A steady stream of headlines prophesize doom and gloom: We’re falling off an economic cliff. We’re in the midst of an economic war. Our debt-ridden, over-consuming, under-producing way of life has suffered a fatal shock. However we define the current crisis, one thing is certain: When the dust settles we’ll be in a place that probably won’t look like Kansas anymore.
We wanted to move beyond the headlines to see how this crisis is playing out in the lives of real people. And more, what this could tell us about the new emerging order. Do the behaviors we’re seeing—which may be typical for recessionary times—represent a momentary change or do they signal a deeper shift in people’s values? If so, what does this mean for how we think about creating the things—the products, services, strategies, experiences and businesses—for this new normal.
So we revisited people we have come to know over the years through our work. These families welcomed us back into their homes. We sat at their kitchen tables to talk beyond the grim statistics of wealth destruction—the eye-popping $10.2 trillion that has evaporated in this country over the past year—to tell us what they’re doing to navigate through this crisis: To make ends meet.
In a period when people arguably have more time and less money—and this less money is being asked to do more, a considered and complex calculus around consumption is driving spending behaviors. This is evidence in small ways, by the increase of “orphan items” retailers are seeing—items picked up in one section of the store and then abandoned in another as people go through the process of asking “Do I really need this?” Under this intense scrutiny, products need to serve a real function. This does not mean products have to be frugally functional, stripped down to the bare basics. Rather, they have to work harder to connect to people’s values—to what they really care about.
[Note: On our homepage, you’ll find several videos of our interviews with people—here’s a brief encapsulation of what we’re learning…]
The Great Migration We see this in our conversation with Rebecca, a cost conscious mom, who has devised a clever solution to her “diaper dilemma.” Rebecca, like many, has already made the “migration” from higher cost to lower cost supermarkets in search of discounts. But she is also migrating across product types in search of products that are “good enough.” She is carefully customizing product mixes to find solutions that work better for her.
For example, diapers are an expensive part of her household budget. She now makes a separate shopping trip to buy generic diapers to use during the day. But the important “overnight” diaper is still reserved for Pampers. The fact that Pampers doesn’t leak and will keep pajamas dry—and Rebecca’s laundering load to a minimum—would seem the obvious value to address. But it’s only half of the story. What Rebecca really believes is that uninterrupted sleep means that her child is getting the restorative rest she needs in order to develop properly. It is this, her child’s well being, that Rebecca truly values. It is why Rebecca will endure the frequent diaper changes with generics during the day; but will not forgo the “luxury” of a more expensive diaper when it comes to nighttime sleep. Even when times are tough.
Indulging Indulgences The challenge then becomes how to broaden a products definition of value—and understand a deeper purpose it needs to meet. The instinct for a company may be to slash prices in response to an emerging frugality: We’ll survive through price cuts, the logic goes. Again, it is not this simple—as we see that even in trying times, indulgences still play a vital role.
Edna is a coupon connoisseur who lets sale prices drive her purchasing. Edna is keenly aware of the price of everything. Pineapples are “a luxury” at $4.99; but a steal on sale for $2.99. But in the next sentence she talks about the $3,500 television she and her husband just purchased. Still, she contests, “we don’t spend extravagantly.” In Edna’s considered, if not confusing, calculus her TV is worth 1,140 pineapples—rattling assumptions about how frugality and thrift are being expressed. But for Edna, the five TVs in her house are an expense that offsets every other entertainment need for her family. It’s a way for them to spend time together—the true value she seeks. And so, it’s a justified expense. This “change purse” versus “blank check” mentality may not seem rational—but it is increasingly pervasive.
It reminds us that in a time when frugality and thrift are the “new black” and one of the few things on the rise is the sale of penny candy, there is still plenty of room for indulgences. Jeannie delights in her expensive pod coffee maker (sales of which were up 31% in 2008) and knows the exact price per capsule. She then rattles off the commercial jingle “each cup is specially brewed for you.” It’s served just for her. Does this explain why she lugs out the “old school” drip pot to serve the crystal coffee brew when company comes? Her indulgences—once the facials, manicures and pedicures that kept her content—may be smaller now and have been brought into the home; but are just as treasured and solely for her.
Edna and Jeannie demonstrate that people are compartmentalizing purchases and dramatically overestimating the difference between small amounts and underestimating the difference between larger ones. The reality of what people can and cannot do without is not so obvious and much more complex these days. Even the most basic product may serve a broader purpose than is assumed. The importance is to understand what roles these products are really filling—and how to remain relevant in that context.
Brands versus Generics The need to remain relevant and recognizable plays itself out in the perennial contest between brands and generics. If two-thirds of people see no difference between brands and generics, why do moms like Rachel and Jeannie go to deliberate and considered lengths to “keep face” with their children around brand food purchases—even in light of one mom’s imminent home foreclosure? Why does Jeannie put bags of generic cereal in CoCoa Pebbles boxes? Store brand mac and cheese bags in Kraft boxes? Why does Rachel still buy brand food products for her older children; but for her 2 year old, “who doesn’t know the difference anyway,” generics will now do?
Conspicuous consumption has given way to a more pragmatic and considered calculus. In times when little feels “in control,” complex mental models drive spending. And a sense of control is important.
What new “calculus of consumption” behaviors are you seeing?
