[Viewpoint] Marketing during these tough timesThe global financial crisis has inflicted the severest blow to Korean consumption since the 1997 currency crisis roiled the nation. In addition to economic shocks (e.g., a decline in income and asset value), consumers have lost prominent figures and been besieged by worries about the swine flu pandemic. In October 2008, top actress Choi Jin-sil committed suicide. The gloom continued this year with the passing of Cardinal Stephen Kim Sou-hwan in February and former President Roh Moo-hyun in May. Meanwhile, the new A(H1N1) flu that started spreading in Mexico and the United States in March arrived in Korea in May and has spread rapidly since August, amplifying consumer anxiety.
Such jolts to the environment can lead to significant modifications in consumer behavior. In the past two decades, Japan and the U.S. have demonstrated changes in post-economic crisis consumerism. U.S. consumers, after going through an economic recession in the 1990s, started to reflect on their free-spending behavior in the 1980s. Now they are being thrifty and are focusing more on no-frills family-centered life. Japan, after experiencing the so-called “lost decade” in the 1990s, is stuck in more frugal and stable consumption.
The latest economic downturn already has prompted thriftiness among Korean consumers. What’s next? The biggest expectation is that they will be even more value-oriented shoppers, evaluating products according to value rather than price. Second, while the desire to spend returns along with the economic recovery, the propensity to spend to will overcome stress and pain will fade gradually. Third, “environment-friendly,” “hybrid” and “safety and security,” which have become global mega-trends, will have an intricate impact on consumption.
Taking into account these drivers, the Samsung Economic Research Institute has compiled a list of 10 consumption trends in the post-crisis era. Three of them will be discussed here, and some tips will be given to companies on how they can cope with such changes.
New focal point
Before the recession, consumers generally preferred diversity even if it meant higher prices, but now, with thinner wallets, they are increasingly selecting low-end products with key functions. The latest hits have been McDonald’s affordable McCafe line of espresso drinks, low-priced netbook computers, retailers’ store brands, fast fashion, and low-end cosmetics. Going forward, as purchasing power recovers, products that combine key functions with “alpha” factors are likely to be increasingly preferred even at the expense of high prices. Companies will thus have to add new focal points such as unique interface functions and attractive styles to attract buyers. For example, private brands that sneak under standard prices will be likely to gain popularity.
The global downturn has pummeled spending on high-end, high-quality products. German luxury brand Escada, which enjoyed prosperity during the past 30 years, went bankrupt in August, and Prada, faced with unprecedented worsening earnings, offered bargain sales during the 2008 Christmas season, diluting the hottest season for luxury brands. In Korea, the imported car market has been slammed, with the number of imported cars registered in January-July this year falling 17.2 percent from the same period a year ago to 33,062 cars.
However, along with economic recovery the propensity to consume luxury brands will rebound. In particular, ultra-high priced luxury brands that had been sought by V.V.I.P.s will be increasingly wanted by V.I.P.s. Yachting and horseback riding, considered luxury sports; V.V.I.P.s exclusive cards and concierge service; medical services at hotels; quick plastic surgery; cruise travel; and luxury cars with limited editions (Bentleys, Ferraris) are the expected hit products.
(Fun + convergence)
To cheer up depressed consumers amid the business downturn, cultural content that brings a quick laugh have mushroomed. Representative examples are the TV comedy program “Gag Concert,” the drama “My Wife is a Superwoman” and variety shows. Restaurants have joined the fun marketing trend while fun and humor have increasingly been adopted in advertisements that had previously focused on products and information. Between October 2008 and May 2009, the ads of 58 percent of popular products appealed to humor and emotion. The post-recession period will see the growth of that approach into more varied fun factors in brand strategies. The quick, fun events that attract customers and alleviate their depression will be expanded and complemented so as to bring about long-term activities that have brand stories.
Companies in this regard need to closely monitor shifting consumption patterns, identify when each pattern broadens and respond. Companies that had been strong in the recession should also prepare for the economic recovery, since strategies that were effective during the recession may not be applicable in an upturn. Companies should also prepare for ever-intensifying competition among industries, rather than focus on one rival. This is because consumers, due to tightened wallets, will tend to go beyond certain products and take into account all categories of products, selecting the key ones for their must-have list.
Nobody knows when and in what sector a new competitor will arise. Therefore, companies will need to alter their traditional goal of focusing on the top three products within the existing product category, instead trying to anticipate the broader mood of consumers.
*The writer is a research associate at Samsung Economic Research Institute.
by Lee Min-hoon