Consumer Spending in Tough Financial Times

Call Center IQ community member Alex Loach submitted this article, which evaluates how customer management has changed as a result of recent macro trends, such as the rise of online and mobile commerce and the downturn economy.

Loach is the head of customer services for Serif Ltd. Serif’s call centre was named one of the top 50 in the United Kingdom by Call Centre Focus magazine. If your call centre has a European focus, you will definitely want to attend the upcoming Call Centre Summit Europe, which marks the continental debut of our famed Call Center Week franchise. You can’t go wrong with cutting-edge topics and the best speakers in the game! Details here!

Consumer Spending in a Different Financial Climate

Our Culture for Deals

Thanks to the rise of online and mobile commerce, a big consideration comes from the fact that shoppers now have access to far more information than ever before. Whether it’s in a supermarket, an electrical store or a holiday outlet, a shopper can stand there and compare the price in front of them with that offered by a competitor.

During these tough financial times, many of us are, meanwhile, addicted to sales. As a result, so many stores now seem to simply have ongoing sales; and we’re not talking about 5 or 10 percent off. Rather, we could be looking at discounts in the ballpark of 40, 50 or even 60% percent off!

The more this happens, the more accustomed we become to it, and so not only do we never want to pay a full price again, but we also no longer necessarily believe the product is even worth its "full price."

Given that transformation as a result of today’s worrying financial times, even those consumers who do not have to either pay less or buy less simply want to do so, and they now have the tools to do so.

The Changing Face of Competition

Another key difference-maker these days is the fact that competition is changing. Consumers have to be a lot more conscious of the money they spend and what they spend it on. As a result, a company like Sony no longer competes strictly with LG and Panasonic over TV sales but also with companies in entirely different industries. After all, the consumer’s decision is no longer between different models of televisions but instead over whether even buying that television should come before redoing the antiquated carpeting or repairing the old car. The competition for our money has become larger than ever, and it is between companies and industries that in the past were deemed to have little or no relation with each other.

This, in turn, is having an effect on the way companies need to advertise their products. Rather than advertising through costly, traditional media like television, radio or newspapers with limited assurance of reaching the target audience, many larger brands are focusing on in-store advertising to reach out to people who are already there and potentially on the verge of making a decision. They want to remind you, while you are in position to purchase, why you should buy their brand and what makes it special to you. They want to push you into that favorable mental decision at the point of sale.

Connecting Better With Customers

Whether within a store or online on a website, retailers are making much larger efforts to engage with their customers and make it easier for them to navigate. It’s rare these days to go into a clothes store where aisles are stacked up to 12 feet high or to websites where the front page has a hundred different products or offers on it. Now, from the second you walk into a store or navigate to that homepage, you can see where you are going.

Store owners and online retailers know that you are only going to be there for so long, and they want you to connect with the area of interest as easily and quickly as possible. As a result, they do not want you to spend time navigating through irrelevant web pages or store aisles—they want you to quickly locate—and maximize your time at—those touch points that are likely to elicit a purchase.

Trends Now that Consumers are Spending Less

The changes to the economy and how that affects consumers can be looked at for different types of consumers.

Firstly, there are those who have already been made redundant or found themselves in a position where they have to work fewer hours and/or take a reduced wage. These consumers have been forced to stop buying anything not seen as a necessity or extremely good value for their money. This group of people may benefit some low-cost retailers such as pound shops or those with immediate discounts on day to day goods but has been lost by most typical retailers.

Secondly, there are those whose employment status has not suffered but have seen the effect of a recession first hand from somebody they know such as a family member of close friend. This group of consumers is still shopping, but it is doing so a lot more carefully. Maybe a few years ago they would get a new television will all the latest features but at a premium cost, but now they are making much more fiscal comparison decisions, and so are considerably more likely to buy the alternative television that has 90% of the features at 50% of the cost.

This group is having a larger affect on high value goods such as automobiles. For example, rather than replacing their car every few years for the updated model, they might be waiting five or more years, and even at that point may purchase a well-conditioned 2^nd hand car or lower spec model. Whilst this is an example regarding a high value product, it all spirals down, and many more people are now purchasing used or second hand goods which is one of many reasons why discount online e-tailers and auction websites can succeed.

Lastly, there are those in what we would call a "financially secure position." Maybe they have already paid off their mortgage and have savings at hand. However, with interest rates so low, even those savings aren’t making what they were, or stretching as far. And so while they might still be spending money, they also might be curtailing luxury spend, such as that on travel. This, in turn, has had humongous effects on areas that rely heavily on tourism such as Greece and Italy within Europe or Florida and California within the US.

The downturn will not last forever though, and economic climates do get better, but what we will find for a long time after is that both consumers and organisations will have a very different opinion on how and when they spend their money.

In the current climate, retailers have been forced to better understand and provide value for their customers—those who have succeeded will be primed to explode once the situation improves, while those who did not make the necessary connections in the down period will risk facing continued struggle during the uptick.