Overview 1
Catalyst 1
Summary 1
Table of Contents 2
Table of figures 3
Table of tables 4
THE FUTURE DECODED 5
Introduction 5
TREND: Macro economic indicators increasingly point towards recession in a number of countries 6
Datamonitor's Global Share Price Index highlights the negative movements in international share price movements against key events in the global economy 6
Many regions and countries are lowering economic growth forecasts with a recessionary environment likely to prevail, and in some cases worsen, well into 2009 8
Unemployment is increasing as companies look to cut costs 11
Poorly performing housing markets have created new uncertainty and consumer caution 14
Consumers are aware of the very real issues facing their housing market and are concerned about the value of their home 18
Commodity prices have become an unpredictable threat to consumer and business spending 18
Food prices fluctuations are a particular concern 19
Fuel prices declines have brought relief but this may be a temporary reprieve 20
Key takeouts and implications: "recession" is a term no longer used in the future tense 20
TREND: Record low levels of business and consumer confidence will create a difficult operating environment for 2009 21
A consumers' wealth/financial status has a significant impact on their outlook 21
Feelings of wellbeing are most influenced by wealth among consumers in the Asian region 22
Wealth affects feelings of wellbeing less among consumers in the US and Western Europe, particularly Scandinavia 22
The downturn has had a discernable impact on consumer lifestyles 26
Consumer confidence across many nations reached historical lows in 2008 28
Business confidence has followed a similar pattern to consumer confidence 32
Key takeouts and implications: rebuilding consumer confidence is essential to reignite consumer-facing markets 34
INSIGHT: As financial wellbeing declines, consumers' attitudes towards investments and savings changes 35
Consumers are trying to save more money but this may not be possible as economic pressures build 35
Much uncertainty exists surrounding the recessionary consumer's saving and spending patterns 38
Prices are falling and the possibility of a deflationary environment exists 38
Declining interest rates have offset the desire to save 39
Banks have passed on interest rate cuts on the saving side but are unwilling to cut lending or mortgage rates 39
Consumers plan to take a responsible attitude to their finances over the next six months 39
Consumers are switching to safer, more trusted investment options 40
Consumers are very concerned about the eroded value of their savings 41
Those who have greater financial awareness are far more concerned about the value of their savings 42
Banks need to attract and importantly retain savers if they are to regain financial strength 43
Key takeouts and implications: consumers want to take a more responsible attitude to their finances but lack knowledge and guidance 44
INSIGHT: Consumers choice of financial services provider is impacted by economic conditions 45
Both for savings accounts and current/checking accounts financial stability is most important for consumers 45
Consumers display a degree of inertia in changing their current accounts, seeing it as difficult 47
The cost of borrowing is the most important factor for consumers choosing a credit card 48
Consumers are looking for price competitiveness and transparency from their insurer 49
Key takeouts and implications: clearly communicating the message of financial stability is key to retaining trust 50
INSIGHT: Consumers have lost trust in financial institutions in light of the recent financial meltdown 51
Reputation and leadership are important drivers of trust in institutions 51
The financial crisis of 2008 had a very damaging impact on perceptions of the financial services industry 52
Online price comparison sites are the most trusted financial services company in the current climate 53
Key takeouts and implications: the failure of financial institutions to pre-empt the crisis has shattered consumer's confidence in their ability to make financial decisions on their behalf 54
INSIGHT: The nature and frequency of credit card purchases will be affected by the downturn 55
High levels of indebtedness have created significant problems during the 2008 credit crunch 55
Lenders are being forced to approve fewer applications 55
Consumers' credit card spending is falling 56
Consumers may be reducing their new card spending but are not reducing their outstanding balances 56
Consumers are reluctant to use credit to maintain their lifestyle 56
Key takeouts and implications: consumer resistance to ongoing credit card usage poses difficulties for the CPG industry and card providers alike 58
INSIGHT: Value/cost is becoming an increasingly important factor in shopping preferences 59
There has been a large shift towards more cost/value conscious food and non-alcoholic beverage choices in 2008 59
Recession is fuelling the shift from on- to off-trade food and beverage sales 62
Value driven alcoholic drinks purchases have been less pronounced than food in 2008 in both the off- and on-trade 63
Value is more important in choices for at-home consumption but the majority of consumers still exhibit little change in behavior 65
Personal care products offer emotional comfort and indulgence that gives them a degree of recession resistance 67
The importance of price in shaping product choice is high for household care products 68
Consumers will pro-actively search out best value options 69
Online shopping has benefitted during the recession as a preferred value channel for consumers 70
Private label is a beneficiary in the current economic environment 70
Key takeouts and implications: price cuts can be a blunt instrument and consumers' value-for-money impulses should be targeted carefully 71
ACTION POINTS 73
ACTION: Adopt an 'informative' approach to marketing promotions with particular emphasis on the savings you can offer 73
Avoid exacerbating the impending sense of panic 74
Avoid falling into the trap of unsustainable price cuts and endless promotions 75
Talk about "value for money" not "price" 75
ACTION: Maintain or increase marketing investment to help offset the difficulties of operating in a recessionary environment 76
Risk and return must be actively balanced in recessionary marketing 77
Falling media rates are fortuitous in helping marketers keep the momentum in their messages 77
Explore alternative channels for delivery of marketing messages and invest in channel marketing tactics and new territories 78
ACTION: Be pro-actively open about the communication of a wide range of trust issues 79
Regain the trust and confidence of consumers with a more personalized approach to service 79
Speed of reaction to a crisis is vital to prevent negative fall-out 80
ACTION: Embrace the internet as a trusted source of information and viable sales channel rather than something to be feared 81
Make more information available via company websites 81
Use the internet to develop new 'online communities' 81
CPG companies must upgrade their online presence and offer value for money in their e-shopping endeavors 81
ACTION: Learn from companies that are trusted by consumers 82
Online aggregators are a resource to be courted for both CPG and financial services companies 82
Financial services aggregators hold a greater degree of trust than the industry's individual players 83
Simplicity and straightforward jargon-free talking has been key to the success of financial services aggregators 83
Banks and insurers must also take action to build relationships with these online aggregator sites to ensure their offerings have a strong presence 84
APPENDIX 85
Methodology 85
Further reading and references 86
Ask the analyst 87
Datamonitor consulting 88
Disclaimer 88
List of Tables
Table 1: Consumer survey: confidence and perception of housing market difficulties in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 17
Table 2: Consumer survey: the perceived importance of wealth or income in creating a feeling of wellbeing or wellness in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 24
Table 3: Number of wealthy individuals (000s), Europe, the US, and Asia-Pacific, 2002-2011 26
Table 4: Consumer survey: perceived impact of the economic downturn on consumer lifestyles in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 27
Table 5: Consumer survey: the extent that consumers are making an effort to save more money in light of the economic downturn in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 36
Table 6: Consumer survey: willingness to use credit to maintain lifestyles in light of the economic downturn in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 57
Table 7: Consumer survey: tendency to make food and beverage purchases on the basis of value/cost more or less frequently in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 61
Table 8: Consumer survey: tendency to choose alcoholic drinks in pubs, bars or restaurants on the basis of value more or less frequently in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 64
Table 9: Consumer survey: tendency to choose alcoholic drinks for at-home consumption on the basis of value or cost more or less frequently in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 66
Table 10: Consumer survey: tendency to choose cosmetics and toiletries on the basis of value or cost more or less frequently in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 68
Table 11: Consumer survey: tendency to choose household cleaning and or laundry products on the basis of value or cost more or less frequently in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008 69
List of Figures
Figure 1: Recessionary consumers' behavior is affected by a number of basic drivers and inhibitors 6
Figure 2: Datamonitor's Global Share Index highlights the negative movements in international share price movements in 2007 and 2008 8
Figure 3: Unemployment is set to rise in most Western countries in 2009 14
Figure 4: In Europe, Spanish consumers have been particularly affected by a housing market downturn 18
Figure 5: Wealth or income have a high degree of importance in creating wellbeing, especially in emerging markets 23
Figure 6: The number of wealthy individuals in Asia is converging on numbers in Europe 25
Figure 7: Less than 30% of consumers across 15 countries feel that their lifestyle are immune to the current economic downturn 28
Figure 8: Consumers are making efforts to save in light of the current downturn 37
Figure 9: Consumers are feeling the effects of the downturn on their personal finances 38
Figure 10: Consumers intend to continue saving more and reducing their credit card spending over the next six months 40
Figure 11: The value of savings is of great concern to consumers 42
Figure 12: Those consumers who consider themselves to be of above average financial intelligence are very concerned about the value of their savings 43
Figure 13: Financial stability is crucial in the choice of savings account provider 46
Figure 14: ING Direct: when savings don't feel so good 47
Figure 15: Consumers are concerned by perceived difficulties involved in changing current account 48
Figure 16: The cost of borrowing on a credit card is at the forefront of consumers' minds 49
Figure 17: Transparency of product features and price is important to a consumers' choice of insurer 50
Figure 18: Reputation and leadership are important aspects of trust building which is why the financial services industry is in a problematic situation 52
Figure 19: Less than 10% of wealth managers were most concerned about a potential recession as of September 2007 53
Figure 20: Online price comparison sites and banks are the most trusted financial institutions 54
Figure 21: Consumers, at least attitudinally, are reluctant to use credit to maintain (pre downturn) lifestyles 58
Figure 22: Food and beverage purchases have been based on value/cost more often in 2008 62
Figure 23: Consumers' on-trade alcoholic drinks choices have exhibited little change based on value considerations during mid-2008 65
Figure 24: The off-trade's existing cost advantages have inspired little extra change in consumers alcoholic drinks choices 67
Figure 25: In the US, Whole Foods Market has initiated several programs that show consumers "how to shop Whole Foods Market on a budget", including advertising through social media 74
Figure 26: In the US, National City has launched a website of "real stories" from its customers, telling how bank personnel have gone out of their way to help 80
Figure 27: Moneysupermarket.com has been a key success in the financial services aggregator sector 84