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Wednesday, 11 May 2011

New consumer mindsets

 Books Review by CHOO LI-HSIAN

Author: John Gerzerma and Michael D’Antonio Publisher: Jossey-Bass

Spend Shift: How the Post-Crisis Values Revolution is Changing the Way We Buy, Sell and Live

IN their book Spend Shift: How the Post-Crisis Values Revolution is Changing the Way We Buy, Sell and Live, John Gerzerma and Michael D’Antonio show how consumers are “moving from mindless to mindful consumption” in an attempt to cope with their post-crisis loss of purchasing power and trust in institutions. In doing so, consumers are becoming “increasingly powerful and unpredictable”.

How they consume products is based as much on their emotional state as the environment around them. The book cautions that for companies “prone to celebrating a leadership position and a competitive market advantage, commoditisation may lie just around the hairpin corner.”

Consumers are resetting their spending and their lives to the new post-crisis financial realities. Through more strategic spending, consumers are voting for values with their dollars and influencing corporate behaviour. Communities are moving from capitalism to social collectivism supported by common values, a shared spirit of entrepreneurship and new skills in areas such as social media.

In response to this, many companies and brands are also making a very intentional effort to prioritise principles over profits, offering greater authenticity and creativity. At Walmart, Microsoft, Zappos and other companies, the authors met with executives who are applying new technologies side-by-side with old-fashioned customer-first practices to make their companies more relevant, resilient and profitable.

Stewards and staff of companies that are doing well by doing good ultimately also feel better about their positive impact on the communities they serve and the planet they share with their customers.

To tell the story of Spend Shift, the authors travelled from coast to coast, visiting large cities and small towns across eight American states to examine the value shifts sweeping the nation. They sat across kitchen counters, talked to small business owners and interviewed people from over 50 start-ups and large corporations. Their resultant efforts help readers to realise the depth and dimensions of the economic crisis and its consequences for American society and the world at large.

Marrying these real-life stories with solid research from Young & Rubicam, they analyse the changing consumer psyche, document the five shifting values and consumer behaviours that are remaking America and the world; and explain what it means to businesses and leaders. In stark contrast to the usual tired narrative of America’s decline, the book offers an uplifting alternative account of innovation, inspiration and surprising opportunity.

The authors introduce us to people who are reinventing their lives and livelihoods in the wake of the “Great Recession” that has “rearranged priorities, awakened creativity and reconnected us to the people and things that really matter.” We meet Torya Blanchard, owner of “Good Girls Go to Paris”, a tiny crepe restaurant that serves low-cost but high-quality meals in Detroit, a city where shuttered shops now outnumber those that are occupied.

There is Paul Savage, CEO of Nextek Power Systems, which champions electrical equipment made from direct current (DC) systems, Thomas Edison’s original creation.

We encounter Leslie Halleck, the first in her Dallas locality to start raising chickens in her backyard, who created a business to train other locals to do the same. Leslie stands as a shining example of how households across America are moving to more self-reliant lifestyles by shifting from consumption to production.

Through Cuban immigrant and Dallas librarian, Mariam Rodriguez, we discover how public libraries have become training centres for those who need to brush-up on skills, conduct a job search, or get free instruction in English as a second language. Library use in America has in fact reached record levels during the recession as people seek out education and community cheer. Sixty-eight percent of Americans now have a library card, the highest percentage ever.

We learn how technology and social media forums are helping to make generational and geographical divides disappear. The book talks of how senior editor of Make magazine, a bible for do-it-yourselfers, Phil Torrone partnered with Limor Fried to create Adafruit Industries, which sells kits and parts for original open-source hardware electronic projects out of a small loft in lower Manhattan. Adafruit sponsors “MakerFaires”, an online social forum where Millennial-aged electronics enthusiasts are mentored by retired engineers from NASA and Boeing.

The authors also reveal how Rob Kalin and his partners in Brooklyn created Etsy, an online place where artisans around the world could display handmade work and sell these to global buyers.

New business models with innovative incentivisation ideas have also emerged from the ashes of the crash. Partners, Lynn Jurich and Ed Fenster, solved the basic problem in rooftop solar energy that roadblocks many aspiring adopters – upfront cost. Her San Francisco firm, SunRun, gives homeowners guaranteed fixed energy costs through fixed leases for 30 years (that can be transferred to subsequent house owners) along with free maintenance with little or no investment; setting a fixed cost for power. SunRun’s customer base has increased by over 400% in 2010.

We speak with Andrew Mason, founder of Groupon, the group discounting phenomena that mobilises the masses with daily deals on products, services and even meals. The discounts are unlocked and activated when a threshold number of people agree to pay for the coupon or “groupon”. We see city council recycling manager Jon Norton working with RecycleBank to initiate the use of trucks mounted with scales and bins with electronic identification tags; so that the paper, glass and metal left on the curb by homes can be weighed and the households rewarded with shopping discounts.

In Western Massachusetts, locals have even created their own currency called Berkshares (named after the Berkshire Mountains) to help native shops survive competition from national chains moving into small mountain towns. Thirteen bank branches and community businesses have agreed to exchange these dollars to keep cash within the community.

The shift has not only been harnessed by small start-ups but also by the behemoths of big business. A case study shows how Scott Monty, head of social media at Ford Motor Co has moved the company toward openness and transparency. His goal was to start conversations with anyone who cared to speak to Ford. The Fiesta Movement on Twitter required that Ford actually allowed people to talk about the car in a way that was “unedited, uncensored, unscripted.” This new culture, coupled with new products designed through close counsel with customers and Ford’s refusal of Government bailout money, has helped to engender new respect and interest for the brand.

As the world economy struggles to find its feet after the last economic earthquake and its aftershocks, people are clearly coping by moving away from the material towards the more fundamental and the ethical. The book is vital reading for any marketer seeking to recalibrate their campaigns after the recession.

It provides a useful blueprint on new consumer mindsets and movements in the 2010s. It shows how businesses can adapt to the new consumer spending reality (more inquisitive, less acquisitive); repositioning themselves to appeal to this new sense of value tied to traditional values.