Consumers will live more simple lives
I believe that containment will have a lasting impact on consumer behaviour. The generation who lived through the great depression and WW2 become very frugal. They didn’t waste food, because food was so scarce when they were growing up. They reused everything because basic commodities were unavailable. Despite the fact that economic progress had made all of these frugal measures unnecessary, it stayed with them until the end.
Our short period of confinement does not compare to living through WW2 but it may well act as a pause button. A moment in time, when we reassess our rampant consumer behaviour. The funny thing about confinement and isolation is that we all now realise how little we need to survive. No bars, no restaurants, no gyms, no fashion shopping, no driving around in a fancy new car; all of this consumerism has just come to a screaming halt. All the things that we once thought were essential to our social and well being suddenly relegated to history. We are all down to food, shelter, health, sleep and clothes (basic ones), just as Maslow said it would be.
Everyday I go bike riding around my neighbourhood, and there are lots of people jogging, walking and riding bikes trying to stay fit (while social distancing) during confinement and I’ve made a few observations:
Gym Memberships: How many of these people have a gym membership, how many of those people will decide that their neighbourhood is a reasonable free alternative to the gym. What if that’s 20% of people who currently have a gym membership?
Cars: If everyone decides to keep their car one more year, the car market will fall 20-25%.
Clothes: What if the average American decides to buy 38 items of new clothes a year instead of 63? The fashion market will fall 40%. What if, what if, what if…
These things are all possible, as we have seen in China, consumption of essentials remains relatively robust but the consumption of other things is proving harder to kick start. What if, it can’t be kick-started because consumers realise they actually don’t need it anymore. As consumer spending declines, the consumer strategy will need to focus on purchase duration, that is the length of time a customer continues to spend with you. A pre COVID-19 consumer used to spend $100 per year for 4 years and had a lifetime value of $400. That same customer now, might only spend $80 per year so you need to keep them for 5 years (80 x 5=400) to maintain the same customer lifetime value.
Regan is a subject-matter expert in analytical database marketing and customer relationship marketing, as well as an in-demand presenter and keynote speaker at national and international events. He also authors thought leadership pieces on data-driven marketing that can be found on the DA Blog.