A front page article (“U.S. Consumers Trade Down As Economic Angst Grows”) in the July 11, 2008 Wall Street Journal contained a statement that caught my eye.
“The ability to capture trade-down shoppers will be crucial for some companies. New, cheaper favorites among brands or stores can be formed after as little as three or four favorable experiences, retail experts say.”
According to that same article retailers and manufactures will also be weeding out niche products that don’t have mass appeal. In addition, premium-priced items that appeal to convenience over value are at risk of being thrown under the bus. For example’ “consultants’ studies of consumers’ food baskets suggest that vitamin waters, 100-calorie snack packages, and children’s lunches in a tray are being supplanted by tap water, value-pack snacks and home-made lunches, respectively.”
What do you do if your customer has decided that cheaper, or home-made, is now up for serious consideration? If it only takes three or four positive interactions with your less expensive competitive option to break your customer lifeline what’s your down-economy strategy? For example, are you still stopping at Starbucks in the morning or has some other “non premium-priced” coffee option taken their place? It’s been announced that Starbucks will close some 500 stores in the U.S. and cut 7% of its work force, so, it appears some consumers are getting their coffee elsewhere. On the other hand, maybe it’s not the price; perhaps you’ve stopped getting your coffee at Starbucks because the new (and tamer) Pike Place Roast just isn’t for you. In April, Starbucks made the new brew the main drip coffee at its 11,000 locations across the country and a small but vocal group of long-time patrons have been voicing their disappointment with the new product (WSJ – July 1, 2008).
In a down economy consumers’ needs and preferences may shift. However; in such an environment marketers should take extra care as it relates to shifting their marketing mix (product, price, place, promotion). When companies start viewing negative feedback from consumers as merely temporary resistance to change the customer relationships they’ve worked so hard to develop may be at risk. I’ve never been a big Starbucks fan; even in good times I’ve just not felt compelled to pay $3 for a cup of coffee. But that’s just me; how about you? Does the new Starbucks brew set well with your palate? Or are you brewing your own at home?