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April 16, 2010

Better Ways to Understand the Consumer Crossroad

Several market research firms have released studies claiming that consumers are ready to start spending again.  According to them, while the economy may still be struggling, things are headed in the right direction…which means expected increases in consumer spending.

These studies oversimplify the consumer mindset.

Consumers are divided, right now, into several different camps.  To understand these camps, one must ask specific, tangible questions about real-world spending choices.  Simply asking consumers if they expect to spend more or less in the coming months is not enough.

Premium cable (HBO, Showtime, etc.) is a good example to understand how many consumers think about the economy.  No doubt, premium cable channels are a non-essential item – something that’s “nice-to-have.”  At the same time, however, canceling premium cable channels requires effort (calling the cable company, waiting on hold, etc.).  Canceling premium cable channels is a solid indication that a family has had a serious conversation about reducing household spending.

A recent Wakefield survey showed that, among households with premium cable channels:

  • 50% plan to get rid of premium channels (HBO, Showtime, etc.) in the next 12 months
  • 50% plan to continue getting premium channels (HBO, Showtime, etc.) in the next 12 months

This figure illustrates how consumers are divided.  They have strong opinions, when it comes to future spending habits.  Those opinions differ based on key demographic factors and attitudes.  They key is understanding which factors serve as accurate trigger-points – and then tying those trigger-points to real-world decisions (like canceling or continuing to get HBO/Showtime).

This formula provides a much more useful and strategic roadmap than simply asking if consumers expect to spend more or less in the coming months.