Meeting Consumer Needs During Tough Economic Times Brenda J. Cude, Professor University of Georgia 2009 ICAE Fall Exchange
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Meeting Consumer Needs During Tough Economic Times
Brenda J. Cude, ProfessorUniversity of Georgia2009 ICAE Fall Exchange
An Overview
ARE these “tough economic times”? How do we know?How do consumers respond during post-recessionary periods? How do we know?What does it mean for you?
What Are Tough Economic Times?
RecessionA decline in the Gross Domestic Product (GDP) for two or more consecutive quartersThe time when business activity has reached its peak and starts to fall until the time when business activity bottoms out. Business activity starts to rise again during an expansionary period. National Bureau
of Economic Research (NBER)
What Are Tough Economic Times?
DepressionA depression is any economic downturn where real GDP declines by more than 10 percent.
CurrentlyFrom the fourth quarter of 2007 to the first quarter of 2009, real GDP decreased 2.8% on average annually. (Bureau of Economic Analysis)
Graphically (Annualized Growth Rates in GDP, April 2007-December 2008)
How Consumers See It
Consumer Confidence Survey (Conference Board)
Consumer Sentiment Index (University of Michigan)
Flatters & Willmott, July-August 2009 Harvard Business Review
How Will Consumers Respond in a Post-Recessionary Period?
Dominant trendsA demand for simplicityA focus on the boardroom
Flatters & Willmott, July-August 2009 Harvard Business Review
A Demand for Simplicity
Overwhelmed by profusion of choices and 24/7 connectivity, consumers will want:
Fewer choicesTrusted brands and valueAdvisers (including online)Less complicated, more user-friendly technologies
The Value of Limited Options
The Focus on the Boardroom
SecuritiesExchange
Commission
Financial Services Oversight Council
TreasuryFederalReserve
FDICCommodityFutures TradingCommission
Federal HousingFinanceAgency
NationalBankSupervisor
ConsumerFinancialProtectionAgency
Market Regulator
Financial Institutions Consumers
Flatters & Willmott, July-August 2009 Harvard Business Review
How Will Consumers Respond in a Post-Recessionary Period?
Advancing TrendsDiscretionary ThriftMercurial Consumption
Or Will They?From Behavioral Economics
Anchoring
Sunk Cost Fallacy
Flatters & Willmott, July-August 2009 Harvard Business Review
How Will Consumers Respond in a Post-Recessionary Period?
Slowed TrendsGreen ConsumerismThe Decline of Deference
Flatters & Willmott, July-August 2009 Harvard Business Review
How Will Consumers Respond in a Post-Recessionary Period?
Arrested TrendsEthical ConsumerismExtreme Experience Seeking
How Will Insurance Consumers Respond?
What do you think?
How Will Insurance Consumers Respond?
The Insurance Information Institute suggests consumers may (and cautions against):
Reduce homeowners insurance coverage (real estate value is down!)Choose an insurance company by price aloneSurrender whole life insurance for cash valueDrop flood insuranceBuy only the legally required liability coverage for autoNot buy renters insurance
How Will Changes in the Economy Affect Insurance Credit Scores?
FICO credit scores are based on:
FICO insurance credit scores are based on:
40%
30%
15%
10%5%
PaymentHistory
AmountsOwed
Length ofCredit History
New Credit
Types of CreditIn Use
35%
30%
15%
10%
10%
Payment History
Amounts Owed
Length of CreditHistory
New Credit
Types of CreditIn Use
How Can YOU Meet Consumer Needs?
Communicate valueDemonstrate ethical behaviorDevelop “smart” advisors – both in person and online
For More Information
Belsky, Gary. (2004, March). A logical choice. Real Simple, pp. 193-197.Flatters, Paul and Michael Willmott. (2009, July-August). Understanding the Post-Recession Consumer. Harvard Business Review, pp. 107-112.
Brenda J. [email protected]
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