Jwt austerity index q1 2013 final
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Jwt austerity index q1 2013 final Document Transcript

  • 1. THE JWT AUSTERITY INDEX A measure of how the UK is feeling and dealing with austerity Quarter 1 2013 Results
  • 2. JWT Austerity Index Introducing the Austerity Index Methodology The JWT Austerity Index is a composite measure created using five key consumer metrics. We use five metrics because we believe the impact of austerity has many facets which cannot be captured in just one question. The metrics we track are as follows: • IMPACT: Two metrics focus on the immediate impact of austerity. The first assesses the severity of the effect on standard of living and the second is an emotional measure – are consumers just surviving, or thriving? • COPING: Two further metrics assess what consumers are doing to cope: how much effort are they making to restrict discretionary expenditure and how difficult are they finding it to put money aside? • OUTLOOK: Finally, we ask consumers how they expect to be coping in six months’ time. Consumers score themselves out of ten on each metric. In each question, a high score indicates an impact of greater severity. We create an index for each of the five component metrics by dividing those scoring themselves in the more negative range (6-10) by those scoring themselves in the positive range (1-5) and then multiplying by 100. The Austerity Index is an average score calculated across all five of our austerity metrics. We polled 520 UK consumers in March 2013 using JWT’s proprietary SONAR panel. The Austerity Index is a quarterly survey – our next edition will be released June/July 2013. Welcome to JWT’s Austerity Index We’re living through the slowest economic recovery in our nation’s living memory. These are uncharted waters for brands. We have no precedents to fall back on, no textbooks or handbooks on which we can rely this time. So it’s never been more crucial for us to understand exactly how consumers in the UK are behaving and changing in response to the new reality. The Austerity Index is JWT’s solution: an in-depth quarterly research survey that analyses the impact of prolonged economic adversity on UK consumers and markets. The Austerity Index aims to diagnose Britain’s emotional and rational reply to austerity, delivering the answers that brands and organisations need today. How severely are consumers being affected? Who is hurting the most? What are the coping mechanisms consumers are deploying? Where are Britons cutting back, trading down or even opting out of categories? And how should brands respond? JWT will be tracking these and other measures every quarter, from now until the economy recovers. We will provide a unique battery of metrics which will track the pace of that recovery, including our proprietary Austerity Index metric. Let’s investigate what the nation thinks and feels about austerity today. Tracey Follows Chief Strategy Officer, JWT London April 2013 3
  • 3. JWT Austerity Index The Austerity Index The Austerity Index: Our Benchmark Metric 0 200 400 600 Impact on standard of living Surviving, not thriving Efforts to restrict spending Having difficulty saving Negative outlook next 6 months Component Metrics of the Austerity Index So here’s where it begins. Our first ever reading of the Austerity Index registers 287. This, an averaged measure of our five component metrics (see below), is our benchmark. What does this tell us right now? That three times as many consumers are finding life tough at the moment as are not. No great surprise there. Where this figure will come into its own, however, is when we start to track it over time, observing the shifts as they happen and in the context of our changing economic circumstances. We anticipate that our Austerity Index will become a barometer; a gauge for Britain’s reaction. Our first data dip was run between 9-11 March, prior to the 2013 Budget announcement. And over the next few weeks, we will learn whether the nation will enter a triple-dip recession. Watch this space to see how Britain responds to these unfolding events. Q1 2013 287 4
  • 4. JWT Austerity Index Austerity Index Components: Impact Standard of Living Index* Surviving or Thriving? Index* Here we take a closer look at our five component metrics. The impact of austerity on British consumers’ lives is not insignificant: people are roughly twice as likely to feel that their standard of living has been negatively affected than positively, and that they are just surviving rather than thriving. This is underlined by the average scores our panel chose – both are heading towards the severe end of the scale. Nevertheless, these numbers are a little less than we expected. Our interpretation is that the nation has been living with austerity for so long now that their sense of its impact has lessened. They have become somewhat inured to it. All the same, consumers will welcome efforts by brands that demonstrate empathy and support, and who make attempts to alleviate their ongoing financial stress. 214 171 Are you/your family thriving, standing still, or just surviving? Average: 6.4 Average: 6.6 1= thriving 10= surviving How much, if at all, has your/your family’s standard of living been affected by the economic climate? 10 9 8 7 6 5 4 3 2 110 9 8 7 6 5 4 3 2 1 1= very positively affected 10= very negatively affected 5 * High score / low score x 100
  • 5. JWT Austerity Index 10 9 8 7 6 5 4 3 2 1 Austerity Index Components: Coping Efforts to Restrict Spending Having Difficulty Saving The UK is investing a good deal of energy into money management in order to minimise the impact of austerity. Five times as many people are making significant efforts to restrict expenditure, as spend freely. The number of those struggling to make savings is almost four times those who are not. These are clearly key stress points for consumers, so brands should step in to demonstrate solidarity. Incentives and deals that are communicated as compensatory gifts or treats will appeal to those who are tired of having to continually watch the pennies. Others, who relish a sense of control will appreciate efforts to help them spot and exploit money-saving or even money-generating opportunities. It may seem counter-intuitive to encourage reduced spending, but the aim here is to ensure that what consumers can afford is spent on your brand, rather than the competition. Index Index 536 375 1= no effort whatsoever 10= very significant effort 1= not very difficult 10= extremely difficult How much effort are you making to restrict your discretionary expenditure? To what extent are you finding it difficult to accrue any savings at present? 10 9 8 7 6 5 4 3 2 1 Average: 7.6 Average : 7.7 6 * High score / low score x 100
  • 6. JWT Austerity Index Austerity Index Components: Outlook Pessimism: Future Finances (next 6 months) Index Our first small sliver of optimism: Britons are fractionally more hopeful for their prospects over the next six months than their current assessment suggests (they scored themselves 6.6 on our ‘surviving or thriving’ metric). Whilst it’s important to recognise and acknowledge that consumers are struggling, nurturing these small seeds of hope may be an interesting avenue for brands to explore. Later, you’ll see our analysis of how consumers feel when they think about their finances right now. Here’s a sneak preview of that: 21% of people say they actually feel hopeful. Could brands tap into this nascent streak of confidence and encourage it to spread through the population? Index* 141 Taking everything into account, how do think that you/your family will be coping in 6 months’ time? 1= will be coping very well 10= will not coping at all Average: 6.0 10 9 8 7 6 5 4 3 2 1 7 * High score / low score x 100
  • 7. JWT Austerity Index Austerity Index: Who’s Hurting the Most? Women: The media has been telling us for some time that British women have been particularly hard-hit by the recession. It seems the women on our panel back up the claim. Since 2010, women have lost more jobs than men; unemployment amongst women over 50 rose by a third between 2010 and 2012. According to research conducted last year by The Labour Party, women contributed £11bn of the £15bn raised from changes to the tax and benefits system by the government since 2010. Full-time workers: A surprise? Maybe not. JWT’s Super Stress Era trend research in 2013 found that 49% of Britons are worrying about their job security. They seem to be working longer and harder as a result. A 2012 survey found that on average, British workers are putting in 9 hours of unpaid overtime per week; another revealed that 60% don’t take lunch breaks, and are eating at their desks instead. Meanwhile, wages still lag behind inflation. This is an understandably frazzled group; working harder with little to show for it. We calculated our Austerity Index metric for a wide range of demographics. The following groups report being under the most pressure. Brands with target consumers in these segments take special note. The Countryside: Rural communities are facing a plethora of hardships. In addition to dwindling job opportunities and pressure on the agriculture sector there’s also the sense that they are becoming increasingly isolated with the disappearance of everything local. From pubs to farms, rural areas are experiencing a decline in their communities. Brands can help through rural initiatives which support local producers as well as foster and help strengthen community links in the countryside. Low income households (earning under £20k): It will come as no surprise that for low income households, there’s an uphill struggle. According to a recent study, more than half of low income groups are failing to keep up with bills, with 7% behind on at least one bill. They are likely to feel hard done-by and that they are suffering disproportionately: 61% of this group told us they believe that only the poor are affected by austerity. Iain Duncan Smith will not be able to look to this group for tips if he tries to live on £53 per week; they spend £91 on average covering weekly essentials. The Middle Aged (40-59 years): In the past, they may have feared the ‘empty nest’; now middle aged parents are now seeing the reverse trend in play. Over three million 20- 34 years olds now live with Mum and Dad because of spiralling rents or difficulty buying their own home. Children studying away from home need help with hefty tuition fees and living costs. In addition, their own parents are living longer and need care. Meanwhile, the retirement goalposts keep shifting. Middle aged people are feeling stretched and worry that they’ll need to work well into their seventies in order to stay afloat. 502 410 383 319 318 8
  • 8. JWT Austerity Index How are we Feeling? Lowest Austerity Impact: Households Earning £40k+ Highest Austerity Impact: The Countryside All Adults: How does thinking about your personal finances make you feel? Although the overriding emotions most consumers feel when they think about their personal finances are linked to world-weariness and gloom, they also feel an element of being ‘in control’. Even when we compare the emotions of the groups who scored at the polar extremes of our Austerity Index (below), this sense of control is something they share. We believe this is derived from the concerted efforts consumers are making to manage their expenditure, as evidenced by our coping metrics. Tapping into this desire for control is another positive way for brands to build engagement with consumers. Brands should look to empower, facilitate and enable consumers to navigate austerity with helpful tools or tactics which will make their money stretch further. We asked our panel to ponder their personal finances and then tell us how it made them feel. 9
  • 9. JWT Austerity Index Perceptions of Austerity Initial findings suggest our perception of the financial turmoil is even more severe than reality itself, at least for the moment. Although we will not receive confirmation of whether or not the UK has entered recession for the third time until later this month, 51% of Britons believe that we are already in one. A further 25% are convinced we’re in a depression. Most negative are the 40-59 year old age group. This correlates with our Austerity Index finding that this group report themselves as the second most severely affected on our survey. At the other end of the spectrum, the younger age group of 18-39s has the brightest outlook. This is unanticipated, considering what we know of the challenges that face young people, such as finding work, or buying a home to name but two. It could be naivety, or a belief that it’s a natural part of being young to struggle financially, but it’s nonetheless striking to note that a good proportion of this group have never known a working life without austerity. Britain’s assessment of our current economic situation - 82% of 40-59 year olds think we are either in an economic depression or a recession + 16% of 18-39 year olds think we are in recovery or prospering 1
  • 10. JWT Austerity Index Attitudes to Austerity Austerity is driving up our stress levels I am heartily sick of austerity - I can’t wait for the good times to come back Austerity has taught people how to live with less Austerity provides an opportunity for brands to help consumers and win loyalty Given the impact that it’s having on their lives, it is unsurprising that fewer people are able to see past the dark clouds to any silver linings. But consumer attitudes do reveal some great opportunities for brands to engage in positive ways. An overwhelming majority of Britons are itching to get back to the pre-recession ‘good times’. So why not help them to have little fun and treat themselves, without feeling like they’re breaking the bank? JWT’s ‘Live a Little’ trend perfectly demonstrates the appetite for this kind of behaviour: 77% of Brits agree that ‘Even if money is tight, I deserve to splurge on myself once in a while’. And as we know that austerity is driving up stress levels, why not try to be part of the solution? Aim to shoulder some of the burden for consumers. Not all approaches have to involve discounting: simplifying choice and finding ways to save time and effort for shoppers, even in the smallest ways, will ease the load and make life easier. Many consumers are convinced that there’s a role for brands to play and they will be receptive to your efforts. Over half are just waiting to see what ideas you can come up with that will make a positive difference to their lives. 84% 84% 62% 55% 11
  • 11. JWT Austerity Index Household Spending & Finances What will £50 buy? We asked our respondents how much money they have left over each month to spend on themselves, exactly as they like. The most popular response was just £50. But what does £50 buy you today? This is the amount of money consumers believe that one person needs to earn to have a good life in Britain today – a third more than the national average for full time workers of £26,500. (ONS, Year to April 2012) 35x 120g bars of chocolate 0.65x tank Based on UK average price of unleaded petrol, tank size of a medium car 2x Cheapest Premier League match-day tickets Pints of milk 49.5x4x Large Domino's Margherita pizzas Here we present our findings on what it costs to get by in Britain today, across a wide range of demographics. Even for our lowest-income group, it costs a whopping £91 per week just to cover off food, petrol and other essentials. Some groups are spending almost double that. These figures by the way, do not include housing costs or bills. The spend of pensioners initially looks remarkably healthy. But it makes sense in the context of findings from the Institute of Fiscal Studies in 2012, which reported that the wealth of elderly people has grown faster than that of any other age group while their tax contributions have simultaneously fallen. Average weekly spend on groceries & necessities* * Excludes mortgage/rent and bills A Good Life £35,179 £122 £129 £114 £119 £132 £114 £131 £98 £138 £108 £120 £104 £114 £129 £121 £91 £124 £174 Total Male Female 18-39 40-59 60+ Have children No children Working full time Working part time Pensioner Not working City dweller Suburban Rural < £20 k £21-39k > £40k 12
  • 12. JWT Austerity Index 9% 17% 17% 19% 24% 27% 35% 46% 53% 54% 58% Switched credit card supplier Used daily deal sites Switched mobile phone tariff Switched utilities supplier Bought through a cashback site Used digital vouchers/coupons Used voucher codes online Shopped at a discounter Used loyalty points to pay Researched prices online Used paper money-off coupons Coping Mechanisms Austerity Britain is breeding a nation of savvy budget tacticians who rely upon a slew of strategies to make their money go further. We found that 92% of Britons are deploying one or more of a range of coping mechanisms to save money. These findings suggest that being a thrifty consumer is now a way of life for many. A domestic marginal gains theory is at work in homes up and down the nation: shaving off a few pennies here, earning a pound there. Data shows that those in higher income households are even more likely to have adopted these habits (95% of them) than those in the lower-earning demographic (89% are doing so). It seems that when push comes to shove, Britain will cope with whatever austerity can throw at it, by using every trick and tactic at its disposal. No surprise, then, that 62% agree that austerity has taught us something: how to live with less. Tactics Britons are Using to Make their Money go Further % having done the following 92% using 1 or more tactics 13
  • 13. JWT Austerity Index Making Life Easier…Making Life Harder Friends & Family Supermarkets Brands Your Employer The Media Transport Providers Banks & Financial Services Utilities Companies Government Fuel Retailers 44% -1% -7% -9% -13% -34% -38% -57% -62% -63% They say we’re all in this together; but are we? We asked our panel who is making their lives easier, harder or making no difference. Consumers are unenthusiastic about the performance of everyone outside their family and circle of friends, with particular ire reserved for fuel retailers and utilities companies. Some of the categories at the bottom of the pile are those which have received media attention for putting up prices whilst making large profits or handing out fat bonuses. First and foremost, this suggests that consumers want companies and brands to simply play fair with them. But there’s surely more that could be done. We believe there’s a major opportunity here for brands to win favour with consumers. Currently, when asked to name specific brands who are doing a good job of making life easier, they struggle to think of anyone who has done anything significant to help them out. The most common response was ‘none’. How can your brand show solidarity with struggling consumers? What can you offer or do which will actually make a substantial difference to their daily lives? Which of the following are doing anything to make consumers lives easier? We are compiling brand-level as well as category data. If you are interested in seeing detailed information on your brand, please contact us. See end page for our contact details. Composite measure of those who say X is “making life easier” less those who say X is “making life harder” (%) 14
  • 14. TRADING UP, TRADING DOWN
  • 15. JWT Austerity Index Trading Up & Trading Down Books, newspapers & magazines Toiletries Cable/Satellite TV -77% -74% -71% -70% -68% -73% -66% -65% -64% -62% -61% -59% -58% -57% -54%-53% -43% -41% -40% -39% -38% -37% -33% -29% -22% -21% -18% -16% Net percentage: Consumers trading up or spending more, less consumers trading down, buying less or stopping purchase in category, due to economic conditions (%) Base: All buyers in category Across every category measured, more consumers are trading down and cutting spend than are spending more, as a result of the economic conditions we face. percentages -36% 16
  • 16. JWT Austerity Index Making Sacrifices Tickets to live events & attractions 30% 32% 27% 31% 28% 30% 26% 31% 43% Music, film & games Drinks in a pub/bar/club Restaurant/pub meals Cinema trips Takeaways at home Organic food Lottery tickets Private healthcare Gym & fitness Consumers are trimming the fat from their spending in a range of categories, but it is leisure that is most severely affected. It’s clear why we are losing so many pubs up and down the nation and why venues are having to go to ever greater lengths to get customers through their doors. Consumers who have stopped buying items entirely (%) 40% Base: All buyers in category 17
  • 17. SPENDING BEHAVIOUR: GROCERY
  • 18. JWT Austerity Index Trading Up, Trading Down: Grocery 6% 3% 53% 18% 19% 1% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely 2% 2% 23% 40% 17% 15% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely For the majority, spending remains consistent on grocery basics (staple items such as bread, milk, cheese, cereals and tinned goods etc.). It’s hard to cut out the essentials, although an alarming 1% of our sample claimed to have done so. Perhaps they have turned to foraging or started growing their own. Nevertheless, as the price of so many basic items continue to rise, it seems likely that consumers are cutting back more deeply in other areas in order to maintain spend here. Own-label continues to be a force to be reckoned with in this category, with 19% trading down on the basics. The confectionery category is significantly impacted by consumers cutting back and trading down away from brands. More worrying is that more than one in ten people has stopped buying entirely. Confectionery brands need to find ways to persuade consumers that they deserve their treats every now and then, perhaps as a reward for their budget managing efforts. Luring shoppers away from own-label alternatives should be a key focus for brands. Tapping into novel occasions, like Halloween, may be a way to offset decreased spend whilst innovation may lure ex-buyers back to the category. Grocery Basics Sweets & Chocolate 19
  • 19. JWT Austerity Index Trading Up, Trading Down: Grocery 2% 2% 25% 38% 24% 9% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely 2% 2% 24% 39% 21% 12% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely A similar story in the biscuits and cakes category, with a quarter of buyers turning to cheaper products and over a third cutting down on purchasing. There is more of a sense of occasion to biscuits and cakes, so brands and retailers could emphasise the social aspect of consumption, to persuade consumers that these are worthwhile indulgences. We know that consumers are cutting back severely on nights out as well as alcohol, so in-home gatherings with tea and cake might be a welcome substitute. The crisps and snacks category also faces tightening wallets. Although a quarter are spending about the same, this figure is outweighed by those who are cutting back, trading down or have stopped buying. It could be that some people are combining the need to cut back on their spending with the opportunity to try to live more healthily. Consumers might up their snack expenditure if they felt that they were still living virtuously by doing so. Brands could demonstrate to their customers that their snack products can be enjoyed as part of a healthy, balanced diet to help alleviate guilt. Biscuits & Cakes Crisps & Snacks 20
  • 20. JWT Austerity Index Trading Up, Trading Down: Grocery A whopping 73% of consumers are cutting back, trading down or have stopped buying alcohol entirely. This can largely be attributed to rising alcohol duty as well as concerns over health risks. Alcohol brands now face the looming prospect of minimum unit pricing further increasing the cost to consumers. Lower alcohol variants would allow brands to entice consumers back to the category with more affordable products, whilst simultaneously delivering a responsible drinking message, which could go some way to pacifying the prohibition lobby. 1% 2% 23% 42% 15% 16% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Over half of consumers are cutting back or trading down on soft drinks and more than one in ten claim to have cut them out entirely. With the media constantly hammering home the dangers of obesity, and with sugar now portrayed as public health enemy number one, players in this category need to work harder than ever. Even diet drinks are under the cosh, receiving nearly as much bad press as their full- sugar equivalents. Brands need to be 100% transparent and focus on a moderation message. Encourage consumers to offset their little indulgences by reducing intake elsewhere in their diet and by being more active. 2% 3% 31% 32% 20% 11% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Alcoholic Drinks Soft Drinks 21
  • 21. JWT Austerity Index Our data shows the rising price of meat and fish is clearly an issue for some; and the recent horsemeat fiasco looks likely to drive prices up even further as retailers look to local sourcing to rebuild trust. It’s not just consumers’ purse- strings that have taken a bashing, it’s their confidence too. Trust can be regained over time though, and messages on quality and standards of husbandry and processing will be crucial over the coming months, particularly as we approach barbecue season. 4% 5% 46% 30% 12% 2% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Trading Up, Trading Down: Grocery Of all the categories tracked by the Austerity Index, fruit and vegetables fares the best. Despite Britain’s reputation as the fat man of Europe, it seems our five-a-day remains a relative priority. Our research chimes with that released by Nielsen: their 2013 Global Survey of Fresh Foods revealed that Brits lead Europe in consumption of fruit & veg. The category has experienced serious growth over the last few years – 24% between 2005 and 2010 according to Mintel. Could austerity lead to a fitter, healthier Britain? 8% 6% 56% 17% 12% 1% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Meat & Fish Fruit & Vegetables 22
  • 22. JWT Austerity Index Trading Up, Trading Down: Grocery It is logical that organic food should be considered dispensable by so many. It is no great sacrifice to cut back when mass- produced goods taste similar and, in many cases, look "better". In addition, research published by Stanford University in Autumn 2012 claimed that nutritionally, organic is no better for us than standard produce. Yet the recent horsemeat scandal in the UK has given organic a little boost, and sales reached a nine- month peak in February according to the Soil Association. 6% of our panel are trading up or increasing their spend too. Organic’s trump card is trust and now is the perfect time to play it. 3% 3% 27% 26% 12% 30% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Household Products A good chunk of consumers are spending less or trusting to own-label and cheaper alternatives to do their cleaning and laundry jobs. Shoppers are realising they don’t necessarily need to compromise, as own-label products have upped their game in terms of performance and quality. For brands, it’s imperative to communicate value. Products which perform across a number of surfaces and can multi-task around the home will appeal to cash-strapped shoppers. 2% 3% 49% 20% 25% 1% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Organic Food 23
  • 23. JWT Austerity Index Spiralling petrol prices (+38% increase between June 2007-June 2012 according to the OFT) are behind consumer efforts to cut back on fuel use. Our data chimes with that of a recent poll conducted by moneysupermarket.com which found that 43% of drivers were cutting down on journeys to save money. Other money-saving tactics include driving more fuel efficiently and using eco-friendly models. The burgeoning rental economy is allowing many city dwellers to opt out of car ownership entirely. Some consumers told us they are cycling or walking to save money too. 13% 2% 37% 39% 6% 3% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Trading Up, Trading Down: Grocery Smoking prevalence has been in decline since the 1950s in the UK. In recent years, price rises have proved to be an effective tool in further driving down numbers who smoke. As the price of a packet of cigarettes approaches the £8 mark, a 20-a-day smoker would be spending approximately £2,700 a year to fund their habit. Just under a fifth of smokers told us that was enough to make them stop buying. A third are cutting down and another fifth are trading down, perhaps to cheaper brands or possibly to the black market: according to ASH, smuggling accounts for 10% of the cigarettes, and 46% of the rolling tobacco smoked in the UK. 2% 3% 25% 34% 19% 17% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Petrol Cigarettes & Tobacco 24
  • 24. JWT Austerity Index Breathe easy. None of our respondents claim to have stopped buying toiletries entirely; times may be hard but we Brits shall be clean! However, almost half are cutting back or trading down to own-brands and cheaper labels. Toiletries are everyday, essential items and half of consumers see an opportunity to make easy savings here. Innovation will be key to keep consumers loyal to brands. The shower experience could be a rich territory of focus; according to Mintel many are switching to showers from bathing due to both time- pressures and water costs. 2% 1% 47% 22% 27% 0% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Trading Up, Trading Down: Grocery Toiletries
  • 25. SPENDING BEHAVIOUR: FAMILY NEEDS
  • 26. JWT Austerity Index That almost two-and-a-half times as many people opt to cut back than trade down in clothing, indicates that brand culture remains uncompromisingly strong in personal style choices. Fashion is so inextricably linked to people’s sense of identity that it is hard for consumers to switch to cheaper alternatives; charity shops and supermarket clothing brands still hold a vague stigma for some. Despite the trend towards ‘fast fashion’, austerity is nurturing an appetite for quality over quantity. Brands should bear this in mind, and also capitalise on their USPs and heritage to appeal to their core markets. 2% 4% 26% 42% 17% 9% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Almost half of people are spending about the same on clothes for their kids. It is likely that this is largely out of necessity as children grow out of clothes and shoes. A healthy proportion are cutting back or trading down though, perhaps by handing down items to younger siblings. Although pester power is undoubtedly alive and well, according to Mintel, 68% of adults decide on the retailer for buying their children’s clothes. Brands must therefore walk the tightrope between appealing to parents’ tight budgets and to children’s fashion tastes. 4% 4% 46% 27% 15% 2% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Trading Up, Trading Down: The Family Clothing for Yourself Clothing for Children 27
  • 27. JWT Austerity Index Trading Up, Trading Down: The Family A third of parents are cutting back and a fifth have stopped paying for babysitting or childcare at all. Looks like nights out for Mum and Dad are taking a hit. Or are they? Many are turning to the grandparents for help. Charity Grandparents plus recently reported that 63% of them help out with childcare. For other parents, it is proving more cost-effective to stay at home than go back to work. At the other end of the scale, it makes sense that parents don’t want to compromise on the quality of care they provide their children; this is one category where the proportion of those trading up or spending more creeps above 10%. 9% 6% 32% 29% 4% 19% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Our Austerity Index metric on saving shows that swathes of consumers are finding it tough to put anything aside for a rainy day at all at the moment. In view of this, the fact that almost half are maintaining or increasing the amount they put away for their children, suggests that many families are doing their best to cushion kids from the impact of austerity. Nevertheless, for the other half of this group cutbacks are unavoidable. Are there innovative steps that financial services brands could take to help cash-strapped families keep saving? 4% 4% 41% 27% 3% 21% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Babysitting & Childcare Saving for Child’s Future 28
  • 28. JWT Austerity Index Independent schools have not been far from the headlines since the recession hit, with news stories ranging from fees soaring ‘at twice the rate of inflation’, to the dropping of selection criteria in order to fill empty places. This is having a knock-on effect on the state sector, as oversubscription for places means some children cannot even attend their local schools. Yet note that more people are spending more or trading up than in most other categories. For those parents who opt in, their child’s future is clearly an area they consider a priority investment. 8% 9% 48% 20% 5% 10% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely University fees have soared within the space of five years. According to the Money Advice Service, student debt now averages £39,000 on graduation. Yet those parents who are choosing not to underwrite their children’s studies may be making the wisest decision in the long run. Student loans are a cost- effective way to borrow, with competitive rates and long-term, means-related repayment schedules. 6% 4% 42% 24% 7% 17% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Trading Up, Trading Down: The Family Education Fees Supporting Children at College/University 29
  • 29. JWT Austerity Index Trading Up, Trading Down: The Family ‘Must have’ gadgets are contributing to the growing cost of raising a child, so cutting back in this category constitutes a significant saving for many. Yet many devices, such as mobile phones, are now seen as necessities for youngsters. Having a mobile phone provides some security for children old enough to leave the house alone, and from the child’s perspective it is the centre of their social world. It should not be assumed that cutbacks in purchasing means kids are spending any less time with devices however. Anecdotally, we hear that children are benefiting from their parent’s upgrades, receiving hand-me down tablets and Kindles. 4% 3% 31% 33% 12% 17% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely As far as children’s pockets are concerned, austerity is somewhat polarised, with just over half receiving the same amount of money as they used to or more, and the other half receiving a dwindling allowance or nothing at all. Perhaps the latter will reap the rewards. A recent study by the Royal Economics Society found that children given a generous allowance are more likely to just spend it straightaway. A recent MoneySupermarket.com survey found that 97% of people thought schools should provide financial education. Is there an opportunity instead for brands to step in and deliver that much needed service? 4% 2% 48% 23% 5% 18% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Child’s Personal Technology Devices Pocket Money 30
  • 30. JWT Austerity Index Trading Up, Trading Down: The Family Some parents see extracurricular activities as CV-building assets for future prospects, ensuring every moment of their child’s spare time is filled with enriching and educational activity. So much so, that the media has been fretting about ‘overscheduled’ kids and ‘helicopter parenting’. Yet over half of parents have been obliged to cut back or pull their kids out of their activities due for financial reasons. There’s another opportunity for brands to step in here, to promote fruitful, rewarding use of this newly freed-up time for the nation’s kids. 6% 5% 38% 27% 6% 18% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely There may well be a mindset of making do with what we already have, but the digitisation of much youth entertainment is contributing to lessened expenditure in this category. The much-loved Dandy comic disappeared from the shelves at the end of last year; the kids who might have read it are now glued to a screen, whether it be TV or tablet-shaped. According to a report in the FT in December, the time children are spending with devices has ‘rocketed’. Traditional players in the category will need to fight tough to stay relevant. 4% 2% 35% 38% 9% 11% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Toys, Books, Comics & Games Extracurricular Activities 31
  • 31. SPENDING BEHAVIOUR: HEALTHCARE
  • 32. JWT Austerity Index Trading Up, Trading Down: Healthcare The main threat to OTC medications is from those trading down. Generic or own-label alternatives can be substantially cheaper than their branded counterparts so brands need to maintain the flow of NPD as well as their marketing efforts. Driving pre-emptive purchasing could reap valuable rewards: research in late 2012 revealed that 62% of adults have expired medicines in their bathroom cabinet. 3% 3% 49% 18% 21% 6% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Wales, Northern Ireland and Scotland currently enjoy free prescriptions, but the cost of prescriptions in England rose by 20p to £7.85 in April 2013. Britons clearly view health as a priority, with few willing to compromise on prescribed treatments. Nevertheless, the trend towards greater self-diagnosis and personal health management should create more opportunities for OTC brands, with more consumers making health decisions for themselves. 4% 3% 63% 15% 7% 7% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely OTC Medication & Remedies Prescribed Medication 33
  • 33. JWT Austerity Index Trading Up, Trading Down: Healthcare Private healthcare seems to stimulate an all- or-nothing approach. More people stick to their existing policies, or prefer to opt out entirely rather than cut back on their cover. This correlates with research showing that the number of insured has fallen for the past two years, after steady growth.Yet more people are using their hard earned cash to pay for private surgery and treatment when they need it: self-pay spending by individuals is up by 14% overall in real terms in the last three years.This suggests that people have become more reactionary than precautionary when it comes to healthcare spend – a trait that brands could draw on for their positioning. 4% 6% 39% 16% 4% 31% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Private Healthcare 34
  • 34. SPENDING BEHAVIOUR: LEISURE
  • 35. JWT Austerity Index Trading Up, Trading Down: Leisure Live events and days out are taking a real hit, with 78% of customers cutting back, trading down or stopping buying. Venues are suffering as a result; the Eden Project recently announced it would have to cut jobs. Ticket prices are tough to justify, particularly for families. Providers need to highlight the social capital consumers can derive from ‘being there’. In 2012, one third of people surveyed told us they deliberately attended an event, even if they did not wish to go, just so they could post an update about it on their social networks. 2% 2% 17% 30% 8% 40% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely 3% 3% 21% 38% 5% 31% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely UK cinemas have already pulled off a “phoenix from the ashes” performance, with healthy growth in revenues since the mid 1990s. Could another be required? According to our data, a third are cutting back on trips and just under a third have stopped going at all. Cinemas face another wave of disruption from internet downloads coupled with increasingly speedy transfers to the small screen. The sector is already hard at work on experience-led innovation: 3D, 4D and even 5D appeals to families and event-style cinema pulls in the cool crowds. Live Events & Days Out Cinema Visits 36
  • 36. JWT Austerity Index Trading Up, Trading Down: Leisure Recently published figures showed that Lottery ticket sales had been holding up well to austerity, with Camelot posting record half- year sales in November. Yet a quarter of our panel now tell us they have stopped buying Lottery tickets entirely and a further third are cutting down on their regular flutter. The announcement that the cost of a Lotto line will double later this year may well price more players out of the game. 3% 1% 35% 32% 4% 26% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Whilst some food delivery companies have thrived thus far, by capitalising on the drift away from restaurants, this sector is vulnerable itself to an even cheaper alternative: supermarket convenience meals. According to our data the takeaway sector faces the loss of almost one third of its customers and reduction in spend by a further 46%. Takeaway outlets and restaurants must exploit their authenticity to convince consumers to continue spending with them. 1% 2% 17% 46% 6% 28% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Lottery Tickets Takeaway Food 37
  • 37. JWT Austerity Index As the demise of HMV illustrates, the outlook for the music, film and games industry (both hard copy and paid downloads) is not promising. A third of people have stopped buying in this category completely. Marketers face a significant challenge in persuading consumers to reinstate their expenditure. The clear enemy here is ‘free’; whether 100% legal or not, consumers have more and more ways of finding the entertainment they seek for nothing online. 2% 3% 20% 36% 8% 30% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Similarly, the fact that 40% of people are cutting back on books, magazines and newspapers will be a surprise to no one when there is such a vast array of free online content at our fingertips. And with the advent of 4G, published media faces a strengthened challenge from mobile phones and tablets. Our devices already effortlessly fill those little time windows where we would once have looked to print for entertainment . With greater bandwidth, their capacity to keep us amused will only be augmented. 1% 1% 30% 39% 9% 19% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Trading Up, Trading Down: Leisure Music, Film & Games Books, Magazines & Newspapers 38
  • 38. JWT Austerity Index Trading Up, Trading Down: Leisure This is the third most affected category in our index. Consumers are really cutting back, seeing meals outside the home as something they can easily forego. With family meals reportedly in decline, brands in this category could seek to be the glue that brings them back together and simultaneously revive a neglected institution. Perhaps they could highlight the benefits of the shared experience of eating together as a family: stronger relationships, better nutrition as well as opportunities for teaching and learning. 2% 2% 18% 43% 8% 27% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely According to media reports, somewhere between 18 and 30 British pubs are closing every week. Close to half of drinkers are cutting back or trading down and a third have stopped going to pubs, bars and clubs. People are either drinking at home to save money or not drinking at all, hence the industry’s shift in focus to dry sales. Venues could focus on new segments and occasions. We’re seeing a small but growing interest in dry bars for instance; free Wi-Fi could lure remote workers out of the coffee shop; and some pubs which are quiet during the daytime are seeing some success through offering a place to catch up for mother and toddler groups. 2% 1% 20% 39% 5% 32% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Drinks Out of Home Meals Out of Home 39
  • 39. JWT Austerity Index Trading Up, Trading Down: Leisure Fitness and leisure is one of the first things to go when money is tight. Understandable, when many of us enthusiastically sign up for gym memberships in January which then languish unused. It’s easier than ever for consumers to get fit without splashing out. Mobile fitness and coaching apps abound. More and more sports brands are offering free events and clubs (such as NikeTown Runners); and guest pass/taster offers from daily-deal sites allow customers to keep switching up their routines for little-to-no financial commitment. Sports & fitness brands could capitalise on this, with in- store classes and experiences to build brand equity. 6% 4% 23% 21% 4% 43% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Although people still want their professional salon beauty treatments, they are finding ways to economise; visiting less often, leaving longer and longer gaps between appointments. This provides a big opportunity for beauty products. With a plethora of DIY goods such as boxed hair dyes and home spa kits available, it is predictable that many consumers should seek to maintain their appearance through these cheaper means. Blogs and Vlogs play a big part by offering online tutorials for those who are less experienced. Many brands are tapping into this channel, providing free product and support to independent bloggers in return for reviews and product plugs. 1% 3% 29% 39% 11% 17% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Gyms & Fitness Hairdressing & Beauty Appointments 40
  • 40. JWT Austerity Index Trading Up, Trading Down: Leisure We are somewhat surprised to see the extent to which the health and beauty category is suffering, with 67% taking steps to minimise their spend on products. This is despite much talk of the “Lipstick Effect”; the theory that women instinctively spend more on luxury beauty in economic recession for evolutionary reasons. Despite the view that women see beauty items as small pleasures, many are shunning labels for cheaper versions, and trusting that they will perform similarly. Brands can fight back by reminding consumers that using their products at home could substitute, and even replicate, expensive salon treatments. 2% 2% 29% 33% 26% 8% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Health & Beauty 41
  • 41. SPENDING BEHAVIOUR: COMMUNICATIONS
  • 42. JWT Austerity Index Trading Up, Trading Down: Comms Home broadband is one category which enjoys something of a cushion from austerity. Mercifully for broadband providers, internet access has become almost as much of a necessity as running water. However there are still ways to spend less without giving up access entirely, and almost a quarter are either cutting back or trading down. Consumers are likely to be searching for the cheapest deal they can find. These services tend to be often bundled and churn is an issue. Allowing customers plenty of flexibility and customisation in their subscribed services may help to drive retention. 2% 2% 69% 13% 11% 2% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely It might be assumed that hardly anyone would go without a mobile phone in this day and age, but 6% of our panel claim to be giving up theirs due to the cost. A further third are cutting back or trading down on their spend. They may be opting for cheaper tariffs or switching to pay- as-you-go deals, but growing numbers of savvy consumers are switching to their Wi-Fi connection to use apps like Skype, Voxer and Viber for making calls, and Whatsapp and Facebook, BlackBerry or iOS Messengers to text without using their phone-plan quota. Workarounds are easily viable with a little research and planning to make sure your friends share the same platform. 3% 3% 50% 26% 12% 6% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Broadband / Wi-Fi Mobile Phone Subscription 43
  • 43. JWT Austerity Index Trading Up, Trading Down: Comms Over half of the population are maintaining spend on cable or satellite TV, so it is evidently a priority. Restricted budgets over the past few years have encouraged many to ‘nest’; spending more free time at home to save money. That said, 40% are choosing to cut back, trade down or stop buying altogether. It is likely that this group are downsizing their subscriptions, opting out of premium services, or switching to services such as Freeview and Freesat. 2% 1% 56% 16% 10% 14% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely As a landline connection is necessary for home broadband installation, and internet is a modern-day must-have, it is unsurprising that we see most consumers maintaining spend. Yet fixed line services face an uncertain future, and have been under attack from mobile and internet telephony. Over 10% of households now have no landline installed at all according to TGI data. And according to a poll by Moneysavingexpert.com, 80% of those under 30 don’t have or rarely use one. 2% 2% 63% 19% 10% 4% Spending more Trading up Spending about the same Cutting back Trading down Stopped buying entirely Cable/Satellite TV Subscription Landline Phone Subscription 44
  • 44. FINAL THOUGHTS
  • 45. JWT Austerity Index Key Takeouts It’s time for radical thinking This austerity journey is taking us off the map. The answers to the questions that austerity poses to brands will not be found in their back catalogues. Furthermore, no category is immune. Now, more than ever, brands need to look for radical solutions and innovate their way back to growth. Research released in 2012 revealed that investment in innovation by British businesses has fallen by £24bn since the recession began. Tough times call for bold moves. Take inspiration from the disruption caused by category innovators like Dollar Shave Club in the USA. Bring the Fun Our data shows that more and more consumers are cutting back on their leisure activities. Brands in this space have a mountain to climb to lure consumers out of home, particularly since technology is making it so simple for us to socialise, shop and enjoy entertainment from the comfort of our sofas. Consumers do value experiences over material goods though, particularly ones which provide them with social capital. So stressing the desirability and exclusivity of leisure experiences that can’t be replicated at home is one way to tempt them. For non-leisure brands, the opportunity lies in boosting the fun they can have at home, fostering social occasions and making ‘austerity entertaining’ more appealing. Can your brand deliver or enhance engaging in-home experiences for families or friendship groups? Do Something to Help Consumers’ relentless focus on value is threatening brand loyalty as they continually seek out lower prices. It’s essential that brands display empathy with their plight, but more importantly, they must show that they can actually do something positive to help. This is a wide-open opportunity, with no brand currently standing out as the people’s champion. Tapping into the consumer desire for control in these turbulent times is a positive way to build relationships based on mutual respect. Look out for our second wave of the Austerity Index, coming in June/July 2013. 46
  • 46. All non-proprietary icons are attributed to thenounproject.com collection unless otherwise specified below. p2 UK map: VectorTemplates.com pp3-7 Gauges: infogr.am p8 Word clouds: Taxgedo.com p16 Spiral chart: infogr.am For more information contact: Marie Stafford Planning Foresight Director JWT London 1 Knightsbridge Green London SW1X 7NW +44 (0) 7656 7000 marie.stafford@jwt.com
  • 47. #ideaswithintelligence