How crisis reshuffles consumer segments
As consumer confidence drops as a result of a potentially approaching financial crisis, classical segmentation, based on demographics or even lifestyle, loses relevance
As consumer confidence drops as a result of a potentially approaching financial crisis, classical segmentation, based on demographics or even lifestyle, loses relevance. A much more useful way to think about your audience and the correct way to approach is offered by a HBR paper on the 2008 financial crisis. According to it, all mothers, all beer-drinkers, all sports-enthusiasts, you name it, fall into one of the following 4 categories.
“SLAM -ON-THE-BRAKES”: feel most vulnerable and hardest hit financially reduces all types of spending by eliminating, postponing, decreasing, or substituting purchases Low-income + anxious higher-income.
They resonate to: Price, promotions; Do-it-yourself alternative
“PAINED-BUT-PATIENT”: tend to be resilient and optimistic about long term; less confident in a near-term recovery and in their ability to maintain their standard of living. Make cuts in all areas, though less aggressively than ‘Slam-on-the-brakes’.
They resonate to: Price, promotions; Loyalty rewards
“COMFORTABLY WELL-OFF”: feel secure about their ability to ride out current and future bumps in the economy. Consume at near-precrisis levels, though now they tend to be a little more selective (and less conspicuous) about their purchases.
They resonate to: Quality; Inconspicuous consumption
“LIVE-FOR-TODAY”: care-free, carry on as usual, unconcerned about savings. Typically, urban and younger, they’re unlikely to change their consumption behavior unless they become unemployed.
They resonate to: Quality; Regular advertising
What does it mean for brands?
Any category will have a specific ratio of these segments.
• Travel (5%-5%-50%-40%)
• Apparel (5%-10%-65%-20%)
• Luxury items (0%-0%-90%-10%)
• Cosmetics & Skincare (10%-10%-50%-30%)
• Home appliances & devices (5%-5%-50%-40%)
• Groceries (25%-25%-25%-25%)
(estimates from GWI April 2020 Findings Report and Kantar Survey)
Brands need to decide whether they can cater to all segments, without sending out confusing messages (through dedicated product offerings) or focus on the most profitable segments. During a crisis, it’s not only consumers who choose to opt out from specific brands. Brands too may need to opt out from some segments.