Alongside these shifts is the way thrift has blossomed to produce a socially sanctioned frugal lifestyle. In 2009, 58 percent of Americans (and 67 percent of Millennials) reported that they used coupons to make purchases.Booz & Company found that two-thirds of consumers frequently use coupons, value price over convenience, and believe saving is more important than spending. In another spend shift sign, dollar stores like Dollar General and Dollar Tree rose up in the ranks of the Fortune 500. And in BrandAsset Valuator, 95 percent of Americans believed that even when the economy recovers fully, they’ll continue to put time and effort into finding the best deals possible (with 42 percent agreeing strongly).
All these numbers support the notion that people aren’t waiting for government or corporate leaders to show them how to respond to crisis. They are, instead, moving almost reflexively, on their own, to adjust and adapt. This phenomenon is not dependent on gender, age, or even income level—all groups are participating— although the Pew Research Center has found that it is, understandably, less pronounced among the affluent. Nevertheless, Pew has seen enough of a spend shift to conclude that 80 percent of all adults have pared back their personal list of goods and services they deem essential to a happy life. “Yesterday’s necessities,” Pew announced in April 2009, have “become today’s luxuries.”
With big and somewhat mysterious economic and political forces driving these shifts, even the most esteemed experts cannot predict precisely where public sentiment will go. A few miles southwest of Everett, John Quelch has been watching the fluid way people adapt to change from his perch as professor at the Harvard Business School, where he studies, among other things, democracy and the marketplace. Quelch is fascinated by the question of whether people will snap back to their old overspending ways or we’re witnessing a permanent change.
“For those who have discovered that when they decide against buying a new car their self-esteem is not affected and their old car continues to run well, the Great Recession has delivered surprisingly upbeat news about their own resilience.” The same people are also discovering that they can be happy after moving from a mini-mansion to a smaller house or even an apartment, or from a home they owned to a rental. As noted, in an abrupt end to a decades-long trend, the average new American house was actually smaller (by 10 percent) in 2009 than in 2008. During the same period, home ownership declined while renting increased. In a market where selling a home can be extremely difficult, renting allows people to move more nimbly to take advantage of opportunities.
When these changes yield lower consumption, they can produce social benefits like reduced carbon emissions as a matter of course. Quelch notes that this people-driven shift happens with fewer struggles than when policymakers try to impose similar measures from the top. For a contrast he points to President Jimmy Carter’s attempt to reduce American energy consumption in the late 1970s. “In fairness to Carter, he was trying to legislate this stuff,” notes Quelch. Today, while conservation and global warming may be a key political concern for some spend shifters, far more people are taking action for practical reasons—and that group, adds Quelch, is growing because they are reaping the benefits directly. “Wise companies,” he adds, “will make it easy for people to get information about how their products reflect this trend by saving them time and money while making the world a better place.”
As experts like John Quelch note, we signal our values and our priorities every time we make a purchase or decide where to invest our time and energy. In contrast, we participate in elections every two years or so. This means political choices are very crude and lagging indicators of public sentiment. If you want to understand how people really feel, track them day-to-day in the marketplace.
About the authors:
John Gerzema is President of BrandAsset Consulting, a Young & Rubicam Brands Company and author of a previous book, The Brand Bubble, which was named a best business book of the year by Amazon.com and strategy+business. His TED lecture on the post-crisis consumer has been viewed by tens of thousands of people. He has been interviewed by the Fox Business Network and other programs. For more, please visit: http://www.johngerzema.com/
Michael D’Antonio is a Pulitzer Prize winning journalist and the author of more than a dozen books including Forever Blue, Hershey, and The State Boys Rebellion. He has appeared on 60Minutes, Today, Larry King Live, Good Morning America, CBS Morning, and many public radio programs including NPR’s “All Things Considered” and “Science Friday”. They both live in New York.
Email me at email@example.com — And follow me on Twitter @BullishonBooks