Tuesday, March 10, 2009

The dawning age of thrift

My partner and I are regular restaurant goers. We’ll often quite decadently travel a not insignificant distance to go to a great restaurant, like for instance Eschalot in Berrima (a one and a half hour drive south of Sydney). Recently we’ve started to pull our horns in a bit by spending less per head. I’ve also noticed a distinct reduction in the number of empty tables at restaurants. I take this as a clear sign that the global recession has arrived in Australia.

People who overconsumed during the past decade are rejecting extravagant lifestyles. Following 9/11 when, in particular in the US, it became patriotic to shop and spend, people are now spending less and more wisely. The penny pinching is showing up in the numbers with personal consumption falling, exacerbated by huge consumer debt ($2.6 trillion in the US).


Which brings us to what John Maynard Keynes called the paradox of thrift. What’s good for the individual, argued Keynes, can ignite or deepen a recession. But that won’t deter the newly thrifty. It isn’t hard to hear the millions of those in debt exclaim, “I can’t help the economy, I’ve got to help myself”. Thrift has gone in and out of style over the years often sparked by recessions. Indeed the Great Depression marked many and their siblings for life. In the 1930s, it was typical for son’s to see their fathers out of work for years, perpetually hungry, scraping together a living. Those sons today, many who are now in their 80s and wealthy, shop with coupons, drive a Ford and take the subway rather than throwing away money on a taxi. Their baby boomer children grew up without psychological scars from the Depression. And the boomers’ children have come of age in an era of abundance, easy credit and a taste for luxury. “We want to build a culture that’s more hospitable to thrift, so it’s not seen as odd but fostered and nudged along,” says Barbara Whitehead, co-author of For a New Thrift: Confronting the debt culture, a new report from The Institute for American Values, a think tank.


As joblessness creeps up, many more will receive their own crash course in thriftiness. Some will spend more up front to reap savings over the next few years, like installing expensive but energy sipping light bulbs or solar panels. Some will switch from shaving cream to shaving soap – a relatively small saving per year but a sizable psychological benefit. People are learning the difference between necessities and discretionary spending. Maslow’s hierarchy of needs is as applicable now as it ever was.


People are eating in more, buying more second hand clothes and turning the lights off when they leave the room. In late 2008, Booz & Co conducted a survey of nearly 100 households and found that 43% of respondents said they are eating at home more and 25% said they cutting spending on hobbies and sports activities. In both cases, most said they’d continue doing so even when the economy improves. Much the way the inexorable rise in petrol price have prompted many to forsake SUVs for smaller cars, the likely fall in home values and the size of consumer debt, will make consumers think twice about hitting the mall and lead, I fear to say, to a more lengthy contraction than some commentators would have us believe.

Wednesday, March 4, 2009

The 'Builders' embrace the power of the web


You know there was a time when my parents didn’t have a clue about computers or the web, let alone Skype or IM. Their generation, those born before 1946 (aka the Builders), were used to stuff in the physical world; purposeful machines you could see working, that could be taken apart, fixed and put back together again. The thought of a mysterious black box sitting in the corner with alien, magical powers that allowed you to get in touch with anyone in the world at any time sent shivers up Builders’ spines. The idea of online shopping was attractive because it removed the hassle of driving or calling around to get the best deal. But there was always the nagging security concern - what if someone intercepted my credit card details? What if I pushed the wrong button while entering my details for payment and ordered the wrong thing or paid too much?

The following is a classic, though admittedly somewhat exaggerated example of my parent’s (actually my Dad’s) first effort to make an online purchase. I have no doubt it’s similar to those efforts of their neighbours and fellow Builders. I guess it’ll strike a chord with my fellow army of Gen Xers who’ve attempted with varying success to educate their ol’ folks of the ways of the web.


- So have you booked your holiday?

- Yes, Dad booked it last night.

- Did you manage to book it online, like we talked about?

- Yes, he booked it all himself online.

- Really, Dad? That’s brave; I thought he was still getting to grips with the computer.

- Well he sorted out the email; he sent you a message.

- Yes, 134 actually. Still it’s good he’s using it, we’ve all got to learn hey. Anyway, where you going on your hols?

- We’re flying to Milan.

- That’s fantastic, it’s a great city. Where are you staying?

- Well, the hotel is a little way outside Milan itself.

- Yes?

- It’s in Miami.

- Dad booked the hotel in Miami but the flights are for Milan?

- Yes, he’s a bit reckless with his mouse. We’re hiring a car so we’ll be able to drive there.

- From Milan?

- Oh no, not from Milan, we’ve got to pick the car up in Manchester.

- Mouse problems again?

- No, no, Dad dropped his bifocals on the keyboard. Still, it’ll be a nice long break. Dad spilt his cocoa on the keyboard and some of the number keys started to stick so he’s managed to book the hotel for 33 weeks…

- Oh no…

- For 222 people…


I am pleased to say that nowadays my Mum - and Dad – use the web successfully, to search for information, to buy various goods and services, to download files and software. They are also fully Skype literate. As I beam into their UK study all the way from Sydney, it is, amongst other things, a pleasure to see their faces filled wonder; the wonder of this technology and the magic it can perform.


Us marketers need to take note. Builders make up a not insignificant 17% of the Australian population (ABS) and therefore present a great business opportunity.
Though still weary of the computer ‘thing’ in the study, Builders have embraced the web and are demanding more from us, the young upstarts that have upset their apple carts and brought them this pragmatic magic.

(Note: McCrindle Research have excellent papers on generational differences including internet usage trend variances.)