Yogi Berra allegedly said “this is like déjà vu all over again.” I was reminded of Yogi’s wisdom while thinking about what marketers can learn from the way in which consumers reacted during previous economic meltdowns.
Our economy is a mess. Jobs are fragile. Real net income for working Americans is stagnant. We knew this for a while but chose to ignore it while buying our McMansions with zero money down. It takes the evaporation of trillions in personal wealth to get our full attention.
Now that we’re duly panicked, how will we respond? One clue is to examine how consumers reacted the first few times we saw this movie.
Let’s go in the way-back machine. No, not 1929, let’s start in 1987. Conspicuous consumption was in vogue. Michael Milken was peddling junk bonds. Yuppies drove “beemers.” Wall Street’s ficitonal Gordon Gekko preached how “greed is good.”
Then came Black Monday, the day the Dow plummeted over 20%. (To put this in context, this past Monday’s 777-point free fall was a 7% decline.)
The consumer response was best defined by trend guru Faith Popcorn who coined the term “cocooning” to describe our desire to seek shelter from the storm by embracing simple pleasures and honest, back-to-basic comforts.
Out went the “beemers” and in came SUVs. The Ford Explorer and the Jeep Cherokee took off because SUVs provided a sense of security, strength and escape from a dangerous world.
Pop culture captured the zeitgeist in movies like Baby Boom and TV shows like Thirtysomething. “Nesting” gave rise to enjoying movies and board games at home with friends as well as the over-hyped trend of women leaving the career track for the so-called mommy track. New brands like Lexus capitalized on our desire for luxury without the premium price and the stigma of conspicuous consumption.
Soon enough the stock market bounced back. BMW sales went up. Martinis and cigars were rediscovered. Michael Milken was replaced by sock puppets. We believed the new economy would spare us from ever again having to eat meatloaf.
By 2001, Greenspan’s warning of our “irrational exuberance” caught up with us when the early dot.com companies proved worthless and the tragic events of 9/11 shook our country to its foundations. The market plunged southward, wiping out retirement nest eggs, diluting 401k accounts and creating a pervasive feeling of vulnerability. Setting aside the impact of 9/11, we learned the “new economy” was as irrational and cyclical as the old one.
But the way in which consumers responded this time was different. Consumers didn’t “cocoon” and “nest” or get all warm and fuzzy about staying at home with kids. We got smarter. Unlike 1987, we had the Internet to help us save money without having to give up the brands we enjoy. We still bought BMWs, but we found the best deal on autobytel.com before going to the dealership. Off-line, we witnessed the advent of strategic shopping – i.e., shop at Wal-Mart for daily necessities to be able to indulge at Nordstroms for those things we truly desired.
What now? Is this credit crisis (and war and failure of leadership and…) jarring enough to send us back to home and hearth? If so, does this provide growth opportunities for brands such as Mattel (games), Volvo (security), Best Buy (stay at home entertainment) and Kohler (remodel instead of move)? Has the Internet fundamentally changed how we respond as consumers because we are better informed and empowered? Or will we seek what Faith Popcorn describes as the “pleasure revenge”?
Predicting the future is a fool’s game. But being unprepared could be even more foolish. Marketers should immediately connect with customers. Listen to what they're saying, but really listen to how they're feeling.
Begin taking steps to be well-positioned for what’s ahead. Find a clear and honest value proposition. Reinforce emotional connections and a sense of community. Invest in service and warranties to replace risk with reassurance. And use the web to help consumers make smart and informed choices.