Seven Key Trends for 2003
Last year was a tough year for business. The slump continued on Wall Street. Spotty consumer confidence led to the worst fall retail season in recent memory. Worries worsened about jobs, terrorism, war, and a double-dip recession. And business scandals kept turning up, one after another.
What made last year especially hard was that we started the year with high expectations. There were early signs of a possible turnaround and business fundamentals seemed sound. We were winning the war on terrorism. Indeed, by historical standards, it was time for a strong recovery. So, we got our hopes up. But as the year progressed the recovery stalled, intensifying the reluctance of businesses to hire or expand.
As we look ahead, our optimism should be tempered by caution. The less we take for granted, the better our chances for success. While many good things are on the horizon, there are several risks as well. Yankelovich has studied the dynamics underlying the consumer marketplace since 1971. With this longitudinal database of information and years of experience observing consumer trends unfold, Yankelovich has identified seven key factors shaping the year to come.
Uncertainty and Anxiety
The most important dynamic affecting the year ahead is the continuing anxiety people have about the economy. Concerns about job security emerged in late 2000 and worsened during the summer of 2001. Just before 9/11, the question on the table was whether consumer confidence would stay strong enough to sustain the economy through the end of that year. For several months after 9/11, these concerns were secondary to the outrage and fear people felt about terrorism. But job worries returned during 2002 as trepidation about terrorism waned and more layoffs were announced.
Job uncertainty was a major factor in the weak 2002 holiday shopping season. People spend money on the basis of where they expect to be in the future, not where their finances are today. If people are not sure they will be able to keep their jobs, they curtail their spending.
Of course, one might wonder why there is so much uncertainty and anxiety. After all, unemployment is only around 6 percent, and historically speaking, this is not too bad. It is certainly better than the double-digit levels seen in past recessions. But we have to remember the context of the recent rise in unemployment. It comes hard on the heels of the '90s boom, a time in which people were used to high expectations about their financial well-being. This makes the current turnaround in job prospects feel worse.
Add to this everything else that has happened since 9/11, especially the scandals in government, church, and business. In the midst of uncertainty and anxiety, there is no one to trust. People are unnerved by this. Throughout 2001 and the early part of 2002, cheap credit buoyed up consumer spending. But this has played out. Homes have been refinanced, new cars have been bought, credit cards have been maxed out. With no spending stimulus of similar magnitude on the horizon, there will be little to offset the impact of uncertainty and anxiety.
Trust in public institutions has been in decline for the past four decades. Of course, Americans have always distrusted institutions like government and big business, but the levels of distrust are particularly high nowadays. The need for honesty and integrity was never greater than it was immediately after 9/11. Yet, what has occurred since then has been an uninterrupted parade of betrayals from government missteps to church abuses to corporate misdeeds. No surprise, then, that the intensity of consumer mistrust has never been stronger and that perceptions of government, church, and business have never been worse.
Distrust worsens the growing resistance to marketing. It takes an ever-increasing amount of money to break through the barriers that people are erecting to block marketing messages. The productivity of marketing spending has dropped substantially in recent years, due in no small part to the cynicism people feel about marketing and advertising. Until people see honesty and integrity in the marketplace and in society at large, marketing and advertising will face a steep uphill battle.
The levels of uncertainty and mistrust have raised questions about all of the old standbys. What people used to do, how they used to shop, how they used to make decisions and behave, all no longer seem to fit how people feel about the future. So, people are in transition.
People are reinventing their lives to better reflect their priorities. In particular, people are experimenting at the margins with new ways of doing things. The extra day on the road for a non-essential meeting is now being replaced with new ways of conducting that meeting, or the meeting is being foregone entirely. New findings about nutrition have put the old ways of dining in transition. The new interest in family and home has put old forms of entertaining and decorating in transition. The new realities about retirement and investments have put the old ways of managing money in transition. New hassles and risks of travel have put the old forms of leisure and vacations in transition. The new interest in connectedness has prompted new offerings and advertising from telecommunications and cellular companies.
Change creates new opportunities. And there is more change and transition going on with people nowadays than at any point in the last three decades.
Periods of turmoil and upheaval always produce transformational political shifts. The 2002 mid-term elections reflect this. In the midst of uncertainty, mistrust, and transition, everyone minced their words except President Bush, who flew around the country telling voters in plain, no-nonsense language that Congress was doing a terrible job. Irrespective of whether you agree or disagree with President Bush's message, he was the only person to make his case in a way that communicated integrity, determination, and, most importantly, authenticity.
The mid-term elections confirm that the close race of 2000 was the start of a turning away from anyone or anything that seems disingenuous. Irony is still okay, but it must feel honest not impudent. How things get done is as important as what gets done. People want politicians and brands that are genuine. Blemishes seem more authentic, just like President Bush. He may not be the most articulate president of our generation, but he is what he is and he makes no apologies for it.
The biggest unknown right now is whether the United States will go to war with Iraq. The looming prospect of a war is adding to people's sense of uncertainty and anxiety and further fueling people's lifestyle transitions. If war were to happen, worries would proliferate and worsenworries about inconvenience and sacrifices, terrorist retaliation, prices and jobs.
The debate over a potential war with Iraq has been quite controversial, so it's unlikely that we would see the same kind of patriotic rally effect that helped the economy for a few months following 9/11. Of course, people are behind the war if it comes to that, but there will be less enthusiasm and more fears. In the event of a war with Iraq, uncertainty and not patriotic fervor will be the key dynamic in the marketplace, adding to the anxiety people feel already and thus creating an adverse economic impact.
More than ever, people want more time. More than money and more than stuff, people want time. And people don't just want more time per se, they want more enriched time, more organized time, and more enjoyable time.
In the past we were willing to trade time for money; nowadays, we are anxious to buy back time. Indeed, over the long-term, an obsession with time is likely to replace the obsession with money and materialism that has ruled the marketplace since the end of World War II.
We continue to hear people talk about their desire for simplification, but we know from experience that this is not literally true. As much as people vent, they have not returned to simpler, more austere lifestyles. Simplification is just the word people use to express their yearning for some relief from complexity, over-abundance, and stress. The word simple is the antonym for complexity, so it's the word people use even though what they really want is not simplicity but a sense of control and a feeling of serenity. Control in a complex, overwhelming world is what provides the satisfactions of simplification. To get back time people want control, whether it comes with simplification or not.
People are anxious to relieve some of the pressures weighing on them. So, the interest in rewards and luxuries continues to grow even in the face of economic strains and psychological stresses. But people don't want the sparkle and glitz of big extravagances. Instead, they want small indulgences that reflect and reward family, home, connectedness, and community.
This is not to say that people don't have higher expectations than ever before. The mainstreaming of the affluent attitude has not been rolled back. It's just that material opulence is now taken for granted. Only the intangibles add value worth a premium price, and many of these intangibles are best delivered through small, personal indulgences and comforts.
Small indulgences can add big value, particularly if they provide an authentic satisfaction that enriches time and relieves the worries of uncertainty and mistrust. More and more people need these small indulgences to help them through the transitions facing them in the year to come.
J. Walker Smith is president of Yankelovich Partners Inc., a marketing consultancy specializing in lifestyle trends and customer targeting solutions. Smith is co-author of Rocking the Ages: The Yankelovich Report on Generational Marketing (1997). He can be reached at (203) 846-0100.