US News and World Report posted a great list of 17 ways consumer behavior has changed in the wake of the enduring changes in the economy. In cautionary times, it is an imperative read for marketers who need consumer behavior to drive recurring revenue.
Since consumers are more thoughtful when parting with their money these days, companies will need to recognize that the tricks of the past won't necessarily work any more. In the days of increasing wealth, it was easy to slip a $5 recurring fee onto a consumer's bill and have it go unnoticed as long as the consumer could make that minimum monthly payment. I'd say that practice is now prey to their "greater suspicion" and their need to reduce their monthly overhead.
In the old economy, status could be bought with premium brands. Today, however, displaying glitzy luxury brands doesn't feel so good when the world is full of so many have-nots.
For rich and poor, that means quality matters more than ever before. Products need to stand when the label isn't screaming their luxury price. As the report mentions, they'll be less waste, and the average consumer won't be replacing or upgrading goods quickly, because it feels wasteful to retire things that still function effectively. That means product lifecycles will change, and not necessarily be led by innovative technologies. Companies will struggle to introduce new technology platforms when consumers are busy trying to get more out of the technologies they have already invested in and are using successfully. And cheap products that fail to meet expectations can be exposed quickly through social media, which can build or dilute a brand's loyal base.
In a rental economy, when credit is tight, commitments are hard to make, and consumers are fearful of what happens if they can't meet them. Consequently, it will be more important for consumers to evaluate the benefit of low upfront costs against the risk of long range contracts, especially if the penalties for breaking the contracts are severe.
Indeed the new economy's consumer is more informed, more defensive, and more alert than ever before. Those that understand this well will lead the economic recovery.
And right on cue, Verizon announces its plans to double fees for early termination of FiOS service. "The company is offering discounts for those who sign up for long-term contracts and said it needed to raise cancellation fees to recover potential losses from those discounts."
It does make you wonder whether the discounts were the right acquisition strategy in the first place. If the consumer thinks there is the slightest risk they may want or need to cancel the service, won't this affect their appetite to buy on a long term contract?
I recently bought a Verizon broadband data USB data stick and paid full retail price for it without a contract. After being informed of the contract penalties the rep suggested I should still take the contract because even with the penalites for cancellation I would have a net savings of $15 if I broke the contract. As a customer, should I have to sign a two year contract, just to net $15 savings?