Tuesday, January 3, 2012

Marketing to the 66%.

A big issue confronting marketers is the shrinking middle class consumer.  Let's call them the 66%, after accounting for the famed 1% and the 33% of Americans living near or below poverty levels (an even bigger issue).

The middle class, a core target for most marketers, is hurting because technology and process-driven productivity increases is eliminating middle management jobs in manufacturing and service industries.

In 2011 marketers witnessed what the WSJ calls the "Barbell Effect."  Marketers catering to wealthy consumers fared relatively well.  Sales at Saks and Nordstrom were strong, as were sales for Mercedes, Land Rover, Porsche and BMW.  At the other end of the "barbell," sales at dollar stores and discount chains spiked as the middle class traded down, causing marketers such at Heinz and P&G to focus on discounting and bargain brands.

What should marketers do?  I'd suggest CMOs look at what Hyundai has done over the last few years to drive a remarkable surge in sales.  Several years back, Hyundai began addressing the fundamental issue depressing sales -- FEAR. The vast majority of consumers are not facing layoffs or home foreclosures, yet they curtail spending because they're understandably anxious about the future.

Hyundai launched its Assurance program, allowing consumers to return their new car within a year of purchase if they lost their job. (Sales jumped 14% that month while the industry was down 37%.)  The company followed that by sweetening the program by offering to pay the vehicle loan or lease for 90 days while the owner looked for work.  Moreover, Hyundai has also made buyers feel smart – another way to alleviate fear – through its warranty program, styling and quality.

Looking back on my recession-themed posts (a topic I look forward to not writing about in the future!), the strategies suggested at the outset of this recession remain applicable today:
  • Reduce anxiety by making consumers feel smart; 
  • Appeal to consumer's need for emotional security and "cocooning";
  • Get closer to your best customers through true loyalty incentives and CRM; 
  • Consider tiered pricing and value options; 
  • Invest in innovation – "new" is still a powerful lure; 
  • Finally, don't let a good crisis go to waste – refocus and reprioritize all elements of your product portfolio, marketing and media mix.

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