Modeling Consumer Economic Mind- States: The Tension Between Hope and Predictability
05 Nov 2009|Miguel Winebrenner
As an economics major in college I was overwhelmed by predictors of economic success that were based on hard variables such as GDP, unemployment, velocity of money, among others. All of these variables are important in predicting the state of economic affairs, but at the time I was also intrigued by other “softer” variables. For example, I was curious about the role that patriotism played in the economic success or failure of a nation- my hypotheses was that a nation of highly patriotic individuals was more likely to outpace countries with a lower index of patriotism. The premise being that the more patriotic, the more likely one is to work in unison with other members of society towards the greater good- thus resulting in higher productivity and prosperity. The lesson being that a country’s leader should invest as much into building loyalty towards one’s flag as he/she does into building new factories.
More recently, having been involved in the realm of consumer marketing within the context of a global economic crisis, I’ve been drawn to the relationship between “hope” and “predictability” and how the tension between these two helps determine consumer economic mind-states.
The tension between hope (the feeling of optimism and a sense of progress) and predictability (the notion that the world works in patterns and that the future is clear) yields four economic mind-sets that impact how consumers are likely to react towards products and services:
1. High hope and high predictability: a “State of Prosperity”- consumers are feeling optimistic, but they also feel that the road ahead will be stable and without major surprises. In this mind-set consumers are likely to buy a new car, purchase travel, acquire top clothing brands, sign-up for higher value financial products, consume different foods, etc.
2. High hope and low predictability: consumers want to feel that their finances are going to be safe, but they see too many shifts in the economy, they’re not sure if their company will be laying-off or not, and they enter a “State of Austerity.” Perhaps the clothes store credit card is not as appealing, they may buy a car but it will be more fuel-efficient, a 4GB mp3 becomes more attractive than the 8GB version, etc.
3. Low hope and high predictability: this mind-set is dominated by a “State of Careful Treading.” Consumers have a good sense of what’s coming but they aren’t feeling it’ll be very good. As a result they will likely begin to retreat- a Caribbean vacation is replaced with a road trip, plans to purchase a TV are put on hold, etc.
4. Low hope and low predictability: people are hesitant to spend money on anything ranging from new insurance products to certain consumer packaged goods. Not only do people feel pessimistic about the future, but they don’t see any patterns that would indicate stability- they fall into a “State of Stress and Panic.”
Most of the time these consumer mind-sets last years or decades but in the past 2-3 years companies have seen their consumers jump from one to another, which in turn has also led to inconsistent expenditure on innovation, trepidation in expanding to new markets, hesitation in matching head count with growth, among others. The use of “hard” variables such as sales data, number of cases shipped, Nielsen data, etc. to understand consumers is useful, but just as patriotism can be a forecaster of national productivity, “soft” variables such as hope and predictability can help companies develop strategies and tactics that are in-tune with their consumers’ economic mind-sets.
For information on this subject contact Miguel Gomez Winebrenner at email@example.com or 312 860 3200.prev next