I saw a headline for a report that was just released by the NPD Group and thought it was quite interesting…

Director of product development at NPD and author of the report Dori Hickey: “Most consumers have unquestionably felt the sting of tough economic times and have cut back on spending and adopted thriftier behaviors; behaviors that may become entrenched the longer the recession continues. Our findings suggest we may be looking at a new ‘normal’.” Read the story.

There is, of course, a chance that they started covering the New Normal before June 2010, but I couldn’t find a reference to anything they’ve produced about it.

Meanwhile, the first reference I made to the New Normal was in 2008. Since then, Mintel has covered the concept in news pieces, observations, expert blogs, trends, reports, a white paper and a webinar.

Here’s that first piece I wrote, from Mintel Inspire. I hope you enjoy it.

The End of Easy Credit

Every once in a while a major event occurs that can potentially lead to a major societal shift in lifestyles, values or perspectives.

Assessing risk
9/11 was one such occurrence in the U.S. The recent economic “meltdown” is likely another such event. These recent economic events are less tragic of course, but much broader in scope, and more global in their sweep.

In other words, once the current “freeze” of available credit thaws, credit will be available again, but in much more limited quantities and to a much more select group of people. This will likely cause a societal shift of major proportions.

The current state of the economy exists for a number of reasons, but one stands out – that the amount of risk in the system was not assessed and priced accurately.

• Much of the current chaos exists because of the uncertainty about how risk should be priced going forward.
• Financial services companies have historically justified their existence to their shareholders and customers by their willingness to either assume, or provide protections against, much of the risk in the economic system.
• When that level is miscalculated those same financial services companies are the first to feel the impact.
• The impact on the consumer is felt later, but can be even more dramatic and substantial.

Personal risk
At the current time, while financial companies are busy trying to determine the amount of systemic risk and how best to deal with it, the consumer is busy trying to determine their own individual risk. They have pulled in spending and investment until such time as they feel reassured about these institutions and the system overall.

However, unlike much of the rest of the world, ever-optimistic Americans have indicated in recent surveys that they feel that things will return to “normal” in 6 months to a year, and that the economic situation will actually improve from its previous levels over the next five years. And they are conducting themselves accordingly.

However, without the availability of easily available credit, it is likely that what is “normal” has shifted and that consumers in the U.S. and globally will be looking at a new “normal”.

In other words, the upwardly spiraling expectations set up by the prolific use of credit in the last few years will need to be reversed—an occurrence that has no precedence for most living Americans.

For the first time in recent history we will need to make do with less.

Amplification of two trends
What this means is that eventually some form of capitulation must take place. Americans will need to develop a new unique state of mind, new ways of viewing themselves and their place in society, and these economically induced trends will likely intensify major trends already in place. For instance, two trends likely to be accelerated include simplification and the “greening of society”.

Simplification

• In a mobile society it is easy see why conspicuous consumption may gain acceptance, since individuals like to provide instant “cues” as to their place in the social hierarchy.
• This lies in contrast to the less-mobile, small town societies of several generations ago in which everyone knew their place.
• It is likely that recent trends identified as part of the simplicity movement (for instance, work/life balance), will accelerate social pressures against more obvious displays of conspicuous consumption.
• Flaunting designer labels may again be viewed as gauche.
• In other words, there is likely to be a significant shift in what is perceived as acceptable outward symbols of social status.
• The new “status” could be outward displays of frugality.

Green movement

• Green marketing has fallen by the wayside in the last few months as people have dealt with more immediate issues, but will likely return with a vengeance when consumers feel more secure with their personal circumstances.
• Concurrent with the simplicity movement discussed above, people are likely to turn their attention from consumption to other issues.
• Being environmentally conscious could very well define the new “cool”.

The new normal
So then, how will this “new normal” impact the financial services industry?

As we all know, opportunity comes from chaos, and the current situation is no exception. Financial services companies need to step back and monitor how society is reacting to these fast-paced developments, while reassuring their customers that they are doing everything they can to insure their future financial security.

One way to show they care is to reflect the values of simplicity, as they will likely be enhanced by a return to diminished expectations for consumption, and a more conservative view of how money is to be managed.

There may ultimately be new product opportunities created as people begin to save more and spend less, but companies need to anticipate how best to speak to these changes in cultural values.

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