What Do We Really Know About Consumers?

Turns out American’s didn’t splurge on trivial junk during this recession, and that means many experts don’t know today’s consumer as well as they thought they did.

Turns out Americans didn’t splurge on trivial junk during this recession, and that means many experts don’t know today’s consumer as well as they thought they did. At least that’s the takeaway from this article by Mina Kimes of CNN Money.

The prevailing assumptions about recessionary spending were based on studies of consumer spending during past recessions that showed Americans spending more on cheap indulgences during hard times. But as Kimes points out, that hasn’t held true during this recession. iPhone sales spiked while lipstick, liquor and candy dropped.

Some of those trends saw ups and downs (a previous report by Kimes indicated general cosmetics doing well last year), but overall, 2009’s cash-strapped consumers seemed to make purchase decisions more thoughtfully than in recessions past. Instead of cutting expensive items and indulging on the cheap, they made more complex calculations. They often saved money to buy expensive items, for example, sometimes by cutting out the very indulgences consumers might have wallowed in during “simpler” times. It appears that many took control of their finances instead of living hand-to-mouth, with some surprising retail results.

I wonder how much of that reflects a psychological shift in consumers, and how much reflects shifts in the retail market. Many goods are available at relatively low prices these days thanks to several decades of the biggest retailers competing on price (i.e. Wal-Mart). I’m not sure indulgent lipstick’s that much less expensive than a pair of bargain shoes. On the other hand, consumer electronics is not simply an entertainment purchase. People spend their careers using their personal laptops and smartphones as tools; so spending more can mean more money or better opportunities. Consumers are well versed in the investment calculation of these items: If you have to buy a phone and phone service anyway, why not choose the one you can carry with you and load with apps that make you more productive, or at least more entertained?

Consumers have changed, but the retail landscape may have changed even more. What can you assume about a nation of potential customers who constantly consider that?

That’s probably not surprising to those of you who read Target Marketing or All About ROI, which often talk about the importance of testing and verifying assumptions about your audience. At heart, direct marketing is a numbers game, and those successful at it know what my football line coach used to sum up: to “assume” makes an “ass” out of “u” and “me.”

But even extensive testing doesn’t really take assumptions out of the equation. Who spends resources testing something they don’t expect to work? When you try something new, where did the idea come from? Usually an assumption. So even with testing, there’s a bias to test toward what we believe to be true. Adaptability is learning to recognize and react quickly when things we thought we knew turn out to be wrong.

So have consumers changed during this recession? Has that been the case for your customers? Are they acting against type, buying or not buying in ways that defied your expectations?