Consumer Interrupted

It’s a new day for the consumer. The credit crisis and its fallout have reorganised not only consumers’ means, but also their mindsets.

The problem, however, is that it is not yet a new day for many companies. Like the indebted parent who has no capacity to teach their children about personal finance, today’s companies may not be reacting quickly enough to the challenges of this new marketplace.

As a result, they are missing out on myriad opportunities presented by this interruption.

The word ‘debt’ has been thrown around so much recently that it is beginning to lose its meaning. It’s now assumed that consumers will have debt beyond a mortgage.

Furthermore, executives are quick to recognise debt as a crucial and often positive part of building a business. With such a position, it’s easy to discount the miserable predicament that the average American consumer is presently in.

Beyond a mortgage, consumer debt is a burden and not a tool for growth. It’s estimated that the average American with at least one credit card carries a balance of over $8,000. Of course, some owe more and some owe less – but coupled with the decimation of home values and the devaluation of personal investment portfolios, discretionary income is becoming harder and harder to come by.

This is seen in consumer spending, which fell sharply in 2008. And while it has stabilised, it is still down sharply from 2007.

If history is any guide, people will be quick to forget their lessons. The dot-com crash of 1999 is still within recent memory, and we experienced a new boom and bust period between then and now.

Consumer spending was brisk during the boom period, and while perhaps the world economy is not yet out of the woods, most indicators and forecasters do agree that a recovery will be on its way. With that, recovery will inevitably follow increased consumer spending, as discretionary income becomes more readily available for the average consumer.

However, the wake of this crisis – one of the worst on record – consumers have evolved, and in order for companies to capitalize on the mentality of consumers both now and after a full recovery takes place, they will need to take into account some important changes.

For one, instant gratification has become the norm. It used to be that instant gratification was simply an immature urge, but in this age consumers are in fact able to get instant gratification if they want it.

Consider books. Ten years ago, if someone wanted to get a book, they would either make the trip to the library or a local bookstore to purchase that book. Now, one can purchase a book for their Kindle in an instant. While this may seem obvious – technology has changed the way people purchase – its implications are often overlooked by businesses.

Even if technology hasn’t radically changed your industry, you can benefit by ‘piggybacking’ on the instant gratification principle. For example, if you run a restaurant, take the time to register with an online reservations service – and watch your business skyrocket. Don’t just give the customer what they want – make it available to them right now.

In addition, quality has become transparent. It might still be possible to peddle items of middling quality at middling prices, but the greater transparency in the marketplace – not only from social media, but from new methods of communication and networking – has made it easy for consumers to compare different products and select the product with the best review or the best word of mouth.

The importance of this absolutely cannot be overstated. The new consumer is easily able to find out the best value and best quality of the product that they are looking for. This creates a huge upside for companies who produce quality products; now that quality is ‘in the open’, the best products can be priced accordingly.

Finally, utility will be an excellent selling point. People may always like flashy gadgets, but unless you’re Apple, it is difficult to produce the single hottest gadget. Now that consumers have less money to spend, they are more likely to spend their money on items that are useful to them – a principle that can be easily used to the advantage of most companies.

Of course, this doesn’t mean you need to sell soap to make money – by highlighting the every day utility of your product, the greater your changes to appealing to the cash-strapped consumer.

There’s been a broad economic crisis. It is now up to companies to avert a narrower crisis of their own by taking the time to understand the new generation of consumer – a consumer that has been interrupted, and changed in the process.

Email the writer: n.farina@alrroya.com