How are consumers coping with crisis?

- 2/20/09

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MARKETINGRX

MarketingRx : How are consumers coping with crisis?

By Ned Roberto, Ardy Roberto Philippine Daily Inquirer Posted date: February 20, 2009

Question: Your column has been quiet about the current global economic crisis, which is quite out of character for you. Were an FMCG (fast moving consumer goods) company selling a variety of beverage, snack, confectionery and packaged instant food brands. Weve attended your presentation of previous consumer coping surveys over the past years. We heard that you just completed a recent survey of consumer coping behavior. Would you like to share with your readers your latest consumer coping survey data and results? Coping behavior Answer: This is your Senior Marketing Rxer responding. For starters, let me say that you heard right that Ive completed the conduct of my survey of consumer coping behavior. As you know, Ive never been reluctant to share my survey data and results. But I share the survey data with the business community only after the survey sponsors have approved of such sharing. In the present case, I had quite a number of sponsors: 24 companies. The terms of the sponsorship states that I can make a public presentation only six months after Ive presented to all 24 sponsors. That took place in November last year. So, the earliest I can present is this coming April if we include November in the reckoning of the six months. The embargo is imposed on the survey data. It does not include my writing about the survey framework and profile because those are mine having designed them myself. What I can share at this point are the surveys logical framework, and data profile and usefulness. Here are the surveys exciting new extensions and usefulness. On the extensions, the survey, now and for the very first time, has gone truly nationwide including coverage of the rural areas. The expanded geographical coverage was made possible by the financial support of 24 survey sponsors. The highest number of sponsors that the survey was able to obtain was 10 since it started in 1984. The average number of sponsors was usually three to four. The recruitment of the 24 sponsors came from the tireless work of no other than the owner and chairman of Mansmith and Fielders Inc., Josiah Go. The complicated and difficult field data collection and processing for a nationwide survey was then carried out by the reputable poll group Social Weather Stations. Going nationwide with 200 expenditure categories The survey presents its data by its four study regions, namely, Mega Manila, Balance Luzon, Visayas and Mindanao. Per study region, the survey data are shown by urban and rural segments. The motivation for this geographical extension came from companies who were past users of the survey and who find that their businesses could no longer source the kind of business growth of the 1980s and 90s from the urban markets. For such business growth targets, they now wish to penetrate the provincial and rural market areas. The second survey extension is in the product and service categories covered. This recently completed survey has included 200 recurring expenditure categories. The previous 2006 wave had 113 items. This increase category coverage has substantially raised the surveys number of likely business beneficiaries. Designing a truly useful consumer coping survey As to the surveys added usefulness, it was the refinement of its data analysis that was mainly responsible for this. The first usefulness is about the capability of its analyzed data to predict and understand economic turning points (both downturns and upturns) at the level of specific product and service categories. For its role in forecasting, Ive positioned the consumer coping survey data in the following manner. Most marketers do market forecasting by considering and combining two forecasting bases.

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The first of this is the macroeconomic forecasts. These are macro in the sense that they predict what are likely to happen to your business remote environment. Its referred to as involving economic although in actuality its about your P-E-S-T market environment of Political, Economic, Social and Technological givens. These are the boundaries that restrict what your business can do in your forecasted period. The second is your microeconomic forecasts. These relate to your business internal environment, especially what your marketing and sales resources can do vis--vis what your brands consumers will do. The forecasts from the consumer coping survey data on product and service categories come between these two forecasting bases. The coping survey forecasts are your betweener forecasts. They are about whats likely to happen in your intermediate (product and service category) market environment. Recurring expenses The coping surveys prediction is based on insighting into how segments of consumer household adjusted their budget for specific recurring expenditure items consisting of 200 product and service categories. The budget adjustments were household consumers chosen budgeting behaviors for each of the 200 product and service categories. 9 Budgeting choices of a household consumer Specifically, a household consumer may do any one of these nine budgeting choices for a given product or service category: 1. Not buy or use the item ever since before. 2. Drop the item from the budget even before this survey period. 3. Drop the item from the budget just now. 4. Substitute something else for the item. 5. Reduce buying or using the item. 6. Economize on its usage. 7. Put it back into the budget. 8. Maintain its buying or usage. 9. Buy, use the item even more. When analyzed for their behavioral market segmentation significance, the data from the responses to this multiple choice question leads to the identification of the following three consumer coping segments: 1. The Maintainer Segment = The Core Maintainers (% maintaining item in the budget) + Big Spenders/Users (% buy even more) + Returnees (% put back in the budget). 2. The Lapser (Deserter) Segment = Core Lapsers (% who dropped item just now + % dropped item even before) + Economizers (% economizing item) + Switchers (% substituting for another). 3. The Non-User Segment = (% not bought/used item ever since) = Consumer households who can be converted into becoming trial users (100% % use ever since) and, therefore, offering a big, bigger, biggest opportunity for growing your category business! Classifying products When the data on the maintainer segment are related to those on the lapser segment, the result is a classification of each of the 200 product and service categories into the following five classes of product category: 1. The staple category This is a product or service category that household consumers consider as an expenditure item that they cant do without, something thats absolutely necessary. During hard times this is a product or service that is unlikely to be adversely affected. 2. The near staple category This is a recurring expenditure item that household consumers find still necessary but not absolutely. They can do without it every so often. This categorys maintainers are still a large multiple of its lapsers. Hard times are likely to somewhat negatively affect its buying and usage.

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3. The nice to have but not necessary category Household consumers consider this product or service category as more a want than a need, something nice to have but no longer a necessity. Maintainers of this category are still more than its lapsers but not as large as in the near staple category. During tough times, its a category that is more likely to be seriously affected negatively. 4. The near dispensable category This product or service category is regarded by household consumers as something they can do without but think of them as still somewhat nice to have. Its no longer a want and far from being a need is how household consumers talked about it. So in hard times, its an expenditure item that is more likely to be more seriously affected negatively. 5. The definitely dispensable category Household consumers consider this product or service category as something they can really live without, and certainly do without. Its a category whose lapsers are a multiple of its maintainers. Tough times will most likely to most seriously affect it negatively. The million-peso lotto question for you is: In what classification does your product or service category belong? There were many surprises from this survey waves data. So watch this column for the April presentation. Hybrid research The other and second usefulness is in my analysis about the relationship between the coping survey and the more popular UAI (usage, attitude, image) consumer survey. While Ive said before that the coping behavior survey has a logic thats different from that of your UAI, combining them in a hybrid consumer behavior research brings you to a much higher and deeper level of understanding of your brands marketing health and key problems. Clarifying how this hybriding can be correctly brought about requires more space than what this column will allow. Well include that in our April presentation. *** Keep your questions coming. Send them to us at MarketingRx@pldtDSL.net.
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