explained the new normal by noting that there’s no separation in the brain between spending and saving so it’s easy for people to do all the right things and still move effortlessly between the two zones.

That’s how folks can sneak into the discount store for generic toothpaste, shampoo, etc. and then march into the Apple store for a new iPad or, better yet, a MacBook Pro with retina display.

They buy the MBP with its anemic SSD (solid-state drive) knowing that as soon as their momentary guilt wanes, they can go to macsales.com and pick up a huge SSD that’s far cheaper than the one from the factory.

It’s the line our wife uses all the time, “see how much I saved you!”

Of course, this is a difficult hurdle for the mass merchants and brands because it is difficult to convince you of the psychological value of commodity and household goods.

At this point, Jeffrey would comment, “Your information train is jammed, man!”

This is also why today’s consumers are spending more time online and connected to others with their mobile devices.

Variety of Devices – Every mobile device has a slightly different keyboard to enable people to communicate with each other; but whether individuals prefer their notebook, ultrabook, tablet or smartphone, they continue to pass news, information, offers, special deals and good/bad brands among one other. Source – The New York Times

People have found new status in private-label products.

They have a whole new level of shopping freedom that lets them research online and buy in the store – bravely asking for and expecting price matching.

There’s a new trend of intense price competition and raised consumer expectations across all sales channels that will be hard to reverse.

Six Frugal Consumer Segments

Global Frugality – Whether people live in high growth, flat or slow growth countries, the past five years have taught them to be cautious about what they purchase. In addition, the ability to quickly find and exchange information about companies, brands, products and prices puts added pressure on manufacturers and retailers. Source – Booz & Company

Buying Approaches
The new consumers – even the new developing country middle-class – have traits in common:

• Shoppers 2.0: this technologically advanced group tends to buy online across all categories and use coupons but have little brand loyalty.
• Deal Hunters: highly price- sensitive, they have low brand loyalty. They do their research online but “negotiate” to get the best in-store deal.
• Online Window-Shoppers: this group carries out a high level of online research but is less likely to purchase online. They exhibit modest price sensitivity and brand loyalty.
• Channel Surfers: hunt for their brands and are likely to switch retailers for a favorable price; they tend to trade convenience for the brand deal.
• Loyalists: least likely to change brands or retailers for price alone; they often research and buy online but stick with their preferred brands
• Laggards: least interested in changing behavior, they do little online research, make purchases with low coupon usage.

Consumers not only expect real value -- the best combination of price, brand and convenience – they now have the tools, means and willingness to share that information with others (even if you don’t want to listen).

What Consumers Trust

Building Trust – The day when manufacturers could control the conversation disappeared the moment virtually everyone was able to get online. Now, consumers expect complete, honest information and answers because it is too easy to check with others on the web and validate the information. But it isn’t the volume of people attracted to the social media site, it’s more important for consumers to understand who is giving/exchanging the information and his/her credibility. Source – Forrester

This has produced a mad rush by manufacturers, brands, retailers to social media.

Of course, once everyone got there, they found that:

• Most decisions are shaped by word-of-mouth
• Success is built on trust, transparency, real two-way conversations (you know, listening, talking)
• The volume of followers does less to inspire trust than open dialogue
• Popularity doesn’t equal influence

Today’s emboldened, frugal consumer wants to make the right choices, so they can feel good about themselves and their purchases.

The key to a product’s or services success is helping consumers make the environmentally friendly choices that are earth friendly, save the consumer money or provide a well-founded long- term investment.

It also means treating people--employees, suppliers, customers, local communities well; and admitting mistakes, accepting responsibility when things go wrong.

Brands today aren’t just peripheral to our lives; they’re part of our culture, community (local, national, international).

If brand managers understand and embrace this, today’s new consumer will return the favor.

If they don’t, they’ll understand what Jeffrey Goines meant when he said, “Look, hey - all of these nuts could just make phone calls, they could spread insanity, oozing through telephone cables, oozing into the ears of all these poor sane people, infecting them. Wackos everywhere, plague of madness.”

G. Andy Marken is President & founder of Marken Communications

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