The Impact of the Recession - Essay Example

? Discussion of the impact of the recession on consumer behaviour and on marketers BY YOU YOUR SCHOOL INFO HERE HERE Discussion of the impact ofthe recession on consumer behaviour and on marketers Introduction The recession is causing numerous changes in consumer behaviour, especially in relation to their brand loyalty and their cost-conscious methodology when selecting products. Once predictable behaviour is now being replaced with a new type of consumer that is constantly seeking value in nearly all elements of product variety. This is making the process of marketing and advertising significantly difficult in an environment where competition is high, especially in areas of food consumption and technology consumption. At the same time, marketers are resorting to new promotional campaigns in order to remain competitive and gain consumer attention in the face of this current economic downturn. Food and technology Statistics indicate that six in 10 consumers have reduced the volume of frequency as it pertains to eating-out in restaurant environments (Bainbridge 2010). As a result, especially noticeable in the pizza restaurant industry, marketers have changed their promotional activities to include vouchers with significant pricing discounts (Bainbridge). Where once major companies in this industry, such as Pizza Hut, used psychographic segmentation and targeting to gain attention and loyalty, they are finding it more difficult to compete especially when their products carry high price tags over competition. Companies like Pizza Hut once had well-established consumer segments that were devoted to the brand and were able to use rather low-cost marketing and higher price methodology to ensure positioning in terms of quality. Today, however, the recession has created price wars that continue to erode profitability especially with more consumers eating within the home and avoiding the high costs of restaurant eating. This is also noticeable in the fast food industry with new promotions being added to traditional menus, such as McDonald’s with its dollar menu variety. However, this marketing effort is not bring the type of profit results marketers had once experienced early in the recession. Today, new freebie offers and Internet-based incentives coupons are becoming the norm for many consumer segments (Glazer 2009). This shows a shift in consumer behaviour toward active searching in the consumer search process to identify coupons before they will frequent even their favourite restaurants. There is clearly a value-driven methodology in consumer groups that change their buying behaviours and choices. This is even apparent in how grocery stores market their food products, with the new value-based consumer searching for low-cost products. Statistics indicate that 53 percent of today’s recession-minded consumers are buying fewer organic products and 50 percent are even turning toward generic or private label brands (Frozen Food Age 2008). Organic products and well-known product brands used to be the driver for significant profitability in the grocery industry, however the recession is changing the supply chain to identify new value for consumers in order to sustain their business. Morrisons, one of the largest grocers in the UK, has control over much of its supply chain and is therefore able to ride out the recession successfully by using new promotional tactics. The store is able to provide fresh food options at a much cheaper price than competition and uses this fresh quality positioning to sustain higher profitability than other markets without control over their purchasing system (Mortimer 2009). However, it shows that the consumer propensity to change from their loyal and trusted brands to generic and private label brands and how it has affected total marketing and purchasing/distribution strategies. The grocery industry has identified that 44 percent of shoppers now consider private label products to be on par or even better than long-standing trusted brands (just-style.com 2009). This is a danger to businesses that rely on clever marketing and advertising to make their products stand out over competing brands. It shows a social shift in attitude related to private label brands that can continue to erode the effectiveness of high-dollar or intensive brand advertising. In the technology sector, price is a significant determinant of buyer behaviour in this economy. The vacuum market is a mature market, however it has seen sales fall from 2004-2009. Consumers, due to price, are trading downward for lower-cost products (giichinese.com.tw 2009). Televisions are also seeing sales reductions as 86 percent of today’s consumers identify that price is the most important factor when selecting a product (Bainbridge 2009). This has sparked price reductions in this technology market since traditional positioning based on feature or quality is not working successfully. Marketing attitudes Helm, Boyle & Matlack (2009) identify that companies are afraid to cheapen their brands by using concentrated incentives-based marketing to gain business opportunities. To gain consumer attention, in the face of strained budgets, many companies are using goodwill-style ads with a focus on corporate social responsibility such as green methodology or fiscal responsibility. However, this is not effective with all market segments. The recession has also changed lifestyle for many through unemployment or temporary lay-offs. As a result, companies that offer logo design are seeing a spike in small business formation (Economics Week 2009). This shows that consumers are not only changing their buying behaviours, but becoming active members of the small business environment in an attempt to secure a better quality of living. This provides new opportunities for companies in design to earn higher profitability and extend their marketing presence through advertisement and promotion. Other companies that have limited budgets due to today’s economy are turning toward low cost public relations firms or specialists to assist (Goodkind 2010). Rather than using expensive ad content with paid actors, as one example, companies are using low-cost press releases or PR teams as a means of changing consumer sentiment and regaining their loyalty. However, this seems to have mixed results with certain demographics depending on the nature of the product being offered. Conclusion Value-conscious consumers continue to drive new methodology in distribution, advertising and promotional strategy in multiple industries. Typical psychographics does not work effectively if consumers see price and value as their main selection determinants. When companies run the risk of cheapening their brand with excessive discounts, they must be innovative to gain new loyalty in multiple market segments. References Bainbridge, J. (2009). ‘Function over form’, Marketing, London. September 23, pp.28-30. Bainbridge, J. (2010), ‘Still earning a crust’, Marketing, London. February 24, pp.30-32. Economics Week. (2009), ‘LogoNerds: as the recession sparks more home based businesses companies are turning to LogoNerds to build their brand’, July 17, p.35. Frozen Food Age. (2008), ‘Price hikes change spending habits’, vol.57, no.3, p.9. Giichinese.com.tw. (2009) [internet] ‘Vacuum cleaners’, Mintel International Group Ltd. [accessed June 13, 2011 at http://www.giichinese.com.tw/report/mt104817-vacuum-cleaners.html] Glazer, F. (2009), ‘NPD: customers hungry for freebies, Internet coupons’, Nation’s Restaurant News, vol.43, no.34, p.22. Goodkind, G. (2010), ‘PR creates good buzz’, Marketing, London. October 13, p.11. Helm, B., Boyle, M. & Matlack, C. (2009), ‘100 best global brands: turmoil in the rankings’, Business Week, Iss. 4149, September 28, p.44. Just-style.com. (2009). [internet] ‘The global economic crisis: the impact on consumer attitudes & behaviours in the United States’ [accessed June 14, 2011 at http://www.just-style.com/store/product.aspx?id=79397&lk=wpud64] Mortimer, R. (2009). ‘Morrisons: triumph at the tills?’, Marketing Week, London. March 26, p.30. Read More