January 23rd, 2015
Economic Fuel: Cognizance In A Stronger Marketplace
The U.S. economy is demonstrating encouraging signs of strength as performance factors in Q4 2014 become clear and recent consumer-confidence measures show an 11-year high. “Great Recession” mindsets are beginning to stagnate and marketers should feel emboldened by the rising tide of factors that suggest more spending power.
This more encouraging tone should be approached with caution, however. The reason? Every dollar means more to the middle class than it ever has before. The positive change we’re seeing are due to small changes versus big leaps in any one area.
The most evident recent boon to the economy comes from cheaper gas, which historically has an inverse relationship with consumer confidence levels. Goldman Sachs estimates falling prices in the back half of 2014 equated to $125 billion in more spending power. In the State of the Union Address, the President stated that lower gas costs mean the average family will have $750 more this year versus 2014. Other factors fueling growth include food prices edging down, unemployment improvements, rising home values and increases in wages.
While the sum of positive economic variables doesn’t hark back to the budget surplus days of the 90s, a double-edged sword scenario exists where the small things really do create a macro boon for commerce. In other words, the struggling middle class—the backbone of economic spending—is managing more with less income. More dollars that come out of expenditure savings and increased wages are being put right back into the economy, creating new momentum.
It’s our job as marketers to meet consumers where they are during these more positive economic times. Creating brand relevance and the engagement necessary to win hard-earned dollars demands an understanding of the economic environment. We must recognize where our target consumers sit within the post-recession mindset in order to glean insights that drive the right strategy.
Only applied research around your brand will reveal the best truisms, which will set you free to dial your strategy. But some universal truths for the 2015 economy may include the following:
Trading Up: Value-mindedness remains in place, but consumers are more open to being traded up to a brand that delivers meaningful value for the money rather than simply more utility for less. The swelling of private label preference has plateaued. The importance of a brand’s equity never exited and is now more essential, thanks to stronger spending power.
Investment Eclipses Expense: Home expenses comprise a hefty chunk of middle-class spending. But the climbing housing market indicates that the pendulum has swung—now spending money on the home is viewed more as an investment rather than an expense. Brands that enhance the livability of one’s dwelling should underscore how they deliver benefits of that investment.
The Urgency of Now: Geopolitical events and swings in gas prices occur quickly and beyond the purview of the best prognosticators. In this fail fast, test and learn marketing ecosystem, it’s important to stay attuned to current state of affairs within the execution of longer-term strategies.
A New Normal: While a positive tide is upon us (and is not completely dependent on factors as volatile as cheaper gas) it’s important to look ahead of consumer sentiment and remember that the wealth gap will continue to widen in the new global economy. Observing the significance that lower gas prices has on sentiment and spending indicates how much consumers can extrapolate out of getting more for their money. It will be incumbent on brand managers to deliver long-term brand value equations that recognize the ways in which their brands deliver meaningful rational and emotional rewards.