What if Our Customers Just Don’t Have as Much Money to Spend?
We spend an awful lot of time trying to figure out how to sell our customers more stuff. It’s been tougher lately and shows no signs of getting easier. It’s the internet. Or over supply and too much retail. The customer wants experiences. Poor distribution. No product differentiation. Too many brands. A smarter and more cynical customer.
It’s all of that. But maybe some of it wouldn’t matter as much if our customers just had more money. For all of us the millennials, however we define that group, are an important group of customers. But between lower wages, the gig economy, debt from college, health insurance costs, high rent and the requirement of having cell phones and sundry other necessary gadgets and services, perhaps they just can’t afford what we’d like to sell them.
A recent article called, “Millennials Aren’t Post-Consumerist, They’re Just Poor, Fed Finds” discusses this. And among the interesting links in it is this one to the Federal Reserve study on which the article is based. It’s called “Are Millennials Different?”
It’s 56 pages long and I’m not through it all yet. I want to ask, however, how many of you, as a baseline of your strategy, have asked, “What can our target customer afford?” I guess we all ask it implicitly as we figure our pricing, features, quality, etc. But our omnichannel machinations and all that implies don’t amount to a hill of beans if the customer doesn’t have the money to buy our product.
So I’d like to hear from any of you who have asked, or had this question asked, straight up in a strategy session. “What can our target customer afford?” There’s value in asking it directly, even if it tends to lead us back to the pricing, features, quality, etc. I know- they can afford things they conclude are important to have and it’s our job, at some level, to influence their thinking. That answer doesn’t dispose of the issue.
I’m not quite sure what changes in behavior the question might lead to. If it’s top of mind, rather than implicit, perhaps it influences other decisions. Or maybe we all just want to sell to the 1%. Not a very practical approach for most I’m afraid.
Aloha Jeff! Interesting consideration!! Thanks for pointing it out. One consideration is that how their disposable income is being spent/allocated in the past few years, versus years past. Cars, travel, phones and electronics are experiencing good sales overall–apparel sales are declining. There is indeed a price ceiling for every category in a shop–that “magic” price point that the consumer feels is valid and worthwhile. Retailers AND manufacturers need to be aware of that, for sure!
You’re right! I’m suggesting that brands and retailers need to pause, get out from under their traditional analysis, acknowledge the change in spending habits (and spending necessities) that’s occurred, and ask what this says about their customer’s frame of mind and what’s important to them. That is, if they’ve got less money, what are they going to spend it on? I’m speculating here, but opportunities may include higher quality product that lasts (though of course the initial cost is higher) and helping people be more disciplined about their purchases. Not quite sure how to do that yet, but walk in a Goodwill some time and check out all the new product from various brands with the original tags on it. How can a brand differentiate itself my helping customers not buy stuff they don’t really want/need?