Howard Shimmel, Senior Vice President, Client Insights, The Nielsen Company
SUMMARY: While the economic downturn is affecting everyone, not all consumers respond in the same ways. Nielsen’s segmentation analysis pinpoints which consumer segments offer the most opportunities—and most challenges—for marketers.
With the country’s economy in the midst of a long-term recession, the behavior of American consumers is changing. The consumer confidence index reached an all-time low at the end of 2008, and spending is dropping rapidly. Although the downturn is seemingly affecting everyone, consumers actually respond in ways that vary significantly. And while almost everybody is cutting back, there are many different methods to trim costs. Looking at these differences can create opportunities for manufacturers and advertisers, even during a prolonged recession.
All consumers are not alike
In order to analyze how the economic downturn is affecting consumers differently, Nielsen created a segmentation that divided households into groups based on their behavior and reaction to the decline. The recession analysis groups consumers into eight segments. The segments range from the “Recession Indifferent”—those who do not alter their purchasing habits at all to the “Panic Stricken”—those who take drastic action to greatly reduce living expenses and cut back in all departments to do whatever it takes to save money.
The remainder six consumer groups are classified by their saving methods and are categorized as:
- Recession Insensitive—only slightly affected by the downturn and will cut back on spending for luxuries such as entertainment and dining out.
- Switch to Private Label—tend to be younger, larger households known as “young, bustling families” and often represent plain, rural living. They buy generic brands or store labels.
- Light Coupons & Sales—typically represent older and smaller households who take advantage of light coupons and sales.
- Stock-up & Save—generally older couples who live in a comfortable affluent situation and are know as “empty nesters”. This group remains loyal to name brands, but depends on coupons and sales to stock up while they can.
- Switch Stores for Best Deal—consumers who typically live in cosmopolitan centers and will switch stores looking for the best deal.
- Brand Disloyal/Promo Sensitive—these consumers will switch from name brands to generics or brands on sale looking for the best deal.
|Income alone does not have a direct correlation with the economic impact segmentation…|
It’s more than just income level
Interestingly, income alone does not have a direct correlation with the economic impact segmentation. More than half (57%) of the “Stock Up & Save” consumers earn over $50,000 per year, compared to only 47% of the those in the “Recession Insensitive” group. Likewise, a higher percentage of people with lower incomes are in the “Switch to Private Label” group than in the “Panic Stricken” segment. Other characteristics such as household size, age and location are also factors in consumer’s ability to tolerate a recession. Which is why trying to reach “Recession Indifferent” consumers with an advertisement by targeting higher incomes is probably not efficient.
With the consumer landscape divided between consumers who seem to be minimally impacted by the recession and those who are extremely impacted, it’s vital for advertisers to effectively reach those consumers who will continue to spend through these tough times.
|Identify optimum media strategies that best reach those consumers…|
Connecting consumer behaviors
In order to guide that strategy, Nielsen executed a custom data fusion, linking households in the Nielsen Homescan Recession Segmentation (product-scanning households) to the Nielsen National People Meter panel (TV-viewing households). This provides a clear picture of the media habits combined with purchasing patterns of the various segments in order to identify optimum media strategies that best reach those consumers who are least affected by the economic downturn.
Being that income was not a primary determinant of the recession segmentation, there were no major differences in TV viewing by recession segment, with one exception. The most recession-impacted segment—the “Panic Stricken”—watch between three and four hours less TV per week than the other segments. The least-impacted groups, “Recession Indifferent” and “Recession Insensitive”, watch the same amount of TV each week as the general population.
In terms of Internet use, the heaviest user segments—measured by the percent that were active online and the amount of time spent online—are the “Switch Stores for Best Deal”, “Stock Up & Save” and “Recession Indifferent” groups. The least-active segment is the “Switch to Private Label” group.
|Diving deeper into the specific program genre and web site genres revealed important learnings…|
Where to reach recession-proof consumers
To ensure that media schedules effectively reach the least-recession impacted segments—“Recession Indifferent” and “Recession Insensitive” consumers—a more in-depth analysis of program genres and popular websites is necessary. While Nielsen data shows that these groups reported average TV viewing and average Internet usage, diving deeper into the specific program genre and web site genres revealed important learnings.
“Recession Indifferent” and “Recession Insensitive” consumers are attracted to different genres of TV programs. “Recession Indifferent” allocate a higher share of their viewing to Sports and News programming, indexing higher than average at 109 and 106 respectively for that group compared to the total audience. “Recession Insensitive” allocate a higher share to Comedy and Quiz shows, indexing 102 and 101 respectively.
Although “Recession Indifferent” and “Recession Insensitive” groups may be watching different TV shows, their online surfing habits are somewhat similar. The best places to reach them are on news/information sites and search or community sites. They are less likely to visit family/lifestyle sites.
To weather this volatile economic climate marketers need to spend their advertising dollars where they have the most impact. The ability to target and reach an audience based on their purchasing habits during difficult economic times can help reduce the impact of these recessionary times.