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Recession—not yet over in people’s lives
According to the National Bureau of Economic Research (NBER), the recession is over. And it’s been over for at least 15 months. So how come nobody is celebrating?
Because the “recession” hasn’t ended in people’s lives. Basically, we are now in the “New Normal” where less credit availability means that things are still slowly contracting.
Less credit means that unemployment will probably stay high (by historical standards) for a while. There are a lot of numbers showing up in our consumer data that indicate the effects of the recession are reaching far beyond what is reflected in the current 10% unemployment rate (or the 20% or so under-employment rate).
Fully half of under-35’s say their parents have been impacted by the recession and that has influenced their own spending and saving behavior. About a third overall say that their children have been affected, which is having an effect on them. Considering that only 56% of the adult population 18+ have children (including children too young to have been impacted by the recession), this number is even more significant.
Seventy percent of survey respondents say that they themselves have been directly impacted by the recession and have changed their spending habits accordingly. That’s a whole lot more than 10%.
What this means is that consumer spending isn’t going to contribute to an acceleration in GDP growth anytime soon.
Loyalty programs, a hot topic for marketers and consumers
I am publishing a report on loyalty programs this week, and the report has been especially popular with Mintel clients.
The subject of loyalty programs is particularly timely in light of how consumer shopping habits have changed with the Great Recession. Loyalty marketers are aware that their loyalty program members are quite often their most profitable customers, and people who actually use loyalty programs tend to become even more loyal to a brand.
So the question is – why isn’t every company upgrading their rewards program to a loyalty program right now?
There are several ways this can be accomplished:
1) Offer rewards that customers see as having real value
2) Personalize offers and communications
3) Offer easy-to-redeem savings on those targeted products and services
It can’t be denied that loyalty programs are becoming a very important part of the relationship with the customer. For instance, according to Mintel’s research for this report, the quality of the rewards program is the number one reason people choose the credit card company they do.
Keeping this in mind, companies can add features to their programs that will really stand out with customers. Instant redemption is one feature that was cited by half of our respondents. Having a large number of redemption opportunities available was cited by a third. And it is the higher income groups (and therefore the most attractive groups for marketers) that are really focusing on these offerings.
It seems that now is the time to focus on adding or improving loyalty programs to help engage customers and maintain the relationship with the post-recession consumer.
Time to walk the walk: More marketing to small businesses needed
On Tuesday, the Federal Reserve confirmed what we have all been thinking for the last couple months – the US economic recovery is weakening. The health of our small businesses is acknowledged as being key to the recovery and many economists agree that the inability of small firms to obtain financing has stifled economic growth. Small businesses need loans to invest in capital and hire employees so that they can begin new projects. We need to have faith in these companies in order to break the negative cycle that is holding back the country.
I was therefore shocked to read in the Mintel Comperemedia Q2 2010 Small Business Lines and Loans Review that just 3% of business panelists had received a business loan offer via direct mail during the quarter; this is down from nearly 40% two years ago.
This fact is particularly alarming when you consider some of the bold statements made recently by banks as they compete to outdo each other with various lending statistics. I take my hat off to those banks that are not just talking-up their lending activities, but are also integrating those efforts with direct marketing campaigns. In other words, reaching out to small businesses, directly, in their time of need.
PNC, BBVA Compass and Chase are doing just that:
– PNC has been promoting its Cash Flow Options program in direct mail. Cash Flow Options encompasses a suite of loan products and the bank is offering a half-point reduction off its daily quoted interest rate plus a 50% reduction off the loan origination fee.
– BBVA Compass has been sending offers to small business owners promoting unsecured lines of credit and business loans. Lines range from $10,000 to $250,000 with interest rates as low as 6.00%. For 5-year term loans of $100,000 or more, small business owners can get a rate as low as 5.18%.
– Chase’s Loan for Hire campaign is the most noteworthy campaign of the national banks. Small businesses can get a half-point rate discount on each employee they hire up to three. Also, if you have a business checking account with Chase, you get another half-point discount on top of that for a total of 2% off the published daily interest rate. We haven’t seen a direct mail campaign promoting Loan for Hire yet, but Chase has blanketed the country with print and radio advertisements and has been promoting the product in its branches.
The PNC, BBVA and Chase examples are encouraging, but clearly it is not enough to keep economic recovery strong. Another positive sign is that small business credit card marketing is up significantly. This will be invaluable for many small firms as they struggle to stay afloat.
It’s time for business lending to follow suit and pull this country clear of the great recession once and for all. Yes, a rallying cry for small business marketers; nothing less than our economic future is at stake.
The “New Normal” consumer is speaking out
Further evidence that the “Great Recession” has had a significant effect on consumer behavior:
– In a recent Mintel consumer study, a substantial 76% of respondents state that they are “smarter shoppers” than they were a year ago.
– Almost seven in ten say they are trying to buy only necessary items, such as food (and that last number includes about half of those households earning more than $100k annually).
But price is not the only consideration. Only half of the consumers in the survey say that low price is more important than good customer service, while seven in ten say they only buy brands they trust.
What does this mean? It means that the definition of “smart shopper” is not just about price, it is more and more about value. And the concept of value has been extended to include trust in the brand, as well as good customer service.
These numbers look very much the same as they did a year and even two years ago, when the recession was just beginning to alter consumer behavior. This means that consumers are settling into a “less is more” mindset, while expecting more from their brand and shopping experiences.
Anyone in Financial Services (along with other industries) who is not conducting branding studies and consumer experience research should probably take note.