RAPP

RAPP

May 06, 2011 04:00 ET

New Research Reveals How Government Cuts Will Impact Consumer Spending

LONDON, UNITED KINGDOM--(Marketwire - May 6, 2011) - The Government's swingeing spending cuts will impact the poor and the well off more than middle Britain, according to new consumer research carried out for global marketing agency RAPP.

The research - carried out for RAPP by trends and forecasting experts the Trajectory Partnership amongst a representative sample of over 2,000 consumers - also reveals the new behaviours and coping strategies being increasingly adopted in the face of the spending review.

Full details are available at www.uk.rapp.com.

The top line findings show that 62% of UK consumers feel that the spending cuts will damage consumer confidence (10% disagree) and 72% believe they will result in a reduction in overall consumer spending (6% disagree). Some 61% believe the cuts will mean a reduction in their own spending (13% disagree).

In terms of overall impact on expenditure, the poorest plan to cut back by, on average, 4.6% and the richest by 6.5%. Those in the middle income brackets will cut back by between 3.2% and 3.6%.

Spending on education and health will suffer most, being reduced by 9.4% and 6.5% respectively. Cut backs in other sectors include:

- Holidays – 6.2%
- Vehicles – 6%
- Restaurants & hotels – 5.8%
- Recreation & Culture – 5.6%
- Charitable donations – 5.2%
- Transport – 4.6%
- Household goods & services – 3.5%
- Communication – 2.9%
- Clothing & footwear – 2.5%
- Housing, fuel & power – 2.2%

The areas where consumers will cut back least are food (1.5%) and alcohol and tobacco (2%).

In terms of family type, families with children will cut the most - 5.3%.

The research has also identified seven coping strategies that consumers are now adopting in "Austerity Britain."

  • 1: STOP – Not buying at all or delaying purchases
  • 2: REDUCE – Consuming less; reducing volume or frequency consumed
  • 3: MANAGE – Managing costs through discounts, volume offers and shopping around
  • 4: DOWNGRADE – Trading down, buying a lesser quality item
  • 5: SMART – Accumulating and redeeming points, prizes and linked offers
  • 6: SWAP – Using a different means to achieve the same aim
  • 7: TREAT – Buying small treats to reduce feeling of deprivation

The spending cuts are also accelerating three key overall trends in consumer behaviour, according to Gavin Hilton, Director of Customer Experience at RAPP.

He says: "Forget David Cameron's 'Big Society' – the research is clearly showing it's all about "The Big Self. " We're in an era of retrenchment where consumers will focus increasingly on doing the right thing - for themselves. Our research clearly shows that people are becoming more selfish, establishing 'Fortress Me.'

Secondly, it's about "Irrational Economics." Says Hilton: After two decades of freewheeling spending consumers are starting to redefine what is a necessity and a luxury. It's about protecting their sense of self and identity so it may be about cutting back in one area but preserving spending on something that may once have been perceived to be a luxury. Consumers want to be left to decide for themselves what constitutes a necessity."

Thirdly, we are now in an era of "Newtility." Now, it's not just about value for money, says Hilton. "It's about the value of my time, putting a value on my attention, the value of my assets. This is already spawning services that pay for you to read email marketing message, services that allow you to rent out your car when you're not using it. And, of course, services like eBay that let you sell what you don't want any more."

He adds: "Such an overall scenario represents enormous challenges for brands and their marketing – but also, clearly, opens up opportunities for those who can react and adapt to shifting consumer behaviour. We will be developing a proprietary methodology that will help brands understand which coping strategies their customers are adopting and consequently how they should react.

"Increasingly it's not going to be about the brands that shout the loudest but brands that deliver the highest practical and emotional utility to their customers. To do that they will have to get closer to their customers than ever before, rely on really sweating the data and creating actionable insight that will help win traction, influence and advocacy."

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