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The Buzz About Buying
| Meghan Boyer
>> Published Date: 6/23/2011
During the depths of the recession, many consumers went into hiding: They avoided stores, eliminated unnecessary expenses, and put a padlock on their wallets. Faces that retailers once saw on a regular basis disappeared, as though whole segments of their customer base had gone into a witness protection program.
Now the shoppers are coming back. As the economy slowly gains strength once again, these consumers-in-hiding are beginning to emerge with eyes blinking in the sunlight and a pent-up demand for spending after all the long months of saving.
But no quick movements! Though you are very excited to see these elusive consumers again, take it slow, and approach with caution. These consumers scare easily. The first whisper of higher gas prices or a dip in the job numbers will have them running into the shadows once again.
It’s up to retailers to keep consumers calm and reassured through social media efforts, adoption of mobile technology, coupons and Groupon-like deals, along with insightful marketing information. Hopefully, this will keep them out of hiding, happy and, most importantly, shopping.
Time to Redecorate
Home furnishings retailers have started to see some increases in sales as consumers begin to spend more money once again on their homes, according to George Whalin, president and CEO of Retail Management Consultants, a retail consulting firm. The sector is unlikely to rebound completely until home sales return to levels last seen before the recession, because consumer purchasing properties are the ones most likely to buy furnishings, he tells Consumer Buzz. This holds true both for interior furnishings, patio and lawn furnishings, and other gardening accessories.
“The trends now are generally influenced by the consumer’s lack of confidence in the economy and gasoline prices. From families with the lowest incomes to the most affluent consumers, [they] consider price and value with virtually everything they purchase,” he says. “Although we’ve seen some return to spending on merchandise such as apparel and home furnishings, we are still well below the sales levels seen before 2007.”
Ladies’ (Online) Choice
Different factors influence women’s choices when it comes to consuming and sharing online content, according to AOL research in partnership with the Bovitz Research Group. Trust is a contributing factor, as 40% of women share information they gather from someone they trust. Email remains the top choice women use to share information, with 62% preferring it. Social networks account for 34% of content sharing among women.
AOL determined three focus areas:
- Social Expressionistas: These women use social networks to express their views and creativity.
- Alpha Trendsetters: These women take both their social lives and their careers very seriously.
- Shopsessives: These women are shopping online across product categories.
Planting the Latest Trends
What’s hot in the garden? Veggies! They are the most popular trend among gardeners, followed by small-space gardening and organic gardening, according to a recent survey from Garden-Share.com, a social
network for gardeners.
“Vegetable gardening has enjoyed a surge in popularity due to the economy, the price of gas and consumer concerns about the origins of the food they eat,” says John Mitchell, the website’s founder. “Add to that the personal satisfaction you get by growing your own food, and it is no wonder vegetable gardening is the most popular trend.”
Of respondents, 20.6% selected vegetable gardening as most popular, and 43.6% noted people can save money by growing vegetables, fruit and herbs at home. Tomatoes, while technically a fruit, are the favorite vegetable to grow among 56.9% of respondents. Peppers came in second at 8.1%.
FYI: Gr8 Sale 2day
Retailers can drive store traffic and sales with targeted text message campaigns, according to research by Placecast Inc., a vender of text-based marketing services. Up to 35% of consumers who have opted to receive targeted promotional text messages from a retailer or brand choose to visit the store, according to the company. Additionally, of those that visit a retailer, up to 34% report redeeming the coupon offered in the text. Redemption rates can vary from 11% on the low end to more than 65% depending on the type of offer.
One Style Does Not Fit All
Americans have diverse online shopping behaviors, and they are not always easy to predict, according to a consumer survey from SteelHouse, a behavioral commerce firm. While nearly 40% of respondents always shop with a purpose to find something in particular, 30% regularly browse with no intention of buying. Additionally, 25% of men would buy premium brand-name products compared to only 16% of women.
“It’s clear that simply giving the same offer to every online shopper is not the way to increase sales,” says Mark Douglas, SteelHouse CEO. “We’re people, we approach shopping just like everything else—based on our personalities and ingrained behaviors. Retailers that understand and act on these different shopper personalities in real time are the ones that will be successful.”
Whether online or in brick-and-mortar locations, this advice holds true. Retailers should understand the needs of the different segments in their customer base to market to them most effectively.
Perception is Reality
At least 80% of households with annual incomes of $100,000 or more consider themselves to be middle class, notes Pamela Danziger, author of Putting the Luxe Back in Luxury: How New Consumer Values are Redefining the Way We Market Luxury. Though most of these households believe they are middle class, an income of more than $100,000 actually places them in the top 20%. But perception becomes their reality, and these households respond to rising prices the way many middle-class households would respond.
“If the bulk of those that used to be luxury consumers now believe that they can’t afford an indulgence, that really puts the squeeze on the luxury brands. Luxury marketers need to up their game and put the luxe back in their luxury to compel the recession-busted, inflation-exhausted, upper-middle class consumer back into the stores and back to their brand,” says Pam.
Roughly 234 million mobile phone users ages 13 and up exist in the United States, which means it’s likely the majority of a retailer’s customer base owns a mobile device, says Courtney Albert, management consultant with the Parker Avery Group, a strategy and management consulting firm. Retailers who utilize mobile checkout devices are essentially removing the need for a traditional counter and line, and allowing for more efficient and rapid service, she says.
“Mobile checkout logically taps into a channel and tool that has essentially been born and shaped by customers’ buying behaviors and continues to evolve faster than any other channel,” Courtney tells Consumer Buzz. “One of the additional benefits of mobile checkout is that it provides the customer with a more personalized encounter, equaling an increased level of customer service and higher conversion rates.”
Capitalizing on Trends
Big opportunities exist for retailers to capitalize on consumer needs and changes, according to Will Ander, Senior Partner at McMillanDoolittle LLP, a retail consulting firm. Social media and mobility are driving significant change in the way retailers conduct business, especially for the Y generation, he tells Consumer Buzz. Additionally, key social trend areas are wellness and sustainability, and both have significant traction.
Most consumers remain on a budget and are concerned about their jobs and income, which means for the most part their spending remains cautious, says Will. However, the aging population, including Boomers, is moving into active retirement. This is a “huge missed opportunity for retailers and service-based businesses,” he says, noting the segment is “tremendously underserved.”
Spending More for Good Service
Americans are willing to reward quality service this year with increased spending, according to a survey by American Express. Seventy percent of Americans are willing to spend an average of 13% more with companies they believe provide excellent customer service, an increase from 2010 when 58% of respondents said they would spend an average of 9% more.
Despite the premium consumers place on customer service, many businesses aren’t meeting their expectations. Sixty percent of Americans believe businesses haven’t increased their focus on providing good customer service, and 26% think companies are paying less attention to service.
“Getting service right is more than just a nice to do; it’s a must do,” says Jim Bush, executive vice president of world service for American Express. “American consumers are willing to spend more with companies that provide outstanding service, and they will also tell, on average, twice as many people about bad service than they are about good service. Ultimately, great service can drive sales and customer loyalty.”
The Definition of Insanity
According to Albert Einstein, the definition of insanity is doing the same thing over and over again and expecting different results. Retailers can keep this definition in mind as they plan upcoming marketing and merchandising campaigns.
“It’s time for ambitious change to the way retailers develop strategy, align their organization, tailor their assortment and pricing, and interact with consumers,” says Courtney Albert, management consultant with the Parker Avery Group, a strategy and management consulting firm. “The first step is to recognize that what you’ve done in the past will result in more of the same.”
For many retailers, their organizational structure likely is the top inhibitor to change. “When you define how you’re going to address this, remember that the new retailing word for success is ‘agility,’” Courtney tells Consumer Buzz. “Consumers will continue to change the methods they use to engage with you; make sure your organizational construct reflects this potential for change.”
There’s an App for That
Consumers increasingly are using smartphones as a way to learn more information about products and deals, creating a mobile shopping culture among themselves, according to a survey by PriceGrabber, a part of information services company Experian.
On average, consumers have downloaded an average of 21 apps to their web-enabled phone, and three of those apps are shopping related. Seventy-two percent of consumers already use their mobile phones to receive coupons, product deals and price alerts, and 34% use their phones to compare prices online while shopping in a store.
“Mainstream consumer adoption of smartphones coupled with a consumer focus on getting the best deal has helped to create a culture where consumers are becoming more and more reliant on their phones for their shopping needs,” says Graham Jones, general manager of PriceGrabber. “With the growing number of consumers utilizing their mobile phones to purchase goods and services, retailers must adapt to this technology quickly or be left behind.”
Do Consumers “Like” You?
The Facebook “Like” button is trumping traditional reviews as the way consumers prefer to show their support for businesses, according to research by Harris Interactive for CityGrid Media, a media company. Twenty percent of people “Like” something on Facebook to show their support, while 13% write a review. Among women, 25% hit the Like button and 11% write reviews.
“Likes are trumping reviews when it comes to sharing feedback, but this does not translate to Facebook being the first or only place consumers turn when deciding to try someplace new,” says Kara Nortman, senior vice president of publishing at CityGrid Media. “What this means for small businesses on the web is that they should encourage Likes but also round out marketing efforts to reach consumers across a variety of touchpoints.”
Marketing in the Final Stretch
At the end of a long race is no time to get sloppy, because any missteps before the finish line could negate the good work completed in the early miles. As the economy comes out of the recession, retailers need to remain focused on continuing their efforts to attract consumers and maintain their businesses, says Ted Hurlbut, principal with Hurlbut & Associates, a retail consultant and business advisor firm.
Retailers should focus on their marketing efforts to existing customers. “They’ve proven that you’re important to them and that they’ll pay you for the products you sell and the services you provide,” he says. “Build those relationships, one customer at a time, one on one, by communicating directly with them. Re-focus your marketing dollars away from broadcasting for new customers to narrow-casting to known customers.”
Time to Landscape
Almost 50 million homeowners are taking on landscaping projects, according to Scarborough Research, a consumer and media research firm. Landscaping (29%) is the top home improvement on consumers’ lists followed by interior painting/wallpaper (28%) and carpeting/floor covering (14%).
Big boxes Home Depot and Lowe’s are the leading players in the home improvement retail market, according to Scarborough. More than half (51%) of homeowners shopped at Home Depot during the past year, and 47% shopped at Lowe’s during the same timeframe. Independent garden centers should continue working to differentiate themselves from the big boxes to gain a piece of consumers’ landscaping budgets.
Tightening the Belt (Again)
More Americans have been holding back on non-essential spending since the beginning of 2011, specifically because of the rise in gasoline prices, according to a study by Bankrate.com. Americans are split on their overall financial security, with 27% reporting better overall financial security compared to 12 months ago and 28% saying they’re worse off.
“The sensitivity to gasoline prices voiced by Americans cuts both ways. Any sustained pullback in prices would be a boost to the economy, but a renewed increase in gas prices would be a further drag on growth,” says Greg McBride, senior financial analyst for Bankrate.com.
Spending on Social Media
Social networks have become a higher investment area among retailers, with 72% saying they will increase their spending on social networks this year over last year, according to “The State of Retailing Online 2011” report conducted by Forrester Research Inc. for the National Retail Federation.
Social networks ranked fourth on the list of successful customer acquisition sources, yet the return on investment associated with them is muddy. Sixty-two percent of retailers said the returns on social marketing strategies are unclear, and nearly the same percentage said the primary ROI from social marketing is listening to and gaining a better understanding of customers, according to the NRF.
“The data indicates that significant investments in social and mobile tactics will be in place this year,” says Sucharita Mulpuru, vice president, principal analyst, Forrester Research. “Retail executives should have modest expectations for the benefits of social commerce.”
Clipping Digital Coupons
Coupon use remained strong among online U.S. shoppers in the first quarter of this year despite signs of economic recovery. The good news for retailers is that businesses providing regular discounts are likely to see increased customer loyalty, according to a survey conducted by Harris Interactive for RetailMeNot.com.
Among women ages 18-34, 41% of online shoppers use coupon sites to find deals when shopping and 31% use daily deal and group-buying sites. For the general population, the numbers are 27% and 22%, respectively. Eighty-two percent of online shoppers report they are more loyal to businesses that offer regular discounts than businesses that offer an occasional discount.
“The so-called ‘coupon craze’ is more than a passing fad, even as new types of discount sites emerge,” says Cotter Cunningham, CEO of WhaleShark Media, parent company of RetailMeNot.com. “As consumers and retailers alike discover the value of a good discount, they are ushering in a new era in online shopping and the retail experience in general.”
Few Pay More for Green
Many consumers are interested in supporting the environment through their purchase choices—unless it will cost them more. Nearly one in four shoppers are willing to pay more for an item if they feel like they are contributing to saving the environment, according to a study by the Integer Group marketing agency and brand-development firm M/A/R/C Research. Consumers are willing to make changes to be eco-friendly as long as those changes don’t require them to spend more time, money or effort, notes the study.
Marketers should focus on the emotional need instead of only the functional benefits to create change. “If shoppers can’t see or feel an immediate reward for this new behavior—saving money, time, creating social change, etc.—they’ll opt to stick with what they know,” says Craig Elston, senior vice president of the Integer Group. “Enabling shoppers to become change agents means helping them overcome deeper psychological barriers within.” GP
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