While consumer confidence has certainly tanked in this uncertain environment, business has not come to a standstill. But it takes a different approach to reach today’s gun-shy consumers, whose mindset is radically different than a year ago.
First, let’s look at the big picture. Yes, foreclosures are up and their effects have been seismic. But it’s important to remember that nearly one-third of homeowners (24 million) own their homes outright. And households that do have mortgages owe on average 55% of their home’s value, meaning they have a sizeable cushion of equity. What’s more, 81 percent of mortgages are at fixed rates, with a median rate of only six percent.
Clearly there is still opportunity out there today, providing you tell your story the right way and connect to consumers in a manner that resonates with the tenor of the times. Here are some key aspects of consumer sentiment today and what they mean for our industry. Some of them are contradictory, but that is not surprising. In an era of uncertainty, consumer behavior becomes less predictable.
In this environment, even people with relatively secure jobs and plenty of equity become risk-averse. They are afraid to spend money. If they do spend, they don’t want to take any chances. They are looking for reassurance.
Reassurance comes from promoting your experience and your warranties or guarantees. Your marketing materials – ads, brochures, Web site and e-newsletters – should talk in depth about your history and heritage, show pictures of your people, provide their bios and describe in detail your warranties and guarantees.
Now is the time to be sure you have meaningful testimonials in all of your marketing. Talk about prestigious projects or designers or chefs or other personalities who have used your products or services. Keep a notebook of testimonials in the showroom with local names that people will recognize. See if you can use their full names on your Web site or in other materials.
Demonstrate your financial strength. Offer bank references or supplier references. Erase any doubts. Consider branding your warranties or guarantees under a name such as the ABC Kitchen & Baths No-Worries Warranty™ or Peace of Mind Guarantee.™ The trademark adds an element of credibility. Take prospects to jobs you’ve done. The more transparent you are, the more confidence people will have in you.
Numerous reports show that consumers are staying in more, entertaining and cooking at home and eating out less. All of this means they are more focused on their homes than ever before.
Faith Popcorn, trend guru, says we’ve gone from cocooning to über-cocooning. However, she points out, this “need not be boring or solitary. It can involve hosting a game night for friends, inventing a new recipe [or] relaxing into at-home spa treatments.” Sales of electronics such as flat-screen TVs are up, meaning there is an increasing market for home entertainment centers. Why can’t a new bathroom be the ultimate Staycation with in-home spa?
“When economic hard times loom, we tend to retreat to our village. Look for cozy hearth-and-home family scenes in advertising. Discretionary spending on home furnishings and home entertainment will hold up well, as uncertainty prompts us to stay at home but also stay connected with family and friends,” says John Quelch, Harvard Business School professor. Now more than ever, kitchens will truly be the heart of the home, not empty trophy rooms.
The retreat to home is creating demand for in-home parties. So why not stage your own kitchen warming parties or at-home spa parties for past customers and their friends.
Another factor encouraging consumers to spend at home, behind closed doors, is that conspicuous consumption is no longer cool. No one wants to be perceived as a greedy Wall Street tycoon type. But spending quietly on the home is okay, especially if it supports family values.
Somewhat contradictory is the fact that brand names can become more important at times like this. “Trusted brands are especially valued and they can still launch new products successfully, but interest in new brands…fades,” comments Quelch. A strong brand takes away perceived risk of a purchase, especially on a major expenditure such as a kitchen appliance or plumbing fixture.
Consumers have confidence in known brands, so tout the ones you offer. And don’t forget that as a dealer, designer or showroom, you are a trusted brand yourself. Reinforce that.
Research done at the Kellogg School of Management at Northwestern University indicates that when consumers feel less powerful, the status aspects of a brand come to mean more than the functional or comfort attributes.
Given that uncertain economic times make people feel less in control, they could be more receptive to the status attributes of, say, a brand name appliance. It may seem counter-intuitive, but brand status of a non-conspicuous purchase can be very important.
Needs Justify Spending
More consumers justify a purchase today by feeling they “need” to make the expenditure. This could mean more activity on the bath side of the business, where a job may be triggered by a household ‘emergency’ such as a leak or non-functioning toilet. Then the “while we’re at it” attitude takes over and pretty soon the whole bath is being redone.
Look for more kitchen jobs to be stimulated by a faulty appliance or a leaky faucet…something that starts as a simple repair or replacement and then mushrooms into a full job. Not every small job will grow this way, but determining if there is an underlying perceived “need” is a good qualifier right now.
It’s also important to redouble marketing to past customers. Increase the frequency of your newsletters or e-newsletters. Two or three times a year is not enough to stay top of mind.
Do more showroom events. Offer to do in-home service tune-ups. Rev up the public relations. Editorial credibility helps reassure prospects that it’s safe to do business with you.
Unfortunately, consumers are more price conscious. They need to understand the value they are getting, be it in status, comfort, durability or longevity. Now more than ever, it is important to have budget information on your Web site, so that consumers understand they have choices and can control their expenditures (within reason) by the mix of products they select. Given that it takes longer to make a decision, anything you can do to stay in touch and hand-hold them during the decision process will add to their comfort level.
And comfort is what it’s all about today.