But here we are in 2010, still weathering the worst recession since the 1930s. The prolonged and severe nature of it, and the distrust born of mismanagement and scandal in the financial, housing and automotive industries, have consumers in an economic funk of historic significance.
So the question for marketers is – will consumer spending bounce back with the economic recovery? Or are we likely to see fundamental and more permanent changes in attitude and consumer behavior as a result of the meltdown (think ‘depression’ era)?
These are important issues for marketing executives. And require us to understand the new ‘psychographic’ segments that may emerge as a result. Authors John Quelch and Katherine Jocz in How to Market in a Downturn (Harvard Business Review) believe that customers will fall into four recession-influenced segments, and that those segments have distinctly different behaviors when it comes to the purchase of “essentials, treats, postponables and expendables.”
- Slam-on-the-brakes: This segment feels most vulnerable for good reasons – they were hardest hit financially by loss of income or housing costs that rose above their means, or worry that circumstances could change for worse at any time. They reduce all types of spending by cutting out, cutting back or postponing purchases. In healthcare, we may see this group cancel elective surgeries, not fill prescriptions, avoid medical care, self-treat, and drop insurance coverage.
- Pained-but-patient: These consumers do believe that happy days will come again but worry about their ability to ride out the downturn. So they economize, but less aggressively than their slam-on-the-brakes neighbors. The largest of the segments, this one may see members adopt slam-on-the-brakes behaviors should things get worse. In healthcare, these are likely to be consumers who put off medical procedures for fear of losing time on the job or, conversely, get things fixed because they fear not having insurance if something happens down the road. They may switch to lower cost brands and back-burner plastic surgery, cosmetic dentistry or other discretionary procedures.
- Comfortably well-off: This group feels good - even secure about their own circumstances even though the economy is tanking. Their consumption patterns haven’t changed much since before the recession but they tend to be less conspicuous. Although the segment consists largely of people in the top 5% income bracket, it also includes some less wealthy but confident consumers. Because these are also likely to be a bit older, they still have healthcare needs and are likely to continue using physician, imaging, surgery and hospital services, including high end out-of-pocket purchases such as cosmetic surgery, weight loss surgery and concierge practices.
- Live-for-today: This mostly younger and more urban group tends to live in the moment and, unless unemployed, carries on less aware of the recession and unconcerned about long-term savings. I would expect to see them at the Minute Clinic for an ailment needing prescription and in the ER for more serious events.
The key learning is that even in a recession, not all consumers will act alike. For healthcare marketers, the challenge is to view traditional segment strategies through the lens of recession psychology. In doing so, a clearer picture is likely to emerge as to opportunity and priority of marketing investment.