Page 55 - SM Aug-Sep-2014

Global consumerism that fundamental change in behaviour are now competing on a ‘value plateau’. – coupled with a ‘hollowing out’ of the while mainstream products may market as more value and premium perform better than value products, the products become available – has The recession difference in performance created by a resulted in the greatest challenge to caused a fundamental particular beneft (say, the freshness of the established market order in the last change in consumer beer or convenience in banking) is not several decades. creating suffcient differentiated value Despite common beliefs, income behaviour to support the cost differential. Instead, distribution is not necessarily it is adding material amounts of cost. responsible for this change. More what results is a preference, important is the increasing gap between among many consumers, for the value disposable income and available reason that consumers will continue to offering – not necessarily because it is income. for example, an increasing try lower-price products long after the better and not only because it is less proportion of income is dedicated to income effects of the Great recession expensive, but because its price is more connectivity (cellphones, video and data) have passed. this change in consumer in line with its benefts than is the case – expenses consumers typically don’t behaviour has profound implications for with the mainstream product. this can consider discretionary, particularly for the future strategies of companies. be true even if the mainstream product recurring subscription-based services. improves its absolute performance looking at purchase behaviour, most Be good, but not too good advantage. take the automobile of the time consumers choose from a As consumer purchasing behaviour industry, for example. over the last few small number of products or services has changed, the price band of most years since the recession, demand – whether it’s the cereal they buy, the goods and services has expanded for used and value cars, such as Kia, bank they use or the television channels dramatically. Companies have hollowed continues to grow while middle of the they watch. the dramatic change in out offers for consumers not by making market brands struggle. circumstances caused by the Great products and services in the middle At the same time, premium car sales recession has forced consumers to less compelling, but by dramatically remain strong. In fact, we’re seeing the reconsider their choices in category broadening the offerings available emergence of more and more premium after category. for many, the new at the upper and lower ends of the products across industries. Just look at the grocery industry. whole foods market. of 100 products competing in choice stuck. Why the ‘disappearing realised lower-priced products the average grocery category in the us, (a us, Canadian and uK supermarket During the recession, consumers chain specialising in natural and many more are now either ‘premium’ organic foods) plans to expand from frequently performed better than or ‘value’ than was the case a mere middle’ is a real expected, leading in turn to more 15 years ago. In many categories, fewer than 400 us stores to 1 200 (with >> mainstream products have gone loyalty to these offerings. for example, more than 100 new stores currently in development), which will make high- if consumers believed private label through a diffcult evolution and they products performed worse than market threat Amore products are moving branded goods, but were prompted to s A result, of these new try them by a change in circumstance, consumer purchasing behaviours, a better-than-expected experience towards either the ‘value’ or ‘premium’ means they will be more likely to ends of the spectrum, leaving a middle continue to buy the lower-priced market that is struggling to remain product, even when their income The Great Recession forced consumers in relevant. Companies therefore need to constraint loosens. this is a many countries to drastically rethink their reset their innovation efforts and think refection of the value perceived purchase behaviours and, even though differently about scale in order to thrive by customers. It stands to in the new global economy. many have regained their fnancial footing the economic downturn that began Since the recession, in the years since the downturn offcially in December 2007 has, in many demand for used and value ended, those buying patterns have economies, had a more permanent cars, such as Kia, continues to grow while mid-market impact on consumer purchase remained. By Steve Carlotti behaviour than companies expected. brands struggle 52 strategicmarketing August–September 2014 August–September strategicmarketing 53