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Harder Times Ahead: Updated Economic Forecast and Survey Results on Consumer Finances and Purchasing

Harder Times Ahead: Updated Economic Forecast and Survey Results on Consumer Finances and Purchasing
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As the COVID-19 Pandemic tightens its grip on America, consumer attitudes regarding financial security and social activities continue to change. Here’s the latest information brands need to strategically prepare for both short-term needs and long-term expectations.

Last week’s news headlines were filled with quite a few anxiety-inducing story lines. We have President Trump remarking that things will get worse before they get betterAmerica crossing the 4 million mark on COVID 19 casesan uptick in unemployment, the use of unmarked federal agents to suppress protests in Portland, spawning solidarity protests around the country, and uncertainty about the contents of the next coronavirus relief bill.  The resurgence of COVID-19, protests for social justice, and a political season of unprecedented polarization has gripped American culture, and it’s anyone’s guess as to how the next four months will evolve, let alone our longer-term future.

Given all the uncertainty and stress, it’s more important than ever for marketers to keep a finger on the pulse of important consumer attitudes and behaviors. To support this need, we at Collage have been conducting an intermittent tracking survey of how 18 to 39-year-old Americans, a group we call the New Wave, are responding to this extraordinary time.  We focus on the New Wave not only because this generation’s preferences will determine the fate of growth for countless brands, but also because the New Wave represents the first generation to grow up in a highly diverse environment. Our tracking survey observes how this group of consumers perceives their financial situation to be changing, and what activities they currently feel comfortable doing. Keep reading to see what we learned from our most recent pulse check taken of more than 1,800 New Wave consumers between July 20-23 as compared to a prior survey taken in mid-June.

New Wave Consumers See Harder Times on the Horizon

The clearest finding from our most recent survey is that New Wave consumers, across race and ethnicity, are more likely to expect their financial situation to get worse over the next month, compared to how they felt just a month ago. Similarly, they’re also much less likely to see their finances improving.

The change in expectation that finances will be worse is largest for Black and Hispanic consumers (9 and 7 percentage point shift, respectively). These responses likely reflect an increase in job insecurity given the re-emergence of social distancing and pausing of re-openings around the country, two actions which disproportionately impact the service industry jobs these segments are more likely to have. We expect these segments to be more price-sensitive in the coming months, especially if Congress fails to extend unemployment support in the next Coronavirus bill.

Consumers Remain Hesitant to Engage in Social Activities that Drive the Economy

Another key indicator in likely economic activity is how comfortable people feel engaging in the social activities which drive personal consumption and job creation. The story here is that of little meaningful change: consumer hesitancy to participate in these activities remains low across the board. We’re four months into a worsening pandemic and unsurprisingly we see that most consumers just aren’t comfortable getting back to life “as it was.” The only substantial difference across multicultural segments is that non-Hispanic white consumers tend to be more comfortable engaging in these social activities, while unacculturated Hispanics tend to be less comfortable overall.

Purchase of Consumer Staples Appears to Be on the Rise, at Least in the Short Term

Despite the greater concern with finances and slightly reduced comfort with public places overall, New Wave consumers report they plan to spend more in a few areas, notably food, personal care, and home care. We see some movement in other categories as well, but the real story is lingering overall hesitancy to increase spending on non-essentials. These two findings could represent a tendency towards “stocking up and hunkering down” in anticipation of renewed social-distancing guidelines or catch-up spending on essential goods that may have been deferred during the first few months of the pandemic. Regardless of the cause, the sustainability of the increase in essentials purchasing depends on what happens with the pandemic and the Coronavirus bill over the next few weeks. Learn more in the download above.

Downturn Will Be Deeper than Previously Forecast, But Return to Growth After 2021 Looks Steep

Economic projections of the COVID-19 Recession have become more pessimistic across the last several months. Indeed, the most likely outcomes envisage no return to the long-term growth rate in consumer expenditure before 2025. That said, forecasts suggest that the depth of the downturn will be matched by a very rapid rate of growth for a few years. If history is any guide, that updraft will coincide with increasing employment and consumer confidence even if absolute levels of expenditure are below those preceding the COVID-19 Recession

Lean In to Multiculturals Now to Ensure Mid-term and Long-term Growth 

While much of the current pandemic response is out of our hands, it’s imperative for brands to begin the process of preparing for the eventual recovery and future-proofing their long-term strategy. When growth returns, which it will, marketers must recognize that this traumatic year has only heightened the importance of multicultural consumers. Between household formation, immigration,and a declining white population, the dominance of multicultural expenditure growth and cultural influence in the medium and long term is a foregone conclusion.

There is simply no way that companies can expect to grow over the next decades without capturing these important consumer segments. The first step to doing that is showing up for them when they need you most. We suggest brands take advantage of the opportunity to show up for these segments in this time of crisis. People will remember who lent a helping hand and advocated for their needs, and who did not. People will remember efforts to improve the representation of multicultural consumers and their stories in advertising. When the pandemic ends and Americans again feel comfortable spending and taking advantage of your categories, this may make all the difference in the brands and products they choose.

In the download, you will find a sampling of the latest COVID-19 economic projections and implications for multicultural consumers, incorporating a comparison with forecasts released one quarter ago, and the most recent pulse survey on consumer expectations for financial security and social behaviors.

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Economic Projections and Spending Shifts During COVID-19

Economic Projections and Spending Shifts During COVID-19
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Collage Group members have been asking two central questions as we head into the new economic reality of COVID-19.  

First, how can we forecast the economic impact of COVID-19 on the US economy and how will it impact different consumer segments?  Can we learn anything from the Great Recession?  And second, how are consumers reacting in each major category?  Will they trade-down to low price brands?  Will they defend certain categories of spend?

As part of our ongoing research into the impacts of COVID-19, we revised how we model our annually revised ten-year forecast and deployed our third COVID-19 survey to understand where consumers are making trade-offs.  More detail is included in the attached download and webinar playback, as well as in detailed category playbooks released last week.  Our top conclusions follow:

Fill out the form to download an excerpt of our Hispanic consumer insights.

Conclusion 1: Multicultural consumers matter even more in a downturn than in good times.

Modeling the effect of the COVID-19 on the economy will occupy the minds of the world’s greatest economists for some time to come. While we have no skin in that game, we do have a perspective on forecasting efforts.

Comparing the guaranteed population growth of the multicultural segments to the negligible or even negative populution growth of the white segment virtually guarantees that these segments will increase in relative importance to the white population. This means that even as total expenditure and median multicultural household can decline precipitously in a recession, the multicultural share of expenditure can only grow.  The chart below shows what happened in the last recession and what would happen by 2025 if the impact of COVID on the economy exactly mirrors the Great Recession.

The real issue is not how deep or severe the impact will be, but how long it will last.  And how long it will last is a product of the financial support consumers need to weather the storm and how comfortable they will feel about resuming normal life in more densely crowded environments (effectively a proxy for mitigating factors such as a social distancing, therapies for COVID-19, a vaccine, etc).

Check out our custom solutions “Size of Prize” analysis for more detail about how to apply our modeling work to your proprietary brand and category needs.

Comparing the guaranteed population growth of the multicultural segments to the negligible or even negative populution growth of the white segment virtually guarantees that these segments will increase in relative importance to the white population. This means that even as total expenditure and median multicultural household can decline precipitously in a recession, the multicultural share of expenditure can only grow.  The chart below shows what happened in the last recession and what would happen by 2025 if the impact of COVID on the economy exactly mirrors the Great Recession.

Conclusion #2: Consumers are revealing a remarkable level of optimism and resilience in the face of this crisis.

In our recent survey of states of mind, consumers are certainly revealing high levels of stress, but also indicate a deeper focus on self-care and on healthier eating.

Conclusion #3: Consumers across race and ethnicity are making very different brand choices across  categories.

Asian consumers will be more likely to focus on quality – which is an opportunity to promote superior features and benefits or some premium brands.  White consumers will stick with brands they know they like, while Multiculturals in general reveal a greater willingness to defect to a different brand.  Hispanics in particular will be trading-down to low cost brands almost across the board.  Indeed Hispanics will only be defending spend on groceries and perhaps home care.

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Recession Planning for Sustainability & Growth: Market Research & Consumer Insights

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Recession Planning for Sustainability & Growth: Market Research & Consumer Insights
Data Analytics, Primary Research & Subject Matter Expertise
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Signs are pointing to a global recession sparked by the economic impact of the coronavirus pandemic. Lessons from the Great Recession suggest that the Multicultural contribution to total consumer expenditure actually increases in economic downturn because of Multicultural population growth.

Through a series of studies launched this spring, Collage Group has collected deep insights on how behaviors vary by race and ethnicity – key to remaining relevant in this rapidly changing environment. Fill out the form to access our webinar recording.

The Coronavirus pandemic is a once-a-century transformation in the global economy, with radical impacts on trade-flows, consumer behavior, and spending across every industry.

Collage Group members are now in the throes of intensive investigation into consumer response across every category to plan for the short- and long-term. Beyond understanding immediate consumer response through our recent syndicated research, many members are now turning to plans for the future to mitigate loss of revenue anticipated given the pending recession.   

Collage Group was born in the Great Recession when it became apparent that the most resilient consumer group was the Hispanic segment. The segment’s larger family size, and faster population growth and household formation guaranteed that marketing organizations had to put the Hispanic consumer at the center of marketing.   

The 2020 COVID-19 recession will see a similar phenomenon. The continued higher growth rate in consumer expenditure of all multicultural groups significantly outpaces the general market. Indeed, the Multicultural consumer contribution to consumer expenditure in the next few years will likely be even greater than it was during the Great Recession.

Based on this unique understanding, Collage Group recommends the following engagements to build efficiency and plan effectively during the COVID-19 pandemic and pre-recession:

SIZE OF PRIZE ANALYSIS

Nationwide, when the economy is in recession, population and spend growth predominantly comes from Multicultural consumers. In preparation for a recession, brands must understand who they should target to maximize growth, and how best to reach these consumers. Collage Group has long helped brands size the opportunity for growth, to guide investments and budgets. Consider scoping an analysis for your categories and brands to ensure your long-term strategy can withstand the upcoming recession.

CONSUMER ATTITUDE & USAGE DEEP DIVE

Understand the impact of COVID-19 on category usage, behaviors, habits, drivers and barriers.

Our work provides a clear profile of the consumer’s attitudes and behaviors and identifies recommendations and strategies for breaking barriers and optimizing communication with target segment(s) through a combination of qualitative and quantitative research modalities.

PRODUCT & PRICING OPTIMIZATION

The pandemic has driven change in purchasing behaviors across categories. Members are looking to understand how the price-to-value equation has changed across ethnicity and socio-economic segments. Discover the top features that will convince consumers to pick up your product in aisle or select your services (i.e., channel plans, mobile plans, etc.) through the choices they make, rather than their stated preferences.

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Spending Shifts and Social Values During COVID-19

Spending Shifts and Social Values During COVID-19
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A pandemic has upended your 2020 strategy, and you need to stay relevant with the consumers who will power your return to normal growth, regardless of how they are impacted today. These are the insights you need to resonate in response to the COVID-19 crisis and its aftermath. The document available for download provides an excerpt focused on Hispanic consumers.  Fill out the form to download detailed insight into the top issues prime for brand activation in the near and midterm for all consumers by race and ethnicity.

 

COVID-19 has forced all of us to reconsider how we interact with the world.

The uncertainty about how the crisis will evolve and impact us – both as individuals and as a society – has left us without guiderails for how to plan for next month, let alone past 2020. No one can predict the future, but we must be ready for whatever comes next, whenever it comes.
We at Collage have done our best to assess this situation and provide you with answers to three key questions:

1. How will COVID-19 and the public response impact consumer spending?

2. What do consumers expect right now from brands, companies, and other organizations?

3. Which issues remain resonant for consumers beyond the pandemic?

Multicultural Consumer Expenditure Share Grew During the Great Recession

Make no mistake: economic downturns have the harshest personal impacts on the most vulnerable consumers. Peak unemployment rates during the Great Recession were much higher for Hispanic and Black consumers (13.1% and 16.8%, respectively) than for other segments. And with April 2020 national unemployment numbers already expected to be between 15 and 20 percent, we can expect these same segments – which are also more likely to be employed in services directly impacted by social distancing – to feel the brunt of the slowdown.

But despite these setbacks, the Great Recession did not reverse the general historical trend towards increased multicultural share of total consumer expenditures. The key ingredients here are fourfold: (1) younger consumers have higher future earnings potential overall; (2) rising education rates increase the rate at which their future earnings will grow (3) larger families require more spending, and (4) immigration is bolstering household formation, especially for the Asian segments.

These trends guarantee continued and increasing multicultural contribution to expenditure growth even under the dire economic impacts of COVID-19. While individual multicultural households are more likely to see greater price sensitivity in the short term, their growth fundamentals continue to improve.

Multicultural consumers will continue to represent an ever-growing share of your target markets. No consumer brand can afford to abandon any multicultural segment now, no matter what happens in the near term. Their loyalty will be 100% responsible for powering your return to normal growth in the recovery. It is in your immediate interest to let these consumers know you are on their side during these difficult times.

So how do you make that happen? ​

Multicultural Consumers Want Brands to Be Practical, Not Preachy

About 4 in 5 consumers believe that brands have a responsibility to step up in response to COVID-19. The need for action is especially urgent for multicultural segments, who are receiving news about the pandemic with increasing urgency and concern that others are not taking the situation as seriously as they should.

Underlying this urgency is the reality of immediate financial hardship and health risk. Black and Hispanic communities are more vulnerable both to the pandemic itself and the resulting economic downturn. Given these strains, it is not surprising that donating products and services to those in need and educating people about the need for social distancing are the most valuable things multicultural segments say companies can do in response to COVID-19.

And if you decide to put out messaging around COVID-19, you need to make sure it speaks to the lived realities of your audience. Feel-good messages will fall on deaf ears in communities that feel like their tragedies are not being taken seriously. There are plenty of organizations already on the ground listening and responding to these struggles – so make sure you are really listening before you try to respond as well.

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Online Qualitative Research Answers In-Person Fieldwork Disruptions

Online Qualitative Research Answers In-Person Fieldwork Disruptions
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With the coronavirus crisis disrupting most planned in-person fieldwork, our existing online qual expertise at Collage Group has allowed us to seamlessly support clients despite quarantines.

We have been able to continue tracking changes to consumer behavior through cost-competitive, online qualitative research services. Our comprehensive suite of tools makes it easy to engage with hard-to-reach segments across the nation, in multiple languages, wherever they are. Explore the benefits of leveraging our online research, including quicker turnaround times, in-the-moment feedback, rich insights and much more:

Online qualitative research is not a new concept for Collage Group. Our depth of experience goes back 8 years, with more than 60 online qualitative studies that apply more than 10 different online methodologies.

Our expertise and best practices allow us to implement highly engaging and insightful sessions.

Our RIVA-trained, in-language/in-culture moderators and analysts have extensive cross-cultural knowledge and unparalleled Hispanic expertise. We are equipped to uncover true drivers of behavior for any segment in any industry.

We use specific interview techniques that enable our responders from different ethnic groups to obtain breakthrough insights across segments.

We have the ability to engage some of the hardest-to-reach segments through a unique community of highly engaged consumers.

Our selection of online tools is powered by the best user-friendly platform providers, allowing you to innovate with different methodologies.

If you are interested in scheduling a scoping call or would like more information around our online research capabilities, please don’t hesitate to reach out to us.

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The First Deep-Dive into Consumer Behavior in the Time of COVID-19

The First Deep-Dive into Consumer Behavior in the Time of COVID-19
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We are now more than a month into the new normal of the COVID pandemic. Buying patterns have been massively disrupted, millions have lost their jobs with panic buying affecting many categories while others have nearly collapsed.

When it comes to multicultural segments in particular, a few things stand out.  First, culture is a significant determinant of human behavior in this crisis and therefore understanding cultural variation is critical.  Who is stocking up more or less?  Who is listening to influencers more than news and vice versa?  These are questions brands need answers to.

Second, the growth rate of the multicultural population and expenditure in good times is important, but in bad times, that growth rate is critical.  From our scenario modeling, we have seen there is virtually no chance of brand growth in a downturn without successfully activating multicultural consumers.

And finally, multicultural influence on the general population only increases every day.  For brands, that means that building trust and cultural relevance with these segments creates cross-over effects that drive demand across all segments, especially younger white segments.

To successfully address the challenges and take advantage of the opportunities, brands need to understand how culture is intersecting with the current climate to alter attitudes, behaviors, and receptivity to support and outreach.

With this end in mind, Collage Group fielded a study during the last week of March to provide members insights into the attitudes and behaviors of different cultural groups—racial, ethnic, and generational segments—during this time of crisis and uncertainty.   We covered attitudes, COVID mitigation behaviors, employment and finances, buying patterns, time spend, general behaviors and expected future behaviors.

Read below for four top findings from the research. 

Key takeaways

    1. Most people recognize the seriousness of the disease and don’t need to be scared into action.
    2. Avoid alarmist messaging. Remain fact-based and compassionate. Messaging should recognize that people are doing what they can, but can do even more to ensure success.
    3. Hispanic consumers are overwhelmingly feeling the economic impact. And Millennials—a group that has already experienced significant economic hardships due to student loans and the Great Recession—are bracing for more disappointment.
    4. Tell consumers how your brand will support them during these hard times. Offer coupons, extended free trials, etc.  Let them know that you know they’re struggling. This is the time to build connections and trust that can last for years.
    5. Black consumers are more likely than other groups to have bought more food, beverages, personal goods and household goods since the start of the pandemic.
    6. Understand which segments are changing behavior; who to target right now is as important as how to market.
    7. Everyone is spending more time on social media and streaming platforms, but this amplifies the differences in information people receive.  Note that younger consumers, especially younger multicultural consumers use different channels for getting information, relying more on influencers than the news.
    8. Build a culturally fluent channel strategy.  More than ever, brands need to show up in the places where segments retreat into their preferred media bubbles.

Please contact us to learn how our COVID pandemic research can benefit your brand.

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