Posts Tagged ‘trust’

A Business Must Pry Loose Consumer Savings

August 4, 2010

by Doug Smith, President, The Woodhaven Group

It has been widely reported that businesses of all sizes have accumulated cash over the last year to reduce debt and have a cash flow cushion going forward.

Someone else is doing the same thing.

The consumer has decided that saving money is a good and needed strategy for themselves and their families.

The US government reported that consumers saved 6.4% of after tax income for the month of July.  This trend in increased savings has been happening now for a few months.  Compare this savings rate to 1%+ prior to the economic chaos that started in 2008.

Why is the consumer deciding to save more at this point in time?  Here are a few reasons as I see them:

  • It is no secret that consumers are trying to reduce any and all debt they have.
  • Uncertainty plays a major role in consumer psychology.  The consumer is telling themselves that caution is the best strategy and that means saving dollars until they can get a better “feel” on the future of the economy.
  • The consumer is becoming wiser.  Part of what got the consumer and the country into economic trouble was spending on unnecessary products and services as well as houses bigger than were needed.  You can add to that a few vacation homes.  Now the consumer is still spending, but it is on more necessities and less on “feel good” items with no lasting value. Some of the remaining dollars is going into savings.

In spite of this new pragmatic approach by the consumer, businesses still have to generate sales.  The consumer has not stopped buying. They are just buying less and being more cautious.  A company needs to capitalize on that mindset.  Here is how to do it:

  1. Know who your target customer is and channel your available marketing dollars at that customer.  As  a business, you do not have the luxury of using a shotgun approach.  That only wastes cash flow.
  2. Know which of your services or products is most desired at this time by your target customer.  Don’t make the mistake of emphasizing secondary products, styles, colors, sizes, or categories in your offering.  Lead with your strength.  Do research to find out what that is if necessary.
  3. The consumer right now appears to only be buying bargains.  So give them a bargain.  Find a way to promote your most wanted items to the target customer at a price point they cannot refuse. Then cross market and up sell to increase the average sale and bump up margin.
  4. Offer the best guarantee or warranty that you possibly can.  The consumer is not very trusting right now.  Let them know that once they finally decide to buy that they can have peace of mind that their purchase will not be a mistake.  Trust and credibility in the seller is currently an important part of the buyers decision-making strategy. 

The consumer has money to spend.  And they will spend it given a good reason to do so.

It is up to the owner or CEO to give the consumer a valid reason to dip into the increase in savings and spend it with your company.

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