Though 2010 widely is expected to provide a recovery from the depths of the recent recession, questions logically remain about how consumers will behave in a recovery most expect will be extended.
A new study by consumer research firm Decitica suggests lasting effects that could shape consumer spending on any number of communications services, applications and devices.
"The effects of the Great Recession on consumer behavior are so profound that many of the assumptions underpinning consumer segmentation are no longer valid," says Dr. Val Srinivas, Principal at Decitica.
Among the key findings: "Price has become the dominant consideration in the purchase of all kinds of products." For this reason, Decitica predicts "a long uphill struggle by marketers to shift the focus away from price."
The recession has caused a profound, deep-rooted change in consumers' spending habits in favor a more restrained approach, Decitica says. Many have accepted this radical change as the "new normal," and not just a cyclical phenomenon.
If correct, the findings could suggest higher customer resisteance to upgrading any number of services. In the wireline space consumers might be harder to win to upgraded digital service packages unless prices are are taken into account.
Customers might not upgrade to faster broadband packages so readily, unless they have determined that they can downgrade or abandon multi-channel video services to pay for the faster broadband, which then would be counted upon to supply more of the appetite for video.
In the wireless space the resistance could either slow smartphone upgrades, or shift demand to lower-priced models.
In is hard to point to any similar long-term behavior after past recent recessions, but Decitica is suggesting that perhaps something really has changed this time.
There are four distinct consumer segments emerging from the recession, including:
* Steadfast Frugalists,
* Involuntary Penny-Pinchers,
* Pragmatic Spenders and
* Apathetic Materialists.
Steadfast Frugalists are committed to self-restraint, and represent 20 percent of the American consumers.
About 80 percent of Steadfast Frugalists say the new behaviors they have adopted will likely stay with them for a long time. About 18 percent of these households report annual incomes of $75,000 or more. So one way of looking at matters is that 18 percent of the households with the greatest disposable income say they plan to hold back on spending for quite a while.
Some 60 percent are women. And though people from every age group are represented, there are fewer Gen X and Gen Y consumers are found in this group.
"Marketers will find this group to be the most challenging, as they are the least brand loyal and most likely to discount marketing messages," notes Dr. Srinivas.
Involuntary Penny-Pinchers include about 29 percent of the population, have been severely affected by the recession, and are mainly made up of households with less than $50,000 in income, with more women than men. But 22 percent of such households report annual income of $75,000 or more.
The implication is that at 40 percent percent of households earning $75,000 or more, representing 49 percent of households, say they are curtailing unnecessary spending, and might do so for some time.
This segment has been forced to embrace thrift like never before. Presently, their actual behaviors do not differ widely from those of Steadfast Frugalists. About 60 percent are women and people in their 30s and 40s are over-represented.
Pragmatic Spenders represent about 29 percent of consumers and are the most attractive group for marketers because of their higher spending power. "While it is true that they have also curbed their spending, they are the most capable, both psychologically and financially, to willfully resurrect their past spending patterns," says Srinivas.
About 60 percent of this segment are men, and are over-represented by people in their 60s, and from the Northeast and West. About 37 percent of households with incomes higher than $75,000 are in this segment. They have cut back their spending, but are most persuadable.
Apathetic Materialists seem least changed by the recession. They have not embraced the new frugality to the same extent as others.
This segment has more men (55 percent) and younger consumers (72 percent) are below the age of forty. The segment represents 22 percent of the population and is over-represented by people in their 20s. They have changed their spending habits least of all the groups, but their disposable income also is limited.
Some 24 percent of households in this segment have annual incomes of $75,000 or more.
The implication is that 53 percent of households with incomes of $75,000 or more are more swayable where it comes to lifting spending. Households with incomes less than $75,000 say they are taking more time to weigh purchases and comparison shopping much more.
About half of all households surveyed have annual incomes of $75,000 or more. Basically, the study finds, about half of consumers say they are spending more time doing research before they buy, while about half are more impulsive. That isn't to say impulse buying remains a strong trend.
On the contrary, impulse buying has declined across the board. Across all segments, between 18 percent and 40 percent of respondents say they expect to buy on impulse "a year from now."
Still, the "Great Recession" has induced higher levels of thrift across each segment, but most heavily among Pragmatic Spenders, Penny Pinchers and Frugalists. About 52 percent of Penny Pinchers say they have changed the way they buy "forever," and 79 percent say they already are doing something about that.
About 55 percent of frugalists say they have permanently changed their buying, and 88 percent say they already are doing something about it. About 28 percent of the pragmatic spenders say their attitudes have changed "permanently," but 67 percent have taken steps already to control spending.
Also, price considerations have become the first consideration for shoppers in all categories. About 27 percent of materialists say so; 52 percent of pragmatists; 14 percent of penny pinchers and 66 percent of frugalists.
American consumers have proven researchers wrong in the past. The issue is whether this time might be different.
