Posts filed under ‘economic downturn’

Anxious and angry: the view to 2013

Andrew Curry writes:

It’s that time of year when people are starting to look ahead to the business environment for next year. From the perspective of The Futures Company, we believe that two elements will dominate in Europe and the United States – and in some ways they represent different sides of the same coin.

The first is that consumers are ‘looking down’, fearful that as recession continues and social protection is weakened by austerity-seeking finance departments, that they are only a slip away from ending in the gutter. The fact that some consumers are increasing their debts to cover basic living costs underlines how fragile their world is. The dominant chord in this landscape is a deep anxiety. Companies will have to respond by changing packaging and positioning. As  Jan Zijderveld, the head of Unilever’s European businesses said in a recent interview:

“Poverty is returning to Europe. If a consumer in Spain only spends €17 when they go shopping, then I’m not going to be able to sell them washing powder for half of their budget.”

But businesses can do a lot more than just change their pack sizes. We have been talking to clients about the ‘5Ps’ of the post-recession landscape: Protection; Practical; Permission; Purpose; and Pride.

If that is the economic landscape, the political landscape is at least as edgy. Our Global MONITOR research identifies a new large group of the ‘globally enraged’, who believe that businesses and governments are, in effect, out to screw them. Globally, this group is around 28% of the population, but it is higher in Europe, peaking at above 50% in Italy. How do you spot them? Easy. The profile of the ‘Enraged’ group is almost identical to the population as a whole.

It can be taken as read, of course, that businesses will be operating in low-growth markets, which means that they have to be smarter about innovation. There are opportunities there, as we describe in our recent Unlocking New Sources of Growth report. But the risks are greater. Consumers have only one question for businesses in the current landscape: ‘whose side are you on?’ And beware the business that gets the answer to that question wrong.
The image at the top of the post is from Wikimedia Commons, and is used with thanks. The caption reads, “Not enough bread for so much chorizo [pork]” – meaning corruption.

9 October 2012 at 1:03 pm Leave a comment

Close to the edge

Sarah King writes:

Yesterday’s news reports indicating that seven million Britons were only one bill away from disaster came as no surprise to anyone at The Futures Company. Our Feeling the Pinch study has been taking the temperature of UK and Irish consumers in recessionary times since 2008. We have identified and tracked three broad swathes of consumers, the self explanatory ‘Plain Sailing’, ‘Choppy Waters’ and ‘All Hands on Deck’ groups.

Across the study we have seen a significant increase in the size of the ‘All Hands on Deck’ [AHOD] group as more people move down from ‘Choppy Waters’ into a more pressured position. 60% of AHOD say that the level of debt they have is ruining their quality of life, and 37% of them say they could only cover their living expenses for less than a month if they or someone in their household became jobless.

At a Kantar event last week, the sentiments and behaviour of these three segments were mapped across polling by our colleagues at TNS-BMRB and retail analysis by Kantar Worldpanel. This work demonstrated that while value-seeking behaviours are entrenched in all groups, strategies differ.  Those in AHOD buy offers that involve less outlay and actually reduce the volume of food they buy. It may be that they are wasting less food, but the possibility exists that some are going hungry.

Of course, at the other end of the spectrum, there are people who are much more comfortable, playing their hand carefully and tactfully in tough times but essentially doing fine. This is characteristic of recessions which tend to be spikey. The challenge for marketers is both to find ways to help one set of customers and to identify the pools of money that do exist out there, and which offer the ‘new sources of growth’ discussed in our latest Future Perspective report.
The image at the top of this post is from the personalfinance4ll blog, and is used with thanks.

21 June 2012 at 9:00 am Leave a comment

Working women

Pen Stuart writes:

It’s international women’s day, and the question of women’s work is top of mind – internationally women perform 66% of the world’s work, but earn only 10% of global income. For many, work is unavoidable, a burden rather than a right – the International Labour Organisation notes that in China and India there is falling female workforce participation among some groups, as more affluent families take pride in the fact that the women in the household can focus on childcare, homemaking, and informal social support for the whole family. Something similar happened in Britain in the 19th century, when the middle classes were glad to show their ‘superiority’ over the working classes, where women had to do manual labour.

It is also reflected in shifts in Pew Global Attitudes data: while 86% of the Chinese sample in 2002 felt the most satisfying kind of marriage is one where both husband and wife have jobs, this had fallen to 78% in 2010. Yet agreement with this statement rose in other emerging markets like Mexico and Russia, showing that you cannot take a ‘one-size fits all’ view of women’s empowerment.

Meanwhile in affluent markets, where work has become a central part of many women’s identity, this is becoming a luxury for some. Women in the US and the UK are actually being forced out of paid work by the rising cost of childcare – in the UK alone 30,000 women have left paid work since last year for this reason.

This challenges traditional understandings of the evolving female market – both in terms of spending power and how they see their identity – and therefore of how you should communicate with them. Women want to be talked to about expanding opportunities, and want more ability to choose their own direction in life – both of which are being squeezed by austerity. But in some markets, those who are no longer single, or feel that they have been squeezed out of the labour market, may not be striving for ‘having it all‘, but for a proper celebration of the work of being a home-maker, wife or mother.

The still from The Homemaker (1925) is from the archive at Stanford University, and is used with thanks.  The film is an early role-reversal movie: the wife goes out to work when the husband loses his job.

8 March 2012 at 2:43 pm Leave a comment

Growing in a slow-growth marketplace

J Walker Smith writes:

It’s dangerous to take the news of late at face value.  While a Greek deal appears to be in place and the Council of Economic Advisors, headed by Alan Krueger, is opining that the US recovery is stronger and faster than expected, there is some way to go.

To put it bluntly, the developed West is in for a long slog. Slow growth is the new normal for Western developed economies.

The implications of this slow-growth West for brand marketers and business strategists are explored in our latest Future Perspective, Quickening the Pace.  For most business leaders, it’s a new situation. They came of age during the ‘Great Moderation’, a period of relative stability, greater predictability and virtually uninterrupted growth.  What marketers and strategists learned as they began their careers offers little guidance for the marketplace they face today.

The Great Recession has left the marketplace smaller and more polarized than ever.  Consumer confidence has reset at a lower baseline and frustration and anger have boiled over into the street.  Every corner of the world is on edge about the trade implications of weak, stagnant demand in the developed West.

There are still growth opportunities for smart companies. But only the smart companies will grow, for there is no longer a rising tide to lift all boats.  Quickening the Pace reviews seven ways in which brands can revive their value propositions for economically challenged consumers.  Three are worth special mention.

First, consumer reference points have changed from high to low.  Aspiration now seems risky, even out of reach. Worse, the prospect of losing it all seems closer than ever. As a result, consumers no longer compare themselves to those with more; instead, they worry about winding up like those with less.

Surrounded by so many who have hit the bottom, consumers are worried that they might wind up there themselves.  So rather than being attracted by those with more, consumers now live in fear over those with less.  While this is different for brands, it is not impossible for brands able to take the risk out of buying.

Second, debt has become a more important marker of financial well-being than income.  It is a better targeting criterion.  It is a more predictive of spending.  It is more strongly correlated with confidence.  The overhang of debt is keeping consumer spending in check, so contrary to conventional wisdom, growth opportunities are to be found by analyzing what people owe, not what they earn.

Finally, lifestage assumptions are being turned on their head.  The traditional focus of marketers on young people and their lifestage transitions has been undercut.  A suffocating job market has kept younger consumers from even getting started.

But the same economy that has made young people less attractive to marketers has made older consumers more attractive.  Battered by economic losses, many older consumers have changed their retirement plans and are planning now to work longer, which will extend their peak consumption years.  Marketers will have to change, too.

The brands which lrearn these new rules – and adapt to them – could have breakout success.  Not every ship is grounded by an ebbing tide. Some brands will find the enduring pockets of dynamic spending potential.  There is less spending to go around, and not all brands will succeed. The battle for share will go to the savviest, those best able to take advantage of the principles for success in a slow-growth West discussed in Quickening the Pace.

The image at the top of the post is from 123RF.com, and is used with thanks. Quickening the pace, and another economics report, The future of the eurozone, also published this week, can be downloaded from our website.

23 February 2012 at 3:09 pm 1 comment

Beyond the eurozone crisis

Andrew Curry and Matthew Lynn write:

As the Greek financial crisis plays out on the streets and in the council chambers of Europe, it’s hard to look beyond the day-to-day drama to the longer term. But that’s what we’ve tried to do in our new Future Perspectives report, which we have published this week. And the results are surprising. The crisis will end, because ecomnomies don’t continue is a state of permanent crisis. To do that, Germany will have to export less, and the peripheral economies will have to export more – and there’s a lot of opportunity in that economic re-balancing.

The report has developed five scenarios for the future of the eurozone, ranging from its survival in its present form to a return to national currencies. From this it forecasts three big changes, looking out to 2020.

One: New powerhouses will emerge. Italy will be one of the big winners of the pos-euro crisis economy, just as it was in the ‘dolce vita’ economy of post-war Europe. If it leaves the euro, it will renege on its debts, and massively devalue. That will massively boost the economy, enabling it to rapidly catch-up with its more prosperous Northern neighbours. Meanwhile, countries such as Poland – with big populations, low debts, and strong growth – will emerge as the powerhouses of Europe.

Two: Germany will have become a consumer society – and rely less on exports. That will mean boosting retail and leisure spending, property development, and industries such as financial services, where it has not been very innovative. Paradoxically, while the UK is trying to re-balance its economy to become more like Germany, Germany will need to become more like the UK.

Three: There will be huge opportunities for companies that read these trends right. New markets will open up in Germany as retail, leisure and property grow – all areas where domestic German companies are not very strong. In Spain, youth unemployment will come down dramatically, meaning that young people will start spending. In Italy, a growing economy will see a huge rise in female participation in the workforce – changing the shape of consumer demand. We’ve done some analysis of the impact of that change on the Italian economy, and reckon that it’s worth around €48 billion a year – or 3% of Italian GDP.

Four: Europe’s banks will be the big losers. Debt will be written off, sooner or later, and as a result, most will end up in public control.

In short, businesses will have to redraw their mental maps of what the European economies look like, and where the opportunities will be found.

Andrew Curry is a Director of the Futures Company in London, Matthew Lynn runs Strategy Economics. The report, The future of the eurozone, is published as part of The Futures Company’s thought leadership programme, Future Perspectives. We are also publishing this week a report on doing business in slow-growth economies, called Quickening the pace, which will also be available from the website.  The picture at the top of tjhis post is published by Wikimedia Commons.

22 February 2012 at 5:44 pm 2 comments

The case against austerity

J. Walker Smith writes:

We’ve been having something of an economics-themed month at The Futures Company, with client presentations about recession hit consumers in the UK and the US, and Future Perspectives reports on doing business in slow-growth economies and the business opportunities in Europe after the eurozone crisis.

So it was useful when I was in London recently to catch Will Hutton, recently installed as Principal of Hertford College, Oxford, give his take on the economic prospects for the UK in 2012 at an event hosted by the HMRC.

It’s hard to summarize quite a rich talk, but some points shone through:

  • The UK is living through a once-in-80-year economic event, but this isn’t reflected in the scale or urgency of the political or policy response.
  • UK GDP is still 4% below where it was in 2008, and won’t regain that until 2014, on government figures. But this is a problem of demand deficiency, not a systemic market problem. (The importance of this idea is all about political narrative. If demand is the problem, the wisdom of austerity is in doubt.)
  • The level of private debt is enormous (320% of GDP), but debt service levels are low, by any historic standards. But cutting the debt aggressively (the current policy preoccupation) risks creating a Japan-style lost decade and a half.

If that’s the bad news, what should be done?

Hutton has quite a long list of suggestions, but two caught my particular attention. The first is the reinvention of fairness. This involves bringing down the ratio of top pay to median pay, and making sure that bonuses aren’t a one-way bet, as they are present. He’s proposed an ‘earnback’ scheme, under which executives put some of their salary at risk in case of under-performance. Unsurprisingly, not one single FTSE-100 is in favor. Hutton had an earnback clause written into his contract when he joined Hertford College.

The other big story is about innovation. Governments can’t pick winners, but they can create ecologies that help particular sectors to evolve. The catch is that these innovation ecologies need public investment – especially in research institutes and skills development. The German network of Fraunhofer Institutes is the benchmark, and, of course, they’ve spent billions developing them over decades. But that doesn’t mean that it’s too late to start. The wide range of emerging ‘general purpose technologies‘ means that there is quite a lot of competitive space to play for. But it does need some political will.

The Future Perspectives reports on the eurozone and slow-growth economies were published this week. They’re available, free, for download from the website. The picture of Will Hutton is from Wikimedia Commons, and is used with thanks.

21 February 2012 at 7:25 pm Leave a comment

The new 5Ps of marketing

Fran Walton writes:

Earlier this week, we presented our latest research on the post-recessiom UK consumer, Feeling The Pinch 6, to clients in London. The overall message is one of gloom: 43% of consumers think the UK economy will get worse in 2012, and 46% plan to spend less. But that doesn’t mean that there’s nothing that brands can do.

So here are our new 5Ps for marketers:

  1. Protection. How can you reduce the risks of purchase, or  help consumers manage risk in other parts of their lives? 63% of consumers now agree, ‘ I find myself thinking twice before making even the smallest purchase’. An interesting example is the German peer-to-peer insurance company, Friendsurance, which reduces insurance costs (and fraudulent claims) by letting people create groups of 15 people to help cover an insurance claim.
  2. Practical. How can you empower people and help them to be self-reliant? 58% of UK consumers agree that ‘Since the recession I feel a greater need to be as self-sufficient as possible’. One response, from the Spanish food company Gallina Blanca: if you send them a a list of the ingredients you happen to have at home, they’ll suggest a recipe.
  3. Purpose. How can you help consumers make new connections or make living with less a positive experience? 53% of UK consumers now agree that ‘since the recession I have learnt how many things I can do without and still be happy’. Sainsbury’s ‘living well for less’ campaign captures this well. It’s not just about the food. It also means making the most of the good things in life, sharing moments or maybe cooking memorable meals together. And without paying the earth.
  4. Permission. How can you help consumers feel like they are achieving something worthwhile? Perhaps depressingly, 53% agree that ‘some of the goals I had before the recession are now probably out of reach’. Say it ain’t so! The French business Onefeat has a model where you set some goals, or ‘missions’, and get support from your friends to help you achieve them.
  5. Pride. How can you help people take pride in small things or help people to be proud to be part of their community? In our qual research for Feeling The Pinch 6, one of our respondents observed that ‘the value of working with your hands seems to have been forgotten about’, also a theme of Matthew Crawford’s surprise best-seller. Transform Your Patch, launched in January. in which Pepsico and Britvic have teamed up with the charity Groundwork, is an ambitious scheme to create new parks and playgrounds and football pitches from waste land across the UK.

Of course, a lot of these are small things, but one of the lessons of the recession is that small things matter. The other lesson is that it’s more important than ever to be able to stand in the shoes of your customers and see the world through their eyes.

The picture at the top of this post is from the Swedish co-operative Lantmannen, which has a scheme which pairs singles to share leftover food. It is used with thanks. To find out more about Feeling The Pinch, and our research on consumer attitudes to the economy in Britain and Ireland, please contact Fran Walton

3 February 2012 at 1:32 pm 1 comment

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