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Bateleur's Business Opinion Forum "Recession Update"

Download February 2010 Report Here ...

http://www.bk.co.za/BOF_Recession_Report_Feb_2010.pdf

 

 

NEWSLETTER : APRIL 2009

THE EFFECTS OF THE ECONOMIC DOWNTURN ON CONSUMER BEHAVIOUR - PART 2

                                                 

Bateleur Khanya and the UCT Unilever Institute join forces

"We are delighted to be teaming up with Bateleur-Khanya on what will be the most comprehensive study to date on the topic. This is something that marketers have been asking us to do and through our partnership with Bateleur we aim to deliver meaningful and actionable insights to marketers." Professor John Simpson - University of Cape Town Unilever Institute

Bateleur Khanya is proud to announce that we have joined forces with the University of Cape Town Unilever Institute to bring you updated information and new marketing insights on the effects of the economic downturn on consumer behaviour.

We will be collaborating to create a strong blend of academic knowledge and day to day market research expertise to help marketers find the best ways to counter the potentially damaging effects of economic recession.

THE EFFECTS OF THE ECONOMIC DOWNTURN ON CONSUMER BEHAVIOUR - PART 2

Since October 2008, the last time we wrote on this topic, many countries have succumbed to economic recession. Bankers have been fingered for irresponsible lending to consumers. The motor industry has been hit harder than ever before by a massive decline in the demand for new cars. Interest rates have been cut in an attempt by governments to rekindle consumer spending. Retail sales have declined. So too have house prices. Unemployment is rising. Stock prices have plunged even further. Governments are extending massive loans to financial institutions, as well as to selected industries in a bid to avoid bankruptcies, job losses and further economic decline.

Alongside all of this, the consumers' needs and behaviours have inevitably shifted as they grapple to come to terms with a sense of an ever diminishing self worth. This diminished sense of worth stems mainly from the knowledge that their houses are worth less now than before, coupled with a fear of becoming unemployed. (When the value of the consumer's home is growing by 20% per annum, he is far more inclined to borrow money to buy big ticket items, and even to fritter money on indulgences.)

Consumer needs have become more basic. They are on a quest for the best value options - durable, trusted and well priced products. They mostly buy only those things they regard as being essentials. They are shopping at different stores and buying different brands to those they patronised before. They are putting off buying big ticket items and cutting back on luxury items.

Secondary Data Recession Insights

Over the past few months there has been a huge amount written and published about the global recession and its effects on consumers. We have scoured many of these writings and found some interesting insights that are worth passing on to those of you having to deal with a disrupted market. Here are some thought starters:

Consumers respond to recessions late, and carry on responding long after they have ended

Economic history shows that consumer behaviour changes lag behind the advent of economic recession. At the outset they are in denial, and carry on behaving like they did before. Then the reality kicks in, and they embark on their frugality programmes. The witnessing of job losses is a potent trigger for consumers to change. 

Once the recession has (technically) ended, consumers continue with their frugality programmes for a long time afterwards. 

Recessions affect declining businesses hardest

As a rule of thumb, businesses that were struggling in good times do worse in recessionary times, than those that were doing well in good times. Recessions amplify poor business performance. Businesses that were doing well will suffer less than those that were already doing badly.

Recession is likely to hit Green sentiment hard

At the rational level, the priority will become jobs and prosperity.  Fewer consumers will be prepared to buy costly organic items, and bottled water, but on the other hand many more of the hard pressed will be saving money on things like electricity and transport, both of which will reduce carbon emissions.

The Twenty-somethings and Fifty-somethings are probably the least affected by recession

Neither of these groups have debt - the twenty-somethings haven't yet acquired it, and the fifty-somethings have paid it off. These might be good consumers to target with your products and services.

Consumers seek products that deliver exactly what they want

There is little room for wasteful functionality, and a desire for customization. Consumers will spend a lot more time and effort looking at alternatives before making a choice. They will choose the product that comes closest to their specific needs.

The appeal of at home activities will grow

Cooking, sewing, home entertainment and gardening fill the hole created by not going out as often.

Consumers prefer the brands they know and trust

Recession is not the time to take risks with brands that are not tried and trusted. Acceptable quality and safety at a good price are the key drivers. The brands they believe are working in the consumers' best interests will prevail.

Consumers want to be cheered up

Anxious consumers respond well to products and services that offer a little fun - they need relief from the serious state of affairs that pervades their lives. They want to be surprised and delighted by empathetic companies. Booze, cigarettes and chocolates usually do well in these times!

The appeal of all inclusive packages will grow

Removing uncertainty from what things cost, is a strong draw card. Expect to see fast food combo's, cruise offers and eat all you can offers growing in popularity. 

The Purpose and Scope of the Bateleur Khanya / Unilever Institute Recession Survey

In September 2008 we set about measuring how the purchase behaviours of economically active South African consumers, were likely to be influenced by tougher economic times. Now, 5 months later we are repeating the study to measure the actual shifts in purchase behaviours. 

In the survey we classify consumer living expenses into 9 categories:

       1.       Home and Food expenses

2.       Communications expenses

3.       Transport expenses

4.       Credit expenses

5.       Recreation and Entertainment expenses

6.       Child Rearing expenses

7.       Clothing and Personal Grooming expenses

8.       Insurance expenses

9.       Investment and Savings expenses

Within each of these categories we list a number expense items and are measuring the degree to which each one has been tackled by consumers as a way to effect a saving.

We are now half way through the second round of this survey and are able to discern some significant shifts in consumer behaviour since September 2008. In essence we now have a measure of how the consumer intended to save money versus what they have actually done.

Cost saving ideas that have become more prevalent

In some instances more consumers have adopted a cost saving behaviour than had done so in September last year. These are the things that are seen to be a better cost saving idea now than last year:

 

COST SAVING IDEA	% Adopting Idea in 2008	% Adopting Idea in 2009	Change in Percentage
Use SMS rather than make a cellphone call	46%	55%	+20%
Buy cheaper clothes for myself	39%	45%	+15%
Use generic medicines	32%	43%	+34%
Borrow books rather than buy them	28%	42%	+50%
Buy kids cheaper clothes	29%	41%	+41%
Buy kids less extravagant presents	28%	41%	+46%
Holiday in SA not abroad	34%	41%	+21%
Buy cheaper grocery brands	33%	40%	+21%
Don't buy things I can't afford	28%	40%	+43%
Get my spouse to get a job	31%	39%	+36%
Put off buying a new car	27%	37%	+37%

 

 

COST SAVING IDEA	% Adopting Idea in 2008	% Adopting Idea in 2009	Change in Percentage
Go out to pubs and clubs less often	29%	37%	+28%
Stay at home for the holidays	28%	36%	+29%
Cut back on going to movies / hiring videos	28%	35%	+25%
Cut back on hair and beauty treatments	26%	35%	+35%
Stay with family and friends on holidays	28%	32%	+14%
Postpone refurnishing my home	21%	31%	+43%
Do away with the garden service	25%	31%	+24%
Postpone home renovations	20%	30%	+50%
Don't spend using credit	22%	29%	+32%
Cut electricity usage	21%	28%	+33%
Join a lift club	21%	28%	+33%
Use less make-up and fragrance	19%	27%	+42%
Ask for a pay rise	19%	26%	+37%
Use cheaper skincare products	18%	24%	+33%

 Cost saving ideas that have become less appealing

In other instances more consumers reject a particular cost saving idea now than did so in September last year. These are the things that seemed like a better idea last year than now:

 

COST SAVING IDEA	% Rejecting Idea in 2008	% Rejecting Idea in 2009	Change in Percentage
Let my vehicle insurance lapse	60%	74%	+23%
Sell investment properties	51%	68%	+33%
Cancel medical aid	60%	67%	+12%
Sell my furniture or art	53%	65%	+23%
Sell my shares	40%	64%	+60%
Sell my house and buy a cheaper one	52%	62%	+19%
Cash in endowment policies	44%	60%	+36%
Move in with other people	53%	60%	+13%
Let my cellphone insurance lapse	50%	58%	+16%
Reduce the value of my life cover	45%	51%	+13%
Stop investing	33%	40%	+21%
Cancel MNET	26%	34%	+31%
Put my savings into my bond	25%	34%	+36%
Use public transport	18%	24%	+33%

 In addition to these shifts, it is worth noting that last year 20% felt that starting their own business might be a good idea for solving their low income woes, versus only 10% now.

 Further, last year 16% said they would cut back on smoking versus only 10% now, and 11% said they would cut back on drinking versus only 4% now.

The results will be available in May 2009.

Is Spending Being Squeezed?

Book now to understand how South Africans behave in a recession and to propose how marketing strategies should be adapted as a result of this...

More specifically:
•    To identify and highlight the differences in behaviour between different groups
      of South Africans
•    To appreciate the trade-offs people make within these groups
•    To demonstrate how South African marketers can use these difficult times
      as an opportunity to position themselves strongly for the future

DATES OF PRESENTATION
Tuesday, 19 May 2009, 09h00-13h00 : Durban Seminar - The Pavilion, Nu Metro
Wednesday, 20 May 2009, 09h00-13h00 : Johannesburg Seminar - MonteCasino, Nu Metro
Friday, 22 May 2009, 09h00-13h00 : Cape Town Seminar - Century City, Nu Metro
To book go to www.unileverinstitute.co.za

Contact Kulsoem Roode for more info on 021 650 4715 / Kulsoem.roode@uct.ac.za

Early bird bookings enjoy a 10% discount before end April.

Non-members:  R1 500 pp (VAT incl.)*
Members: R1 125 pp (VAT incl.) (25% discount on above price)*

Block booking specials:  Book for five delegates, get one FREE

 

 COMMENTS PLEASE: Go to "The Forum" to leave your views and discussion points. ___________________________________________________________________________________