Marketing In a Post-Middle Era

Thanks to Brandie Young‘s wonderful post, I found David Amano’s thought-provoking post on “Marketing in a Post-Consumer Era”.  It’s worth reading in full.  Actually, they’re both worth reading in full.

I couldn’t help immediately reacting, however, with skepticism.

Perhaps it’s because the last time we were in a recession, we heard the same thing: conspicuous consumption is out, and frugality is in!  Since then, we have seen an absolute explosion of conspicuous consumerism, celebrity worship taking over as the official culture of the United States, and a continual denigration of the average middle American lifestyle in our cultural institutions.  (I for one do not recall “Walmart” being a dirty word back in the recession of the early 90’s.)

For example, take a look at the Top 10 TV shows for 2008 vs. 1990.

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Shows like Cheers, Roseanne, and The Golden Girls were not about beautiful people doing glamorous things.  Rather, they tried to at least portray something positive (true or not, given that it is television we’re talking about) about the average American lifestyle.

In contrast, not a single top 10 show on TV in 2008 even tries to portray the average American lifestyle, nevermind in a positive way.  The reality TV shows are contests either to become a pop star or to win $1m in a jungle somewhere.  Two medical dramas about beautiful doctors having sex with each other and saving lives are hardly “average American lifestyle” — for that matter, they’re not even presenting the average American doctor lifestyle.  Then we have pure fantasy fare like Heroes and Lost.

Meanwhile, every morning and every night, Americans are bombarded with celebrity news, celebrity gossip, buy magazines devoted to following the fabulous lives of celebrities (People is the 12th largest magazine in the country by total paid & verified, and grew in 2008 from 2007), and spend hours and hours at Today studios to get on TV for 30 seconds.

I just don’t know that I believe consumers have embraced the culture of “living within their means” and rejecting consumption.

Numbers?

All of the above are mere observations.  What about the numbers?

David Amano cites an article from The Economist purporting to show that the global trend is away from consumption:

Asked whether they want more stuff, consumers in rich countries have responded with an emphatic “No”. The breathtaking speed with which retail sales have plummeted in both America and Europe (see chart) has caught retailers and manufacturers by surprise. In response, companies have tried desperately to prop up revenues using a variety of promotions, advertising and other marketing ploys, often to no avail.

But as they battle with these immediate problems, marketers are also pondering what longer-term changes in consumer behaviour have been triggered by the recession. It is tempting to conclude that, once economies rebound, customers will start spending again as they did before. Yet there are good reasons to think that what promises to be the worst downturn since the Depression will spark profound shifts in shoppers’ psychology.  (Emphasis mine)

Yet, the rest of the article provides pretty thin soup when it comes to identifying these “profound shifts in psychology”.  The Economist says, for example:

Sociologists also detect a distinct change in people’s behaviour. Until the downturn, folk had come to assume that “affluence” was the norm, even if they had to go deeply into debt to pay for gadgets and baubles. Now many people no longer seem consumed by the desire to consume; instead, they are planning to live within their means, and there has been a backlash against bling.

Really? Sociologists?  Which ones?  In what study? Using what data?  Why are these unnamed, unquoted Sociologists deemed reliable?  And are we talking two Sociologists or twenty thousand?  Is there consensus now in the Sociology field (a dismal discipline if there has ever been one) that consumer psychology has permanently shifted?

Maybe it’s just me, but I don’t know that you can make grand claims about the psychological state of millions of people without at least providing some sort of backup beyond unnamed, unnumbered Sociologists.

The second reason why The Economist feel justified in talking about a permanent shift towards thrift is an as-yet-unpublished BCG study showing that people have greater distrust of big business.  Um… okay.  And that has to do with thrift… in what way?  Bling brands like Chanel and Cartier aren’t seen as “big business”… so why would people being pissed at Bank of America and GE mean there’s a permanent shift?

This isn’t analysis or trend predictions; it’s more like wishful thinking.

In contrast — and this being a frikkin blogpost, as opposed to an article for a respected business magazine, I’m not spending hours of research on this — let me give you some numbers:

Unless you are prepared to argue that the iPhone, which costs $199 with a two-year commitment to AT&T Wireless (and who knows how much in other countries), is a necessity for 17,377,000 people worldwide… I daresay that the reports of the death of consumerism are greatly exaggerated.

Whole Foods (NASDAQ: WMFI) reported that its 2008 revenues jumped to $7.9B from $6.6B in 2007.  Now, you may be in the demographic that believe Whole Foods is fully worth the cost, and organic milk is a necessity, but can we at least agree that this data point is inconsistent with a “profound shift” in consumer psychology towards thrift?

Another interesting fact: in 2008, Rolls Royce set a new sales record, and marked the sixth consecutive year of sales growth.

Now, let’s be fair — one can find tons of counter-examples.  Luxury brands are seeing demand dry up.  Luxury retailers are getting hammered.  Champagne sales are down.

But there’s a pretty big gap between, “People ain’t got no money now, so they’re not buying bling” to “People no longer want bling.”  Especially to a marketer.

Marketing In a Post-Middle Era

I think what is actually happening — and has been happening for years — is that the psychological middle has been disappearing in America.  Can’t speak to global consumers, but for U.S. consumers, that’s been going on for a while.

Due to trends in marketing, culture, media, entertainment, and society as a whole, I believe that Americans are now in either a Thrift mode or an Aspirational mode, with nothing in between.

Put in terms of apparel brands, I believe the American consumer either wants the cheapest cheap pair of jeans from Walmart or Old Navy, or the $297True Religion designer jeans.  They no longer want the $65 mid-priced Levis sold in department stores.  I base this partly on Levi Strauss & Co’s 2008 Annual Report, which shows that 2008 revenues from North America were down compared to 2007, which in turn was down compared to 2006.  Levi’s is making its money in Europe and Asia, not the U.S.  Plus, friends who work in retail tell me that Levi’s these days is making sales in mass merchant channels (e.g., Walmart, Costco, etc.) rather than higher-priced department stores.

When marketers like David Armano talk about new strategies for marketing, I think it is useful to look at those strategies through the now-bifurcated Thrift vs. Aspirational consumer psychology.  For example, Armano writes:

As my diagram illustrates, marketing can not longer be a 360 degree “blitz” that assaults consumers with reasons to buy. The future of business will be simple. Providing better products, better experiences and providing indisputable value through things like services will get the right people saying the right things about you. This means there’s going to be a Darwinism effect at play here. Inferior brands, services and marketing strategies are going to fall on deaf ears and wither away while superior brands with more relevant and meaningful ways of connecting with their customers will prevail. We must remember that the social web DOES NOT create recommendations (or criticisms), it only amplifies them and accelerates the speed at which they spread. (Emphasis added)

The first thought is that “getting the right people saying the right things about you” is absolutely perfect for the Aspirational brand, products, and services.  But that is relatively useless for Thrift brands, products, and services because consumers are really only looking at one thing in Thrift mode: price.

For example, take gasoline.  Despite attempts by refiners to say their gasoline is higher-performing, or has cleaning chemicals in it, or saves the earth, or whatever… consumers are going to buy gas based mostly on price alone.  No amount of “relevant and meaningful ways of connecting with their customer” will matter one bit if your gasoline is $1.86 a gallon and the BP across the street is $1.75 a gallon.  You probably lost the sale, bub.

This is not to say that Aspirational mode disregards price.  The annual Barney’s New York Warehouse Sale is a madhouse, as one example.  Folks like to save money.  But there’s a big difference in saving money on something you want in the first place, vs. choosing a product based on price.

Nor is this observation meant to disparage the very real work that marketers have to do to go from a Broadcast model of marketing to a Conversational model.  It is, however, to point out that the tool one would use is based on the need.  You don’t use blogs and Twitter and recommendation marketing to promote pure commodity products, where the power of social web is low.  But you don’t use the “BUY BUY BUY!” screeching to sell unique luxury goods either.

One Implication

If I am right about how culture and mass psychology is moving us away from a broad embrace of the Middle towards a Thrift vs. Aspirational modes, then there is one clear implication: You don’t want to be the guy in the Middle.

You don’t want to be Macy’s competing with Target and Walmart on the low-end (price/Thrift) and competing with Barney’s New York on the high-end (Aspirational).  You don’t want to be Tommy Hilfiger competing with Walmart’s in-house brand on the low-end, and True Religion on the high end.  You don’t want to be the brand that is too expensive to compete on price, but not quite hip or cool enough to compete on aspirations.

Next Time, On As The R.O.B. Turns…

So all this is fine and good, but what does it mean?  If you’re a regular reader, you know that I deal mostly with marketing, technology, and real estate.  All this talk about iPhones and $300 jeans is interesting, but how does it apply to me?

That, dear friends, will have to wait for the next installment, since this already got to 1,800 words.  But some questions to prep:

• If the Middle is disappearing, and the two dominant modes of consumers are Thrift and Aspirational… have you considered how you are positioning properties not only to demographics, but also to psychographic profiles?
• Are your services marketed as Thrift or Aspirational?  What does it mean to market services in an Aspirational way?
• Consider your brand, both personal and organizational.  Are you positioned as the Low-Cost Provider or the Aspirational Luxury Provider, or the Middle-of-the-Road A Bit of This and a Bit of That Provider?  What are the implications going forward?

To be continued…

-rsh