the new consumer mindset

Arnold On explores cultural, social and consumer trends that are directly impacting businesses today. Through a combination of cultural observation and proprietary qualitative and quantitative research, we aim to uncover meaningful shifts in consumer attitudes and behaviors and provide marketers with ways to harness these trends to benefit their brands and businesses.

As the economy makes its slow recovery, debate continues as to how long changes in consumer mindsets will last. To help answer such questions, Arnold has fielded a national survey twice a year since 2008 to monitor mood, mindset, behavior and evolving consumer priorities. Consistent themes have become clear over this time. People are seeking a stronger sense of control and security in their lives. There is an entrenchment in “smart” spending and brands must increasingly demonstrate their value. The “right” priorities and values are emerging. In this latest survey, we are seeing the emergence of a more balanced, and likely lasting, post-recession mindset. There is a shift underway from a control-seeking, panicked mode toward a pragmatic approach with priorities in balance. Most people are reevaluating or have reevaluated their lives and spending. People are largely confident and satisfied with their new approaches, indicating a likely long-lasting impact on the consumer mindset moving forward. Not everyone is there yet. There are differences in how easily people are making this transition. In this Arnold On, we explore different segments of emerging post-recession mindsets, and the value and values they seek from brands.

ENTERING AN ERA OF GROUNDED OPTIMISM
It’s been a long two years, and people are still in the midst of financial stress. Beyond the immediacy of the Great Recession, the median household income in America was lower in
1 2008 than it was in 1998, adjusted for inflation.

66% 60% 51% 45%
MARCH 2010 JUNE 2009 JUNE 2009 Though Most Foresee a Long Haul Still Ahead
% believe we are at best halfway through recovery.
Arnold People Pulse June 2009, March 2010

Less Anxious about Financial Situation
Q: How anxious are you about your financial situation? Top 2 box on 5 pt. anxiety scale.

And more Optimistic
Q: How would you rate your general outlook for the next 12 months? Top 3 box on 7 pt. optimism scale.

Yet, adversity appears to make us stronger, and more grounded. Despite the recognition that there’s still a long road ahead, people are starting to choose optimism over pessimism and gaining an overall sense of well-being. U.S. Well-Being Index: Continuing to Increase in 2010 2

Leading to Greater Satisfaction
Q: How satisfied are you with life today? Top 4 box on 10 pt. satisfaction scale.

And a more Positive Outlook
Q: What 2-3 words would you use to describe your attitude toward the next 12 months? Open-ended. Ratio of positive-to-negative sentiment.

2 to 1

67.4%
May ’ 10 Jul ’09

66.4% 63.3%
Dec ’08

1. NY Times 9/10/09 2. Gallup

MARCH 2010

JUNE 2009

CONFIDENT SMARTS
Smart spending and saving are becoming the standard approach to consumerism. Being smart means being more deliberate, considered and prioritized (even if spending isn’t any less), and putting a higher emphasis on saving and reducing debt. As people prioritize, they consider where to cut back, but also when emotional benefits justify spending.

Are being more “thoughtful” in how they spend.
Even if they don’t necessarily spend less.

41%

46%

Reevaluating priorities and how they spend money.

54% 45%

JUNE 2009

Want to be smart about spending.

“(regarding house hunting)… I argued that the hiking trail could be a factor contributing to our happiness, and we should worry less about things like how pretty the kitchen floor is or whether the sinks are fancy. We bought the home near the hiking trail and it has been great.” 1

SIX TWO
%

vs 

JUNE 2010

%

Personal Savings Rate: July 2010 vs. Past Several Years1 

1. NY Times 8/7/2010

1. U.S. Dept. of Commerce Arnold People Pulse June 2009, March 2010

Ed Diener, Illinois

MARCH 2010

WHAT SMART SPENDING LOOKS LIKE
Consumers first undergo a sense of sacrifice – a prioritization of their needs, not wants. In deliberating, both emotional and rational elements play a role, with ultimate priority often given to family and health. Brands must help people through the purchase process, providing the guidance they need to make an informed and considered decision. Consumers want to be confi dent that they are making the right choice, and getting the most for their money.

THE CONSUMER SMART PROCESS
Should I purchase this? Does it Make me Happy?
“I bought a nice tent for my husband’s birthday, but the whole family could enjoy it, so it was a smart buy”; “garden stuff… although not a need, it makes us happy” Brands: ensure you have an emotional benefit to close the deal

Is this a Need or a Want?
Majority agree a “smart” purchase focuses on needs, not wants, and controlling spending Brands: create a need from a want with a rational justification

The Rewarding Payoff? Is this a Need or a Want?
“I watched airline ticket prices for a month till I got the price I wanted to pay” Brands: make value clear
Arnold People Pulse Nov 2009 Open-Ended responses to describing a “smart” purchase (Nov 2009) top responses to Q: Which best describes how your “smart” purchase made you feel?

A “smart” purchase makes me feel: In Control, Happy, Confi dent, Proud Brands: reinforce the rewarding feelings from making a smart purchase

smArt BrAnds todAY:
technoLoGY mAKes it eAsier to emPower PeoPLe to mAKe smArt decisions

How can I get the Right Information?
Online research is key to getting informed, with 1/3 of consumers planning to do more online searches and 20% planning to use online peer reviews more to help in purchase decisions Brands: provide easy-to-use tools to help ease the decision-making process

empowering tools
groupon Consumers drive down prices through group volume discounts. red laser Red Laser app lets people scan bar codes with their cell phones to search for the retailer with the best price.

brAnds mAking shopping smArter
bank of America Online videos outline complex processes, such as mortgages, and what steps consumers should follow. netflix Provides a personalized rating estimate based on your prior viewing likes and dislikes.

SMART IS HERE TO STAY (AWHILE)
The smart, considered approach is likely here to stay awhile because, in fact, people find that they are actually good at it, and perhaps more importantly, enjoy doing it. Confidence in and satisfaction with smart spending increases among women – the household CFOs who control 73% of household spending1 – and higher income households, who may have found that cutting some of the discretionary spending fat out of their diets may have been easier than expected.

IT’S DOABLE & ENJOYABLE

CONFIDENCE
in sticking to moneysaving tactics

ENJOYMENT
of sticking to moneysaving tactics

CONFIDENCE
in sticking to moneysaving tactics

ENJOYMENT
of sticking to moneysaving tactics

Arnold People Pulse March 2010

Satisfaction with smart spending approaches is tied to this cultural moment of reevaluation. Forty-nine percent of satisfied smart spenders agree that they are reevaluating their priorities, vs 38% of those who do not find smart spending approaches satisfying.
% rating 5+ on 7 pt. scale of confidence in or enjoyment of money-saving techniques like spending time researching prices, using coupons, shopping around, etc.

1. AdAge “The New Female Consumer” Nov 2009

POSTRECESSION CONSUMER MINDSETS
On the whole, the majority of people are increasingly gaining control over their spending. Over half are both satisfied with smart spending approaches and confident that they can stick with it.

POST-RECESSION CONSUMER MINDSET SEGMENTATION

(sticking with money-saving tactics)

CONFIDENT

ARRIVED (29%)*
STEADY (15%)* EMERGING (26%)*

(using money-saving tactics)

NO ENJOYMENT

Least engaged and motivated in reevaluation. Likely to maintain existing pragmatic approach.

Arrived consumers have achieved a controlled balance and are most secure. Emerging are following suit.

ENJOYMENT

We identified five post-recession consumer mindsets: ARRIVED EMERGING RECEPTIVE  confidence in and satisfaction with their smart approaches moving
forward allows them to focus on other, more emotional, values in life immediately following Arrived, still in the midst of reevaluation 

aspire to stick with smart spending, but are still actively
reevaluating and in need of greater confidence to stick with it

ANXIOUS (15%)*

RECEPTIVE (15%)*

ANXIOUS

too constrained by the reality of their economic situations to move  forward, they need to gain more control and confidence

Most in the throes of continued economic crisis. Seeking control, but not able to take steps until more financial security is achieved.

Actively reevaluating their priorities and striving to have smarter approaches, they have not yet attained confidence moving forward.

STEADY 

re simply not interested in changing their habits, likely due to a
preexisting practical spending approaches

NOT CONFIDENT
*Arnold People Pulse March 2010, percent of total sample population

POST-RECESSION EMERGING MINDSET SEGMENTS

STEADY (15%)*

ANXIOUS (15%)*

RECEPTIVE (15%)*

EMERGING (26%)*

ARRIVED (29%)*

WHO ARE THEY?

YOUNGER MALES WITH FAMILIES. LOWER INCOME BUT STEADILY EMPLOYED.

YOUNGER MALES, LESS EDUCATED, LOWER INCOME, HIGHEST UNEMPLOYMENT.

YOUNGER WOMEN WITH FAMILIES, AVERAGE INCOME AND EDUCATION. MOST EMPLOYED.

WOMEN WITH MODERATE INCOME, MORE EDUCATED, STEADILY EMPLOYED.

WOMEN, SLIGHTLY OLDER, AND LESS LIKELY TO HAVE FAMILIES. MORE EDUCATED, HIGHER INCOME.

SITUATION

The least engaged in the financial upheaval, not particularly anxious or scared about finances. Muted in optimism and satisfaction with life.

Somewhat paralyzed by downturn. Financial instability colors their attitude toward life. They are not optimistic or very satisfied.

Actively reprioritizing their lives, they realize the benefits and satisfaction of smart approaches. Looking for ways to move forward with greater confidence in sticking with these approaches.

Far more satisfied with life and optimistic. Less anxious about finances, they have worked hard to address their priorities and change their spending habits.

Least impacted by the downturn, more financially secure to begin with. Optimistic and satisfied by life.

VALUES

Life continues steadily on. They are not actively reprioritizing, as they have already cut back and don’t tend to splurge. Values are straight already – achieving a balance of family and friends, practicality, honesty and fun.

Reality, stability, control and safety are on equal footing with spending time with family and friends. Strongly affected by a dramatically changed economic reality and unclear on how to adapt.

Concerned about having a stable ground centered on control, practicality and honesty, to enable the more emotional benefits of family and friends, hope and relaxation.

Have life in better balance. Responsibility and stability are important priorities, but so are family and friends.

Economic downturn is opportunity to simplify and prioritize. Having gone through this process, have emerged happier and now have time to fully focus on friends and family and the things in life that are most important.

WILL USE MORE DIY PURCHASE DECISION TOOLS. HOW CAN IT BE MADE MORE REWARDING?

NEED MORE ACTIVE HANDS-ON GUIDANCE TO START FEELING MORE IN CONTROL AND CONFIDENT.

SEEKING GUIDANCE TO HELP AND AFFIRM SMART PURCHASE DECISIONS.

SEEKING TOOLS TO SIMPLIFY AND CONTINUE TO MAKE SMART CHOICES.

*Arnold People Pulse March 2010, percent of total sample population

Top Values of Growing Importance

ARRIVED

EMERGING VALUES
In the midst of the Great Recession, people understandably focused primarily on finding steady ground. Insecurity reigned, and the top personal values sought as of June 2009 were security and stability, honesty and control. While control and security still form a core grounding for many today, new values are emerging as people break free from the panic. Those groups best embracing a smart spending approach are able to achieve a better balance with what is truly important to them: family and friends, enjoying life (relaxation), and hope moving forward. In fact, those who have Arrived and gone through the reevaluation process are now seeking out ways to simplify their lives.

RELAXATION OPTIMISM FAMILY & FRIENDS SIMPLICITY

RECEPTIVE/EMERGING/STEADY

STABILITY FAMILY & FRIENDS RELAXATION

OPTIMISM RESPONSIBILITY REALITY

ANXIOUS*

HONESTY SECURITY & STABILITY CONTROL

*While family/friends, relaxation and optimism are still important to “Anxious” Consumers, they greatly underindex on these values relative to people overall.

VALUE TODAY: PROVE IT
People don’t want to “downgrade.” They want to get more for their money. By more than 3:1, people would prefer to “wait it out” on a significant purchase, like a new TV or vacation, to get exactly what they want, rather than buying a less expensive option sooner. Beyond providing more for the money, brands also have to prove their value with more certainty. We are all too short on time, money and energy, and we don’t have anything to spare on brands that can’t: deliver it right, eliminate risk and make it easy.

VALUE TODAY
(Trusted to Deliver + Eliminate Risk + Make it Easy)

+
Good Price

Run out of time by the end of the day

Run out of energy by the end of the day1

BRANDS PROVING IT TODAY:
these brands make people’s lives easier by taking the GUESSWORK out of shopping

Recommended selections, reviews

Most of us are Empty by the end of the day.
Free delivery, both ways
1. Iconoculture May 2010 Arnold People Pulse March 2010 Q. Which of the following are most important to you to convey the value of a product or service beyond price?

Price compareD to competitors, select your own payment

Be true to yourself. This group may respond to brands that have core values and stick with them, and make “smart” more fun and rewarding.

mArKetinG to the Post-recession mindsets

reinforces the brAnd’s heritAge And work ethic.

Post-recession consumer mindsets

Tap into Value and Values: continue to focus on value while enabling connecting with friends and family, relaxation and optimism.

(sticking with money-saving tactics)

conFident

ArriVed (29%)*
steAdY (15%)*
not sAtisFied

provides fun opportunity for fAmilies to reconnect, At A greAt vAlue.

emerGinG (26%)*
(using money-saving tactics)

Provide guidance and tools to stay on track, recognition and affirmation as they take steps to be more confident.

sAtisFied

AnXious (15%)*

recePtiVe (15%)*

gives users A complete picture of their finAnces with eAsy grAphics And tips.

In limbo until greater financial stability comes, help them create moments of calm control or empower them through a great deal.

not conFident
*Arnold People Pulse March 2010, percent of total sample population

eAsy compilAtion of coupons online Across cAtegories.

VALUE
NEEDED TODAY

TRUSTED: GET IT DONE LOW RISK: GET IT RIGHT CONVENIENT: MAKE IT EASY

BRANDS TODAY NEED TO DELIVER MORE

BASELINE

MORE FOR THE $

VALUES
CONNECTIONS: TO FAMILY & FRIENDS
NEEDED TODAY

RELAXATION: ENJOY LIFE OPTIMISM: HOPE MOVING FORWARD

BASELINE

CONTROL, STABILITY, RESPONSIBILITY

Sherpa as the new model of guidance
Providing the right guidance for consumers to make informed, smart decisions is difficult as brands try to strike the right balance between providing enabling DIY tools vs hand-holding full service. We imagine the ideal role of a brand in providing guidance to be a “Sherpa.” A Sherpa helps you 1) see the path, 2) moves you along and informs you at key decision points, providing the right decision-making tools, and 3) is always there when you need them. Brands today need to provide the right number of tools and recommendations and eliminate risk, but then can ultimately step back to let people enjoy the pinnacle of the resulting emotional rewards (rather than taking credit themselves).

Great Sherpa Brands:
Babycenter Helps pregnant women and new parents know what’s happening, what’s coming and how to best prepare by simply entering baby’s due date GEEK SQUAD Best Buy’s Geek Squad service helps ensure that people’s new entertainment technology will work properly in their homes

BRAND CHEAT SHEET
1 2 3 4 5

VALue: ProVe it
Today, smart is sexy, and expectations are high. Marketers must first demonstrate the value their brands deliver, eliminate risk and make it easy

deLiVer controL & stABiLitY
These continue to be core values for most consumers and are necessary to achieve in order to focus on more emotional and satisfying values

smArt APPeAL
Help people make smart choices by giving them the tools to make smart decisions and guiding them along the way, Sherpa-style

Grounded oPtimism
People are increasingly optimistic. An upbeat attitude, grounded in a practical voice, is resonant with the times. Don’t be flippant, but recognize people will still spend money smartly

VALues
Post-reprioritization, people are focusing on what is truly most important: • Family and friends • Moments to relax • Hope moving forward • Greater simplicity

cvs coupon center Just scan your ExtraCare card for personalized coupons to print out

new york life Continues to emphasize providing safety and security for your family

fidelity Leads the way for people to stay on the path to financial health

frito lAy Rebranded to emphasize simple happiness, grounded in simple ingredients and their natural sources

ZipcAr Renting cars online by the hour gives people full control over car costs while opening up the possibility of adventure

G

ARNOLD STRATEGIC INSIGHTS GROUP
Arnold On is brought to you by the Arnold Strategic Insights Group. This edition is based on results from a nationwide online survey of 1,000 adults conducted in March 2010 on general attitudes and behavior among adults and secondary research. The series will provide analysis and consumer insights across a variety of topics and their relevant impact on how marketers communicate with consumers. The content for this edition of Arnold On was developed by Liz Greene, Associate Director, Business Strategy and Neela Pal, Managing Partner, Global Director of Brand and Business Stategy. If interested in further discussion or a workshop, please contact us: Lisa Unsworth Chief Marketing Officer lunsworth@arn.com 617.587.8242

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