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Financial uncertainty’s impact on consumer behaviour

A glimpse of what our speakers are presenting at the 2022 Human Insights Conference!

Covid-19 brought many changes to Australians, one of which is economic upheaval, and many Australians have and continue to suffer financial challenges. With hyperinflation and a potential economic crisis around the corner, this is just the beginning of a shocking new Australia.

Our news is continuing to paint a rosy picture of our economy by quoting imaginary positive statistics on unemployment, underemployment, and indebtedness. The true numbers however are polar opposites.

Our way of managing debt is also increasingly precarious with the help of buy-now-pay-later schemes and living beyond our means. Mortgage lenders have speculated recently that impending rate hikes coupled with the current property bubble bursting, one third of owner-occupied borrowings could be at risk of defaulting i.e., some 1 million mortgages, over the next 2 years.

Given that our manufacturing and production in Australia has been reduced to the point where even the fuel we use in our cars is now fully imported, everyday Australians rightly feel that as a nation we are at the mercy of offshore supply. This scares consumers and increases uncertainty because the importation tap can be turned off at any minute, leaving our nation and its people exposed, vulnerable and unprotected.

Although hidden by design until recently, pronounced inequality is now apparent in Australia and people are furious, distrusting, and apprehensive as to what the future might hold. This is having short-term and long-term effects on the effectiveness of marketing, because when financial and economic uncertainty increase with no end in sight, utilitarian purchasing takes over.

Our financial data indicates that everyday Australians have changed not only their thinking with respect to spending, but that the increase in online purchasing activity has polarised the way that consumers spend into two camps. We now have a small and shrinking camp of affluent spenders, and a large and burgeoning camp of the struggling working class, in ways previously unseen and buying mainly with debt.

We will demonstrate that given various drivers of uncertainty, the popular brand equity frameworks which govern today’s marketing thinking, break down. Further, with prolonged financial uncertainty, the heuristics and decision strategies that consumers use change dramatically in line with preserving cash reserves. Both have tremendous impact on the effectiveness of marketing research and marketing.

When consumers realise that they can spend far less than before and live just as well, the economy cannot be kick-started. This is because consumers will find new ways to spend even less, essentially creating a consumer-fuelled collapse of demand for products and services.

As market researchers, our job is to conduct valid research and to inform marketers and management of the drivers of consumer behaviour. We base our behavioural assumptions on utility maximisation for satisfaction.

What happens though to our consumer demand theories if this is not the end goal for consumers, but rather survival?

Whereas previously product and service attributes may have been anchored on price, moderating and mediating effects representing fear, apprehension and financial uncertainty now need to be accounted for. More intricate and delicate attributes need to be used to understand the evolving impact of impending economic constraints on the marketing of goods and services.

We will show how loyalty, segmentation, retention, acquisition, and choice models break down due to financial uncertainty. We will present market research solutions that increase prediction of consumer behaviour for brand, advertising, and marketing strategies.

We emphasise that business as usual marketing research no longer delivers valid results, and that specific and improved approaches to account for this quickly evolving new world need to be understood to maintain and improve behavioural prediction for financially stressed consumers.

Presenters: Con Menictas, Strategic Precision & Brian Fine, QOR

See program day two: Human Insights Conference

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