Turn belt tightening into brand engagement

As recession-hit consumers look for ever-more frugal retail bargains, how can brands use online discount promotions to entice people to part with their increasingly precious cash?

U.K. families are more fearful about their financial future today than at any time in the past 26 years, according to the GfK NOP figures for June 2008. The combination of falling house prices and soaring food and fuel costs has led to this dramatic drop in economic confidence, which is having a very real impact on both disposable income and spending habits.

There is absolutely no doubt that consumers are now far more price sensitive across the board: this economic downturn is not affecting only those so-called 'sub-prime' individuals that are most commonly associated with the U.S. credit crunch. This tranche of society has always been price sensitive, living a hand to mouth existence based on limited economic stability long before any shift in general financial fortunes.

As the latest research reveals, the lack of economic confidence is also being felt particularly hard across middle England.

Recent figures reveal that families suffered the steepest drop in disposable incomes for nearly a decade during the first three months of the year. And this drop in income is having a quantifiable effect on buying behaviour. According to the latest figures from the British Retail Consortium (BRC), in June U.K. retail sales value fell 0.4 per cent on a like-for-like basis, compared with June 2007 -- making sales the worst since summer 2005.

Indeed, across middle England, the response has been a significant move towards the European cut-price supermarket chains (Aldi and Lidl). It is this radical purse tightening and the adoption of discount rather than luxury goods that is the most telling indicator in this extraordinary transformation in economic confidence that has occurred over the past 12 months.

The implication of this emerging trend is significant for both FMCGs and retailers. In fact, whilst this shift in middle England's behaviour may appear to represent a real threat for brands, it also represents an opportunity for savvy marketers prepared to look deeper into how they can exploit today's economic trends.

Whilst tougher economic conditions are typically associated with decreasing sales, this is not the full picture. Consumption does not stop in a recession -- consumers still need to purchase essential goods, from cleaning products to butter. However, consumers are making both conscious and unconscious modifications to purchasing behaviour in a bid to reduce spending, from switching brands, to moving to 'own label' goods, to taking advantage of promotions such as coupon offers or trade promotions.

In a price conscious economy, consumers also spend much longer evaluating purchasing decisions. They are also increasingly influenced by money-saving options and clever shopping hints and tips being presented daily by magazines, news programmes and information shows on television and radio.

The impact of this changing behaviour can be seen on the high street as retailers embark upon significant price based competition in a bid to win new customers or stop the steady erosion of the existing consumer base. But reactive, tactical retailer discounting alone cannot be a long-term solution.

Organisations must look at new ways of maximising sales and achieving strong customer engagement to boost brand value. TV and radio advertising are currently losing significant ground as organisations turn their investment towards customer marketing activity that can build far stronger and more measurable direct customer interaction. There is already a clear trend towards sales promotion and online marketing. Figures from the latest Bellwether report reveal that sales promotion budgets have suffered less than other areas of marketing because of the need to strategically drive sales during a downturn. Furthermore, the only category to see an increase in the last quarter was the internet -- one of the media channels used for sales promotion.

This demonstrates the continued move towards leveraging the internet as a powerful and cost effective vehicle for driving sales growth and enhancing brand value. The ability to rapidly access information, undertake product comparisons and research and assess price options has made the internet a key tool to support cost effective buying behaviour.

Consumer usage also continues to grow, particularly amongst 'middle-class' women, also the primary household shopper, as they search for imaginative ways to live well in a downturn, according to Financial Times research. Their research revealed that middle England in particular is increasingly using the internet to search for money-off vouchers, discount groceries and cheap holidays. There is also strong evidence that these consumers are changing the way they shop for the mundanities of life -- including groceries. According to data from Nielsen Online, discount retailers are registering increased interest from households with incomes of £50,000 a year or more. Also, Couponstar, the interactive coupon solutions company recently reported a 652 per cent increase in redemptions for internet printable coupons over recent months.