Consumers find ways to stay afloat
Although more consumers this quarter are driving freely, as gasoline prices have eased, more are cutting back on overall spending. Fewer consumers are spending freely for apparel, food, and medical expenses.
There is a surge this quarter in buying plans and active shopping for electronics (computers, TVs).
At the same time, fewer consumers are planning an overnight hotel/motel stay, suggesting that consumers are planning to do more “cocooning.”
Buying plans hold relatively steady for automobiles and home appliances/furnishings.
35% of homeowners believe their home lost value in the past six months, down from a high of 40% in Q3; only 11% think their home gained value. Looking ahead, slightly more consumers expect home prices to rise than decline (29% vs. 25%), with nearly half (46%) expecting stable home values in the coming year. Home buying plans remain low: 7% are planning to buy, 4% are actively shopping for a home.
Consumers’ Christmas spending plans are more encouraging in November-December 2011 than they were a year ago. Consumers planning to spend more this Christmas are up four points (8% to 12%), while those planning to spend less are down four points (56% to 52%). Those planning to spend the same amount as last year remain at 36%.
Most consumers with credit cards are holding their balance in check. While 19% report that the amount they owe on credit cards rose in the past month, more (22%) say it declined.
Slightly fewer consumers have been adding to their savings (35%), down slightly from 37% in Q3.
Consumer perception of inflation remains relatively high, though it has continued to decline since Q2, when gas prices reached an all-time high. A majority of consumers (63%) report that prices in general rose during the past month.
Again this quarter, nearly half (47-48%) of consumers say their financial situation is worse than it was a year ago, compared to only 17% who say their financial situation has improved.
Fear of a potential layoff or loss of earnings eases this quarter; still, 54% of Americans feel their income is at risk. Fewer households report having experienced a layoff or loss of earnings during the past year (36% vs. 39% last quarter).
Optimism about personal finances rebounds slightly, as consumers who expect to be better off financially a year from now rise two points to 38% this quarter. Fewer consumers expect their finances to worsen during the coming year (24% vs. 27% last quarter).
For the second consecutive quarter, seven in ten Americans (71-72%) are saying that things are getting worse for the country as a whole; only 15% feel things are getting better. Americans are less negative about the economy than about the nation as a whole: 50% feel the economy is getting worse, while 28% see it improving. Perception of the economy is somewhat better now than last quarter (when 56% saw it getting worse and 25% saw it improving).
One-third (34%) of Americans are pleased with the job President Obama is doing, down from 41% two quarters ago and 58% at the beginning of his term. For the past two years, over half of Americans (53-58%) have felt that the nation’s problems are too big for any President to solve.
Consumers are easing restraints on spending for electronics and Christmas gifts. However, they are “robbing Peter to pay Paul” by cutting back on everyday consumables and contributions to savings, while holding the line on credit card debt. They are pessimistic about the nation's current direction, but feel less vulnerable to inflation (especially gas prices) and future layoffs.
Marketers need to keep in mind that consumers are managing a delicate balance between income and spending and have become even more sensitive to price changes. This means they are more likely to jump at great deals, but by the same token, are less likely to accept price increases, or even “regular prices.”
At a time like this, capturing sales at higher price points depends even more on communicating and delivering value for the money –- not any kind of value, but a specific benefit that is important to consumers and differentiating from competitors. Innovation, uniqueness and exclusivity help to raise value perception and command a higher price.