JWT’s AnxietyIndex is designed as a place to discuss how brands and consumers are responding to the global recession. With daily content updates, AnxietyIndex.com includes contributions from around JWT’s network, offering a truly global perspective.
As the cost of living in the U.K. rises and Brits become increasingly anxious about covering the cost of their weekly shop, supermarkets must work harder to keep customers loyal. According to recent research, the cost of living in the U.K. is 11 percent higher than the international average and an incredible 18 percent higher than it is in the United States. In addition, since the horsemeat scandal broke, U.K. advertisers can no longer rely solely on a “cheapest price” message. The public still wants their food to be as inexpensive as possible, but the scandal made it clear that there’s often a price to be paid when offerings appear too cheap to be true.
Low-cost supermarket Asda has previously focused on price against their competitors. In a marked departure from its usual method of communicating, the retailer is now engaging the consumer with the reality of juggling a busy household and bills in an amusing, charming and also honest way, before the lowest-price message comes along in all its glory. Asda’s new price lock initiative, which freezes the costs of essentials for a 12-week period, seems a clever tactic to prevent regular and potentially new consumers from shopping around week on week.
In the first wave of JWT London’s new quarterly Austerity Index, we found that 92 percent of Britons are deploying one or more of a range of coping mechanisms to save money: using money-off coupons (58 percent), using loyalty points (53 percent), checking price comparison tools (54 percent), or switching utilities suppliers (19 percent) and mobile tariffs (17 percent). Austerity Britain appears to be producing a nation of savvy budget tacticians who are relying upon a slew of strategies to make their money go further. They’re also finding more ways to restock the coffers. Selling unwanted items is a popular strategy: 51 percent are selling or planning to sell items at car boot sales or auction sites like eBay.
JWT London’s findings suggest that being a thrifty consumer is now a way of life for many. This is not surprising given that low-income households fork out an average of £91 each week to pay for necessities like groceries, toiletries, petrol and travel. That’s excluding money for the mortgage or rent, or any bills. And once they’ve covered off those essentials, more than a third of those surveyed told us they have nothing left to spend on themselves or others as a treat at the end of the month. A further third have just over £12 a week, barely enough to cover a small round of drinks at the pub.
Amid the gloom, there’s a glint of steely resourcefulness. While 30 percent of people report feeling depressed, 27 percent say they feel in control. It seems that when push comes to shove, Britain will cope, using every trick and tactic at its disposal. No surprise then that 62 percent agree that austerity has taught us something: how to live with less.
The horse meat scandal is perhaps the greatest food transparency issue in recent years. It continues to grow, and here in the U.K., the majority of big retailers have been affected in one way or another. The country’s largest retailer, Tesco, has felt the effects the hardest, with a number of their value products implicated. This resulted in an apology ad that guaranteed a full refund in national press.
By contrast, the scandal has played into the hands of Morrisons, which can claim “100% British meat” and has around 1,700 butchers across 500 in-store butcher counters in the U.K. They capitalized on the scandal with ads stating, “100% British. 100% of the time.” Morrisons has said they’ve had an unprecedented number of customers approaching them for advice and to buy fresh burgers, among other meats. The results have been significant: fresh meat counter sales have risen 18 percent, sales of fresh beef burgers are up 50 percent, and sales of beef mince are up 21 percent.
As we noted last year during the “pink slime” scandal in the U.S., as consumers grow increasingly anxious about food quality, brands that can clearly illustrate safety and purity will continue to gain ground over those with suspect ingredients.
With continued economic uncertainty, many shoppers remain hesitant or unable to make big-ticket purchases, especially the un- or underemployed Millennials. In response, some brands have been creating crowdfunded registries for consumers. We wrote about Best Buy’s Pitch In card back in 2010, which we described as “bridal registry meets microfinancing meets layaway”: Friend or family contributions to the card tally up to help customers secure the costlier items on their wish lists.
Now an automaker is embracing this concept. Consumers looking to buy a Dodge Dart—a compact sedan that Chrysler introduced last year—can log onto DodgeDartRegistry.com, customize the features and then seek funding for specific car parts, using social media to promote their cause. As a TV commercial outlines, “Dad sponsors the engine for your birthday. Grandma sponsors the rims for graduation.” Car seekers can ask for enough dough to fund a down payment, the car in full or anything in between. As with a Kickstarter campaign, there’s a time limit: Fundraising can run for a maximum of 90 days. At completion, buyers receive a check, with which they in theory purchase their new Dart. Since the launch earlier this month, around 1,200 people have created registries, but donations have thus far been minimal.
It’s likely the campaign will resonate with Millennials, the target audience here, who firmly believe in the collective ethos—that every bit counts in addressing today’s challenges.
The recession revived the popularity of layaway plans, and with many consumers still struggling to make ends meet, retailers have been pushing their pay-over-time offerings again this holiday season (as we’ve posted about). Last year saw the rise of “layaway Santas,” Good Samaritans who paid off strangers’ layaway accounts, mostly at Kmart, and this year retailers have been trying to leverage the behavior.
Kmart sponsored a Big Layaway Giveaway, holding a drawing for 10 weeks from September through November to pay off the remaining balance in a layaway account. And it set up a Layaway Angels page online to track the frequency of “angel” donations (as yet, the tally is a tepid $1,521). Toys “R” Us, meanwhile, announced it would donate $200 worth of goods to the Marine Toys for Tots Foundation for each layaway order that a Good Samaritan pays off. Layaway provides a novel means for new types of retail initiatives to help strained consumers, and even for consumers to help one another; it will be interesting to see how retailers continue to expand the concept.
Petrol prices have spiked as much as 38 percent over the last five years in the U.K. and continue to rise, adding one more headache to the deck of everyday concerns among British consumers, who are also grappling with rising food and rent costs. U.K. grocery chain Morrisons recently introduced the Fuel Saver program, offering discounts on the retailer’s petrol. Unlike other fuel schemes, it doesn’t require the participant to shop at Morrisons, only to buy gift cards from the chain for any of 34 participating retailers, including Toys R Us, Homebase and Boots. Consumers get 1p off each liter of fuel for every £10 worth of gift voucher. “We know that the cost of filling the family car is a real worry for our families but using Fuel Saver for purchases can lead to very large savings,” said Morrisons commercial director Richard Hodgson in a press release.
We’ve seen similar save-on-fuel schemes in the U.S. as well, from retailers including Walmart and Kroger. With many people still struggling financially even as the cost of everyday living rises, brands have opportunities to both help consumers get by on shoestring budgets while also retaining their business.
Back in 2009, Kmart and Sears revived the old Christmas layaway concept, first popularized during the Great Depression, as we noted at the time. Toys “R” Us and Best Buy followed suit with their own iterations. But even as the recession has subsided, the layaway concept has endured (getting a PR boost last December when “layaway angels” began paying off random balances at Kmarts and Walmarts around the U.S.). With many Americans still struggling and reluctant to pile more debt onto credit cards, merchants are filling in the gap to get the sale, with both brick-and-mortar and online retailers revving up their pay-over-time concepts for the upcoming holiday season.
Accordingly, the layaway landscape is getting more competitive. Within the past two weeks, Toys “R” Us said it would waive its service fee and minimum purchase amount until Oct. 31, after which it will be $5. “WOW!! No upfront fees!” proclaims the retailer’s site. Then Sears’ Kmart announced that it too would waive its layaway fees, through mid-November. And after initially tripling the fee, to $15, Walmart dropped it back down to $5, which is refunded after customers make their final payment. The retailer also extended its layaway program by a month (it kicks off Sept. 16), giving customers more time to pay, and added more eligible items.
Online retailers are jumping into the layaway game, too: eLayaway offers Internet retailers a turnkey solution for managing their layaway programs. And Globalgroup Investment Holdings, a payment and collection services company, is preparing to launch “America’s Layaway Mall,” an online department store targeting “fiscally challenged” shoppers with various payment plans for electronics, jewelry and other bigger-ticket items.
Managing one’s finances responsibly is anxiety-provoking at any age, but especially for young people just getting started in life at a difficult economic time. We’ve spotlighted efforts by Australia’s UBank to educate Millennials about smart saving habits (“Live fast, save young”). Now Charles Schwab is targeting this cohort with a similar approach, positioning the brand as an advisory figure that can help change irresponsible financial behavior (“Don’t blow your cash”). In a new online video campaign titled “Oh Chuck! I Blew My Cash,” several videos portray Millennials chatting with company founder Charles R. Schwab about amusing incidents of ridiculous overspending. One guy, for instance, has splurged on 90 pairs of sneakers, while a woman has bought pricey animal masks at a Renaissance fair. As they go on, Schwab remains cool and collected, offering advice on better ways the money might have been spent.
By illustrating real anecdotes (each vignette claims to be a true story), Schwab reminds viewers they’re not alone in their reckless habits. And by showing the company founder in conversation with these flummoxed spenders, the ads position the bank as an accessible and friendly but straight-talking confidant.
Last August, our AnxietyIndex research in the U.K. found that concern over the cost of living was on the rise, and the second highest driver of anxiety after the state of the economy. Now, with the U.K. in a double-dip recession, it’s an even worse time to be perceived as a posh place to pick up groceries. So Marks & Spencer—seen as a destination for treats more than everyday goods—recently introduced Simply M&S, a roster of 500 “shopping list favorites” at budget prices. Advertised as “M&S quality now at prices you’ll love,” the new line may help the retailer retain some of its “squeezed middle” customers. Revamped value ranges from supermarkets including Tesco and Morrison’s are also vying for these consumers.
The move is another sign of a trend we termed Navigating the New Normal—the idea that with many economies continuing to struggle, brands will need to retool for highly cost-sensitive consumers, opening up new entry points. While competing on price can be tough for retailers like Marks & Spencer, many consumers are seeking budget options that don’t feel terribly downmarket, giving this upmarket brand some leverage in retaining customers.
One particularly sad truth of the recession is a sharp decline in charitable giving. From 2007, voluntary income among the U.K.’s top 1,000 charities has fallen by more than a fifth, according to The Charities Foundation. One major reason is a decrease in regular giving by direct debit as people struggle to justify the monthly expenditure. In response to these changing habits, JWT London teamed up with supermarket chain Budgens to pilot a new fundraising mechanism that aims to make charitable giving habitual again, by turning it into an impulse purchase.
Engraved wooden blocks branded HOPE sit on store shelves and can be scanned at the checkout along with the rest of a consumer’s shopping. A £1 donation is then automatically sent to the Alzheimer’s Society, the first charity to sign up for the initiative. The block is subsequently returned to the shelf. The aim is to target consumers when they are spending money but at the same time make the process continuous, as much a part of their everyday lives as the weekly grocery shop. The initiative is being trialed in two London stores with a view to expand if it proves successful. Here’s hoping HOPE catches on.