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OMD Sense. How the post-recession landscape looks

OMD Sense. How the post-recession landscape looks

So, it seems that the UK’s longest recession on record is over, for the time being at least. This Sense piece examines what’s changed for UK consumers since it began, in the second quarter of 2008.

As is common to most periods of volatility, there have been winners as well as losers. Low interest rates have increased the spending power of many. Perpetual sales and offers have ensured that those with disposable income have been able to make it go even further.

Of course, the more prevalent trend in personal circumstances has been the increase in unemployment. Around 2.5 million people of working age in the UK are unemployed, not including those who are ‘economically inactive’ (home-makers, students, long-term sick or disabled).

This represents around one million more than two years ago. In addition, there are just over one million people working part-time because they cannot find full-time work. So the collective spending power of UK consumers has undoubtedly taken a massive hit.

Furthermore, in all the recessions of the 20th century, unemployment peaked after the economy started to grow. For some unfortunate workers, the situation may get better before it gets worse. Indeed, none of us may be out of the woods yet.

Increased inflation, fuelled by the VAT increase, a rise in oil prices, and expensive imports due to weak Sterling, will lead to a decrease in disposable income and may result in an earlier-than-expected increase in interest rates.

This would, in turn, reduce disposable income even further. So there is a danger that the fragile recovery of the housing market may recede and even that the economy could go into recession again.

So it’s important that we try to understand how closely linked individual consumer trends are to the recession. We’ve seen numerous trends emerge and/or grow during the downturn.

Staying in as the new going out; holidaying in the UK; use of vouchers and coupons; growing your own; reuse/recycle; shopping around (on the high street and online); decline in new car sales (pre-Scrappage). Which of these are reliant upon the recessionary mindset, and which are here to stay?

Over 70% of us have used the recession as impetus to change long-standing habits (Source: 1). The increasingly rapid growth and spread of technology has acted as a catalyst. As discussed in previous Sense pieces, the near ubiquity, scale and speed of the internet has empowered consumers of all ages and social classes.

Price comparisons, reviews and discussions are available within seconds, across almost all product categories. Conversations with brands and faraway friends are easier than ever. These developments are fundamentally changing the way consumers interact with brands. The end of the recession will see no slowing of this trend.

The recession has indirectly encouraged some people to adopt or increase more environmentally friendly behaviour, as a means of economising. Some 11% are growing more of their own fruit and veg; 17% have increased their reuse of items they would have previously thrown away; 15% are taking more of their holidays in the UK, presumably reducing the number of flights they take( Source: 2).

The vast majority of these people anticipate continuing with these habits, even once their financial situation improves.

Contrary to some expectations, sales of Fairtrade goods and organic textiles actually increased during the recession (up 45% to £713m and 25% to £100m respectively)(Source:3). It’s true that sales of organic food fell by 13% in the year to August 2009(Source:4), but this is after a decade of 26% annual growth (Source:5).

While the human benefit of organic consumption is still something of a moot point, there is little doubt that it, along with consuming goods producing locally and sustainably, is better for the environment. It’s a reasonable assumption that environmental issues will once again come more sharply into focus if economic woes begin to appear less in the headlines.

Ethical and environmentally aware values will continue to be flaunted, whether it’s through home-grown vegetables, locally-sourced produce or electric vehicles, which will continue to become more visible on our streets. Conspicuous consumption, and flaunting wealth, seemed ill at ease with recessionary belt-tightening. It will be some time before they are deemed acceptable in mainstream society.

Two of the biggest changes in consumer habits have been to how we shop and to how we enjoy ourselves. Almost half say they are now shopping round more to save money, and four in ten have increased their use of vouchers and coupons. It seems these habits are also here to stay – more than 90% of these people say they will continue with their new-found money-saving habits, even beyond the recession.

The majority of people have been spending less time and money on out-of-home entertainment. This trend is more dependent on financial frugality, yet slightly over half expect to be spending less than they were, despite expecting improvements to the economy and their finances (Source:6).

Even as we (hopefully) emerge from the recession, the signs are that the habits people have adopted are here to stay. As predicted at its onset, it is the brands who sought to capitalise in the recession that will most likely emerge victorious, having positioned themselves to appeal to consumers’ recessionary habits. Habits that are now ingrained, and largely independent of the recession that gave them impetus.

Sources: 1, 2 & 6 – OMD Snapshots; 3 – nVision; 4 – Mintel; 5 – TNS.

Ben Haley
Insight Manager OMD
Direct: +44 (0)20 74705482
Mobile: +44 (0)7798 630564

AJR
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