Customers have changed during the recession - how does marketing respond?

This ten-minute video interview from Harvard Business School would make for a challenging, but potentially rewarding, lesson resource for students researching how the global recession has altered consumer behaviour. It covers some pretty fundamental ground in terms of market segmentation and the role of marketing strategy during an economic downturn. Whilst focused on the US consumer markets, the points raised by Profession John Quelch are highly relevant to UK students.

I have added some brief summary notes from my viewing of the video below. To run the video, click the play button below:

SUMMARY POINTS FROM THE VIDEO

Two broad issues:
- How has consumer behaviour changed in the recession
- How should marketing strategy respond?

What is different about the 2008/2010 recession?
- The length and depth of the recession
- Consumer confidence in particular took a significant downturn

Is traditional marketing segmentation dead?
- There is a need to

Four types of consumer groups:

Slam on the brakes - consumers who have been devastated by the recession; loss of jobs; lower income. They focus on cutting back spending to the basics

Pained, but patient - their income has fallen, but they remain optimistic

Live for todayers - younger, more urban; don’t save much; will continue with the lifestyle until they lose their job

Comfortably well - people with a strong financial cushion; carrying on their spending as normal

The goods and services consumed by these consumer groups vary:

E.g. Pained but patient consumers:

- Likely to move from higher-priced goods to lower-price; e.g. away from branded goods to own-label goods
- Less likely to buy treats
- Postponable goods: consumer less likely to buy a high-priced consumer durable good (e.g. new car, new washing machine); more likely to buy repairs
- Expendable: things you can do without or less of - e.g cut back on holidays

Implications for marketing strategy:

- Businesses with strong cash positions: a recession is a great way to build market share
- Weaker competitors will tend to cut back on marketing
- A cash rich business can add 1% market share for much less marketing spend during a recession than it would cost during a boom
- The length of recession: consumers may have permanently changed their behaviour - so past experience of boom conditions may not be much
- Consumers will remain keen to demand goods and services that add value
- Recession is not a time to cut back on new product development