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Here is an interview from the Globe and Mail, I will make comments after the excerpt:

It’s no secret that consumers aren’t spending as much as they used to, and they’re buying different products as well.

Overspent baby boomers in particular used to be the most brand-loyal of all shoppers. Now, they’re perusing the weekly sales flyers like any other bargain hunters and causing grief for small businesses across the country.

“Brand loyalty is waning and comparison shopping is increasing,” says Gordon Hendren, a Toronto-based consultant who spends his working hours closely analyzing consumer behaviour.

“One of the trends that we see is a kind of cocooning, simplifying life and spending less,” says Mr. Hendren, who is president of Charlton Strategic Research, which, along with the Strategic Counsel, has just completed a quarterly survey of shifting consumer attitudes in both Canada and the United States.

Will a “new” consumer emerge through this recession? That’s one of the questions Mr. Hendren and his team are studying. They are also looking at how consumer behaviour is evolving, how the environment is playing a role and how brands can engage with buyers.

Mr. Hendren has more than 20 years of experience conducting consumer studies and providing insight, with client experience ranging across such sectors as media, petroleum, financial services and retail. He is also an expert in brand tracking and brand marketing. He is a graduate of the commerce program at Queen’s University in Kingston, Ont.

Mr. Hendren joined us earlier to talk about consumer behaviour and its effects on business.

First of all, as an expert in consumer behaviour, what kind of general advice are you giving to CEOs today?

Gordon Hendren: Although we see the recovery taking some time (likely a few years), good brands, smart brands, brands with a good point of difference and a value proposition should protect and even gain share.

Today is a time of risk but also a time of great opportunity for their brand and business – this is driven by brand loyalty declining and comparison shopping increasing dramatically, as consumers search for value. The paradox of the current marketplace is that many companies have dramatically cut marketing spending at exactly the time when they should be increasing marketing spending – to defend their position and take advantage of this opportunity. While there is a short term gain from cuts there may very well be a long term consequence. The weaker brands will likely suffer and decline.

Competition is increasing, so focus on your brand’s/company’s point of difference and competitive advantage. If you don’t know exactly what your point of difference is – I strongly suggest identifying it, quickly!

Dave Michaels, globeandmail.com: I’ve heard that this recession came on so quickly and frightened so many people that it has forever “changed” consumers. We’ve seen lots of stories about people cutting back who never thought they would do so, and now they are saying they’re not going to go back to their old ways. Do you think that’s true?

Gordon Hendren: There is no question that attitudes have changed significantly. That said, “forever” is likely an overstatement. Our quarterly tracking study, Consumer Shift, shows a significant pullback in consumer attitudes toward spending continuing and that a quest for value is still very much the current mindset. Also, I do believe in “wealth effect” – meaning that if your investment portfolio is down and/or the value of your house/condo is also down you are less likely to want to spend more. Negative media can also play a role – especially when coming from the U.S., where things are worse than in Canada.

We have noticed some key differences within certain demographics: Ontario has been the hardest hit in terms of attitudes toward spending; women are most likely to say that they are “comparison shoppers”; those 35 and older are most likely to be “price is the bottom line” or “comparison shoppers” segments; those with household income under $50k are most likely to be in the “price is the bottom line” category.

The segment that is likely to have a longer spending pullback (and increased savings) is the pre-retirement (50-plus) group. A significant proportion of this age group is worried that, as of today, they do not have enough saved for retirement. While this may be good for the financial services sector (increased savings and investment) it is not good news for other consumer categories. While they will be very selective concerning value, this 50-plus segment offers an emerging opportunity to win new consumer loyalty driven by relevant value propositions.

It is essential to understand the mindset and needs of the new consumer. Yes, different products may be offered OR the consumer might buy existing products for different reasons today. As well it is also important to understand that the marketplace is segmenting, meaning that there are different segments that are very price-sensitive, some are value shoppers, some are brand-loyal.

Using the automotive category as an example: Hyundai recognized a fear among buyers of being locked into a new vehicle purchase (fear of losing their jobs), so they created the assurance program where if you lose your job within a year they will refund your money – obviously an added feature to a current offer that was very relevant.

The continued emergence of the online world is another trend we see, because it is cheap to use and is perceived to offer lots of stuff that is free, thus appealing to value-conscious consumers. Notice that Microsoft is getting into the search business to compete with Google.

In the sports world we see indications of growth potential in fantasy pools, betting on sports and playing sport video games. These appeal to the consumer’s need and desire for escape (as do movies, which are up significantly).

The bottom line to thinking about any new products – start with consumer’s needs and their mindset.

Certainly the financial/investment sector has lost a great deal of respect in the past year. Re-earning their clients’ trust needs to be a big focus for them.

While consumer demand in the automotive sector is down significantly several brands have stood out with a solid value proposition: Ford and Hyundai. Ford for its straight talk and employee pricing. Hyundai being the first to offer its assurance program. This shows that some brands with a solid product offering and relevant communication can rise up, even in categories that are experiencing a tough time.

Offering good value is fundamental and is more important than ever. Think beyond price. Our study shows that while consumers are spending less in general they are also looking for better value. Rewarding customers with value added, product bundling and loyalty programs is very helpful in such a competitive environment.

From a communication point of view, there is a need to be in tune with how consumers are feeling and thinking. A humorous approach can be very effective but is hard to do well; straight/honest talk is seen as a good approach by consumers.

Social media have created new channels for information (such as Facebook, Twitter). Also, social media have changed the speed/rate that information can travel. A bad consumer experience can get circulated very quickly to hundreds, maybe even thousands of people. This can be further amplified by the fact that the source is “trusted” (for instance, a friend within the social media network). Marketers are trying to figure out how to harness social media – and it is not easily done!

Martin’s comments:

Now is the time to climb inside the “Mind of your Customer and your Market”

Retailers know the numbers, analytics can help you determine what your customers are doing, the blind spot is your customers who are not in your loyalty program (typically at least 70%) and your in store browsers and competitors customers.  How will you get good, real time information on their actions?

Now get better analytics to really segment your customers.

Once you have better numbers, you need to know two CRITICAL FACTORS

WHY DO THEY DO WHAT THEY DO?

WHAT CAN YOU DO ABOUT IT THAT WILL BE MOST EFFEFCTIVE/

You will need a way to get inside the mind of your customers and your marketplace.  Your solution needs to be like a real time nervous system, telling you what is happening day to day in your stores, and in your market.

That is where we are finding the greatest return on effort.

_________________________________

Martin Hoffmitz
VP, Client Partnering
BehaviorWorx Inc.
#202 – 222 Islington Avenue
Toronto, ON  M8V 3W7

Email: martin.hoffmitz@bwxi.com

Office: 416.251.0111 x250

Cell: 647.287.4491
Fax: 416.251.9489
Web: www.bwxi.com
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Martin Hoffmitz to me, Howard

show details Aug 19

Change within retail does not happen by accident, according to retailers speaking at the World Class Ideas that Transformed Retailing session at the World Retail Congress in Barcelona.

Paul Charron, former president of fashion brand Liz Claiborne, said that if change is to be effected, the chief executive needs to be capable of “listening and learning.” He added: “I pretty much ignore detractors. One of the key roles of the CEO is to bring people up when they’re down and to put them down when they’re up, because when you start believing your own BS, it’s time to exit stage left.”

Bernie Brookes, chief executive of Australian department store retailer Myers, said that enabling change in retail organisations is like “changing the engines on a jumbo jet while it’s flying.” Brookes related how Myers has put in place a programme that has proved instrumental in improving the company’s fortunes with measures including creating in-store “heroes”, rewarding some of the retailer’s “best individuals”, as well as sending DVDs to stores outlining company news that could be viewed by staff when time permitted.

Stewart Mcphail, chief executive at Middle Eastern retail group Fawaz Alhokair, seemed to capture the mood when he said that retail change could not be viewed in isolation and that it should remain an integral part of what a retailer does from day to day.

Like Charron, however, he warned that chief executives charged with making this happen have to be sensitive to the differing requirements of the many disparate individuals found within retail organisations. “There has to be trust from all of those involved,” he said.

Retailers need to wake up:  Maybe Mr. Traub earns too much money to really “GET IT”

22% of Americans owe more on their homes than they are worth!

Mr. Traub needs some reality therapy!  Your customers just got a lot poorer, that is the reality, now..

What are you going to do about it?  Do you know what retailers gained last month?  Do you really really know why?

Retailers need to work harder to persuade shoppers to start spending again in what is the most difficult time in the sector’s history. That was the message from famed former Bloomingdale’s president and CEO Marvin Traub at the World Retail Congress today.

Traub, who is credited with turning Bloomingdale’s into a world leading retailer in his 40 year career with the US department store, told the congress that “we live in an atmosphere of ongoing pessimism”, which meant that “our customer is turned off”.

“There has been a transformational shift in consumer sentiment as consumers re-evaluate how and why they spend,” he said, adding “our industry is consumed by the fear and guilt which have gripped shoppers”.

Describing today’s market conditions as “the most difficult and challenging time our industry has ever faced”, Traub said that retailers need to reach out to shoppers by working harder to ensure the products and experiences they offer do more to persuade them to get back into the mindset of spending.

“There is a changed attitude to consumer spending,” he said. “Our job is to create a more positive attitude for consumers and for our stores. We live in a world of exponential change and retailers need to react.”

He said that too often the customer service in stores is poor, which leads to low levels of conversion of store visits to sales. “When I visit stores I am frequently concerned by how poorly some staff interact with customers.”

Traub warned that the luxury market, on which his success with Bloomingdale’s was built, needs a fundamental rethink. “In recent years prices of luxury goods have grown to levels which are unsustainable,” he warned.

He pointed to Matthew Williamson’s tie-up with H&M as an example of how luxury brands could develop more affordable secondary ranges that are accessible to more shoppers.

“At all price points, today more than ever, retailers will need a value proposition,” he said.

So, Get into war mode, and prepare to dig deep, Who is your market?  What are consumers thinking?  WHERE ARE THEY HEADED?

Yes, I do have ways to find out!  DO YOU?

ARE YOU MORE LIKE DETROIT THAN YOU ARE PREPARED TO ADMIT?

You must gain RELEVANT clarity, what is it that really drives sales in your stores, restaurants etc?  If you really knew, you would not be reading this!

Retailers struggle to cope with an accelerating decline in consumer spending. Major retailers, across all spectrums, are experiencing dramatic declines in same store sales:

• Williams Sonoma – 38% (forecast)

• Gap – 14%

• Target – 6%

• Macy’s – 7%

• Home Depot -9%

Some of the strategies being seen in the marketplace include:

Cut costs – not prices.

Home Depot is resisting the market’s move to deep discounts. Their belief is that in today’s economy, these promotions generate little incremental traffic. Companies would rather maintain margins and move aggressively to cut costs. This includes closing stores, layoffs, slowing the opening of new stores, reducing inventory, etc. For example, Macy’s has consolidated its divisions, closed 11 stores and reduced its workforce by 7,000.

Localization

Macy’s is rolling out a My Macy’s strategy. Individual stores will have more freedom to select merchandise that better reflects the needs and tastes of their local market. Home Depot has similarly added a new emphasis on localization to take advantage of local tastes to wring every possible sale out of the market.

Focus on staples

Discount stores like Costco and Target are beefing up on heavily discounted staples like milk, eggs, baby products and bread. Hoping that these discounted necessities will draw more shoppers into the store.

Private labels

From Wal-Mart to Nordstroms, sales of private labels are growing and the share is coming out of the name brand companies. Retailers are pushing manufacturers to come through with substantial price deductions. And, if they don’t get the price cuts, the stores make room for more private label products on their shelves.

Is there a solution?

It’s clear that there is no single strategy that will save a retailer in these very difficult times. Instead, companies are forced to completely re-evaluate their business processes as well as their structural approach to the marketplace.

The most important goal is to survive the downturn in a way that does not damage the company once consumer spending returns. But, it’s a razor’s edge. How can you be the right retailer for a recession and a destination store when shoppers return?