The Great Recession prompted many Americans to change their spending habits—in some cases, permanently. If you’ve been in business for any length of time (at least long enough to have lived through prior recessions), you’re likely familiar with the concept of “frugality fatigue”: the idea that people get sick of scrimping and saving and decide to splurge, often on small but luxurious purchases like a $5 latte or a designer handbag.
But Americans don't seem to be following that trajectory this time. A recent Harris Interactive poll suggests that while they're still being frugal overall when it comes to the little things, they’re planning to make more big-ticket purchases in the coming months. Could they be cutting back on small purchases to come up with the money for those higher-priced items?
Still Counting Pennies
The Harris poll finds Americans continuing to cut back in key spending categories. In the past six months, for instance, respondents say they've been buying more generic brands (62 percent, up from 57 percent in November 2012), brown-bagging lunch instead of buying it (44 percent, up from 41 percent), using refillable water bottles rather than purchasing bottled water (38 percent, up from 33 percent), and doing less dry cleaning (22 percent, up from 18 percent). Some 40 percent now get their hair cut and styled less often, 30 percent report having cancelled magazine subscriptions, and 20 percent say they don’t buy coffee in the morning.
Nor are they planning to loosen up the purse strings on smaller, everyday costs. Asked about their outlook for the next six months, 62 percent say they plan to decrease spending on eating out at restaurants, while 59 percent will cut back on entertainment. That’s an increase from 59 percent and 55 percent, respectively, from the previous poll six months ago.
But is all that cash being saved on lunches and lattes going into CDs? Not necessarily. A growing number of Americans say they plan to make big-ticket purchases in the next six months:
- One-quarter (25 percent) say they'll buy a new computer.
- Thirty-five percent expect to take a vacation away from home that lasts longer than a week, an increase from 29 percent this past November.
- Twenty-two percent plan to move to a different residence (up from 16 percent in November), and 8 percent plan to buy a house or condominium (up from 6 percent).
- Sixteen percent intend to buy or lease a new car, truck or van (up from 13 percent six months ago), while 7 percent say they'll buy a boat or recreational vehicle (up from 5 percent).
Americans aren’t expecting raises or windfalls to fund these purchases. Just 31 percent assume they’ll have more money to spend in the next six months, and 50 percent don’t expect to save more money in that time frame. So what’s behind the change?
Time To Spend
Harris reports that consumers have realized they can’t delay big purchases indefinitely. So to make their desires jibe with their stagnant incomes, Americans are making small adjustments to their spending to afford their bigger goals.
But what does that mean for you? If you sell big-ticket items, the news is good. Your marketing message can tap into consumers’ pent-up desire to spend on these items. Now's the time to emphasize messages like, “There’s never been a better time to buy,” or “You deserve it.” Focus on the product as a reward for hard work and savings, and stress its lasting value, reliability or ability to create meaningful experiences and memories.
If you sell the kinds of products and services that consumers are cutting back on, all is not lost. Your goal, however, is to make customers feel they’re saving money by buying what you sell. This may mean you'll need to cut prices, but be careful here. Rather than permanent reductions, try offering package deals such as buy one, get one free; a gift with purchase; or a gift card or coupon if customers spend a certain amount. Such approaches encourage spending while allowing customers to feel good about it.
It's also critical to emphasize value—which doesn’t just mean low prices. If your product or service lasts longer than the competition’s, consumers will save money even if it costs a little more because they won’t have to replace it as often. Put your ads' focus on durability and value.
Finally, focus on the “investment value” of what you sell. Eating out can be portrayed as an investment in family time, while magazine subscriptions or professional memberships can be considered an investment in an education or career. Even a haircut and color can be sold as an investment in someone’s image. Think creatively to convince customers that purchasing your product is an investment they'll want to make.
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