Understanding Consumer Recession Psychology
April 2nd | 2009 By
Tags: Emotion, HBR, Psychology, Recession, Segmentation
Category: Blog, Connect, Corporate, Insight, Interactive, Networks, otocorporate-posts, otoi-posts, otoinsights-posts, otolabs-posts, otonetworks-posts 2 Comments 
In this month’s Harvard Business Review (HBR), John A. Quelch and Katherine E. Joez published an article titled “How to Market In A Downturn“. By studying the marketing success and failures of dozens of companies navigating recessions starting in the 1970s to present, Quelch and Joez identified pattern’s of consumers’ behaviors and firms’ strategies that either propelled or undermined performance. Specifically, they uncovered that firm’s who understand consumer’s recession psychology and fine-tune marketing effort’s and product portfolios accordingly are the most likely to prosper through a recession and long afterward.
Quelch and Joez believe marketers need to re-visit their current attitudinal and behavioral marketing segmentation schemes and consider understanding the needs of their customers in light of the most severe recession this country has ever seen since the Great Depression. Corporate scandals; failures in the financial, housing, insurance, and automotive sectors; taxpayer bailouts, etc. have all had a profound effect on consumers and their buying behavior. By dividing customers into four groups based on their emotional response to these economic realities, Quelch and Joez believe firms will better understand how to tailor marketing tactics to maximize their effectiveness through the recession.
Below is a brief example of the four consumer recession segment’s Quelch and Joez define, their needs, their behaviors related to essential products, and recommended tactics to engage each segment:
| Segment | Needs | Behavior Re: Essential Products | Recommended Tactics |
| Slam-on-the-breaks | Feels most vulnerable and hardest hit financially. This group reduces all types of spending by eliminating, postponing, decreasing, or substituting purchases. |
Will seek lower-cost product and brand substitutes such as private labels. |
-Emphasize price; hit wallet-friendly retail price points. -Offer smaller pack sizes for less money. -Expand retailer private labels. |
| Pained-but-patient | Tend to be resilient and optimistic about the long term but less confident about the prospects for recovery in the near term or their ability to maintain their standard of living. |
will seek out favorite brands at lower prices but settle for cheaper, less-preferred alternatives; will stock up on good deals. | -Offer a lower priced option.
-Hit retail price points. -Promote bonus packs to encourage stockpiling. -Emphasize dependability of branded product or service. |
| Comfortably well-off | Feel secure about their ability to ride out current and future bumps in the economy. They consume at near-prerecession levels, though now they tend to be a little more selective about their purchases. |
Will continue to buy favorite brands at prerecession levels. | -Continue awareness advertising. |
| Live-for-today | Carries on as usual and for the most part remains unconcerned about savings. Typically urban and younger, this group responds to the recession by extending their timetables for making major purchases. |
Will continue to buy favorite brands at prerecession levels. | -Continue awareness advertising.
-Remind consumers, “You can’t live without it”. |
The HBR piece goes into far greater detail then this post; offering segment behaviors and corresponding marketing tactics for products considered to be treats, postponables, or expendables. I highly recommend business executives and marketing professionals get their hands on a copy and give it a thorough reading. The detailed recommendation’s and strategies offered will arm you with a better understanding of where/how to execute on reassuring messages that reinforce an emotional connection with the brand and demonstrate empathy during these difficult times.
