Economic Recession, Consumer Depression
By Rick Newman
What's eating consumers? The latest numbers show that consumer confidence is close to 40-year lows, suggesting the economy is in worse shape now than in times that seemed far darker, like in the early 1980s, when inflation and unemployment both crept into double digits. Yet inflation—despite record gas prices—remains at a manageable 5 percent. And unemployment is a modest 5.5 percent. So I asked Dan Ariely, a behavioral economist at Duke University and the author of Predictably Irrational, to help explain why a modest economic slowdown has produced such dismal public attitudes. Excerpts:
Why are consumers so gloomy even though the economy, by traditional measures, isn't all that bad? Is it $4 gas? Or falling home values? Or something else altogether?
I think there are three reasons. First, cars are very important to the American psyche. Think about James Dean and his motorcycle, "On the Road Again," and all that. The American psyche has associated freedom with cars, and now it costs a lot more just to use your car and get this feeling of freedom.
Second, bankers have told us for years, "Your house is your most important asset. You should stretch and buy as much house as you can." Now, it looks like they lied to us in terms of how much we should borrow. And they personally made money in the process!
Third, I think the American people are really losing trust in our institutions. Think about all the meltdowns. First, it was the Internet. Then, Enron. Then, a banking crisis. Then, housing. Now, oil. All of these disasters are coming relatively close to each other. To people, it seems like there's something incredibly wrong with the way markets and institutions operate. Bankers giving crazy loans to people who can't pay them back, then they turn around and sell the same mortgages to people who know even less about them. It's incredible. It's a new version of the Wild West, and it's causing incredible distrust in the markets and institutions.
So, is the gloomy outlook justified?
I think the psychology is justified. If you thought you lived in a world where you understood the forces at work, and all of a sudden you didn't understand what's going on, your trust in the system all of a sudden becomes pretty low. Bankers can give loans to people who don't deserve them... It's not a world we understand or can predict.
Yet a lot of people aren't really that bad off. For all the foreclosures, most homeowners are still doing OK, especially those who bought before the bubble. Gas is expensive, but other things are cheaper, and overall inflation isn't that bad.
In general, you are right, but I think these problems are signals. Going into the stock market, for example. We've been told for years that's where you should put your money for the best return, but it turns out that's not the best thing to do. People told us: Housing is the best investment we can make. It turns out not to be such a good deal—and not because of anything we did wrong. It's the bankers who went wild.
Right now, it's the oil crisis. We went into Iraq in 2003 partly because of oil. And then we see a rapid sequence of events like this, and we have no control over the price of oil. Even for people who are doing OK, the problem is their inability to know what's right and wrong, and know where the next hit is going to come from.
What about market forces? One way or another, the markets would correct themselves, even if it's ugly. Doesn't that give people any confidence? That sooner or later this will end?
The only force I think can bring back consumer trust is regulatory force. People talk about market corrections. OK, there will be some price reductions but still, there are all these crazy people who made these stupid decisions. And they're still part of the market forces! Without serious regulations, there are good reasons not to trust the system. And, on top of the people involved, it turns out some of these sophisticated financial products were too sophisticated. Even the bankers didn't understand them.
So when all of these meltdowns are over, will consumers end up scarred in some way?
I think so. If you look at some of our experiments with cheating, what happens is, when people are a step removed from cash, that makes it much easier for them to cheat. So, think about stock options, and some of these complex derivatives and other securities. They're many steps removed from actual cash, and I think that makes it easier for people to do bad things with them. They're using ambiguity to color reality in a way that suits them. This is why I think that most of these meltdowns come from these complex financial products.
Isn't healthy skepticism a good thing?
If we're overworried, it will create a huge deficit to the economy. Trust is an incredible lubricant to the economy, and erosion of trust is hugely important. Yet the level of trust in the United States is sliding.
Will this new mistrust change the way consumers actually behave? Or the way we spend money? It's not like there's some alternative economy where we can spend our money instead.
Over the long term, I think we'll end up less trusting, and this will play out in small bits. The next generation will be unlikely to invest in the stock market at the same level, for example. It's true that most people's financial lives have not been affected by all these events as much as the news suggests. And it's true that in some sense we're talking way too much about all of these issues. But, in another sense, we're not talking enough about the real problem, which is the erosion of trust.
Have we become a nation of whiners, like Phil Gramm said recently? I don't think so. In some ways, we don't whine enough. When was the last big public demonstration? Or the last big public outcry? Yet these are issues that deserve an outcry. There ought to be consequences. People should get fired or go to jail. These are things that do deserve high-level attention.
jeudi 30 avril 2009
dimanche 26 avril 2009
Relationship marketing to face with the recession!
My own article
by: TT
In crisis period relationship marketing or one to one marketing can be very useful. Indeed, Relationship Marketing can be defined as direct individualized communication methods to establish individualized and interactive value added relationships with clients on the long term.
A good communication associated with a rich database can allow to:
- increase commitment & trust and exit barriers.
- precise: fine segmentation with precise knowledge about customers which have the most important probability to response (database)
- Increase transactions by client (repurchase behavior, cross selling, up selling)
- Controllable and measurable: Redemption rates
- Increase transactions by client (repurchase behavior, cross selling, up selling)
- Controllable and measurable: Redemption rates
I note that we forget to remind there is some consumers (most of them are rich) which are not really affected by the recession and to leave them aside would be a mistake. That is why some companies rely on the individualization of the relationship and the offer to target these special consumers. This strategy allows to capture and to retain upper class consumer and this in despite of the crisis.
Sure, we can take the example of the Ferrari group is a very good example of this success. Indeed, in the late of 2008 Ferrari has increased its sales by 17, 6 %.( http://www.autoevolution.com/news/ferrari-reports-record-2008-sales-figures-4047.html)
The crisis does not really seem to affect Ferrari and the excitement for the brand is still present. Actually, for years Ferrari has understood that decreasing price is not a good solution for their segment but offering new services or new processes to make business can be a good tool in order to increase the loyalty of the customers. Thus, the “One to One Personalisation Program” has appeared which enables his rich customer to build their own and unique model. This program is essentially for the aesthetics that is to say the colour, interior lining, and for the finishing equipment. Thus luxury, exclusivity of the product in line with the market demands, higher range and niche model can be good weapons against the crisis for Ferrari’s segment.
In one-to-one marketing, the company establishes new relationships with customers by personalizing both his speech and his offer. This strategy enables customer feel recognized and increase their loyalty to the brand. All companies which are targeting upper class should follow the example of Ferrari and continue to maintain a particular relation with their customers through the one-to-one marketing strategy. As we have already said not everyone are affected by the crisis and concentrating efforts on most valued customers’ guarantees revenues and in some extent can be a solution to face with the crisis.
samedi 25 avril 2009
No risks if you customize your offer!
The Store of YOU
Why buy off the rack when you can customize? Shoppers design clothes, candy, even credit cards
Why buy off the rack when you can customize? Shoppers design clothes, candy, even credit cards
Posted October 27, 2008
Here's some good news for the nonconformists among us: Soon, it may be impossible to follow the latest fashion trends. The days of True Religion jeans and Jimmy Choo shoes will be over. While retailers have long made money by selling multiple copies of the same pair of pants or mass-produced sneakers, we're on the verge of a world where every individual merits his or her own production line—call it the Store of You.
Driven by increasingly demanding consumers empowered by the Internet and new technology such as digital printing and online ordering systems, the shift to personalized production represents such a departure from tradition that the retail industry has been forced to come up with new terminology to describe it. Consumers are "information omnivores" who like "überobscure" products in the new "meconomy."
Driven by increasingly demanding consumers empowered by the Internet and new technology such as digital printing and online ordering systems, the shift to personalized production represents such a departure from tradition that the retail industry has been forced to come up with new terminology to describe it. Consumers are "information omnivores" who like "überobscure" products in the new "meconomy."
Owning one-of-a-kind sneakers, clothes, jewelry, wine, and even credit cards that reflect one's taste, personality, and lifestyle is the new sign of success and luxury. At the same time, it's a form of frugality well suited to the current economic downturn. By customizing, shoppers can get the most out of less frequent splurges. And the trend is not restricted to those with money—it spans ages, income groups, and regions.
Hard to please. "In the context of a postindustrial age where everything looks the same—you walk through the parking lot and have a hard time picking out Hondas from Jaguars—the customization process offers a sense of difference," says retail consultant Paco Underhill. One recent Yankelovich survey found that because consumers at all income levels have more options and access to information, they are less willing to compromise. More than half of respondents said an essential consideration when choosing a brand is how well it represents their unique tastes and individuality. While the number of retailers offering customized products is hard to come by, industry experts say it is quickly growing as retailers struggle to attract consumers who are hesitant to part with their cash.
The new production methods make the creation of one-of-a-kind items more affordable than ever, says Joseph Pine. He popularized the industry's term for the trend—mass customization—in a series of articles for Harvard Business Review and a book by that name in the 1990s. Pine says there are now hundreds and possibly thousands of retailers offering customization. Custom-made products were once so labor intensive, he says, that only the wealthy could afford them. While the printing and ordering technologies to customize for "the masses" have been available for at least a decade, only now is the trend really taking off as customers have come to realize it's available. "Customers are saying, 'I can get custom M&Ms, custom shoes—why am I putting up with the off-the-rack stuff over there?' " Pine says.
At Reebok, customers can design their own sneakers, mixing various colors, styles, and materials. In early 2009, a new program created by designer
John Maeda will transform customers' photos into designs that decorate their shoes. "It's not just about us offering a set of tools that you can use, but we're saying to the consumer, 'What is important to you?'" says Rich Prenderville, Reebok's head of global brand marketing.
Murphy Burch, 39, an airline pilot and hockey fan in Cooper City, Fla., spent $105 on customized sneakers from Reebok that not only reflect the bright yellow, red, and navy colors of the NHL's Florida Panthers but also have his nickname—Murph—emblazoned on the back and a panther on the side. He plans to wear the shoes to all 41 games he attends this season. "I could buy a comparable shoe for $30, but I designed them, and they're exactly what I wanted," he says.
At the CafePress website, users can design and buy custom-made T-shirts, many of which focus on niche interests, political beliefs, or strange combinations, such as donuts with robots or pink llamas. "We're a huge destination for self-expression," says Amy Maniatis, vice president of marketing. "There's a huge trend toward 'I want it my way' and 'I want something that's unique and right just for me,'" she says. The company refers to it as "me-tailing." CafePress was founded in 1999 after digital technology made print-on-demand T-shirts possible. Today, 40,000 new products are added each day. The company generated over $100 million in revenue last year.
(...)
My commentary:
One to One Marketing or personalized offer/service enables customers to build their own and unique model. This program is essentially for the aesthetics that is to say the colour, the design, and the general look.
In one-to-one marketing, the company establishes new relationships with customers by personalizing both his speech and his offer. This strategy enables customer feel recognized and increase their loyalty to the brand.
Inscription à :
Articles (Atom)