COVID-19 has ushered in new ways of living, working - and spending. With the majority of the nation currently under lockdown, non-essential businesses closed, and huge levels of uncertainty around the future of work and the economy, consumer mindsets are drastically shifting.
When it comes to spending, we're definitely not looking at business as usual. 32% of Americans expect their income to decrease, and they're shopping accordingly. Other than groceries, the only thing Americans are spending marginally more on is entertainment (as Netflix's rising stock indicates).
The Four New Spending Personas
This change in consumer behavior has given rise to a series of new spending personas. According to EY, the four new coronavirus consumer personas are as follows:
1. The Save and Stockpile persona.
In the early days of COVID-19, the dearth of toilet paper received almost as much attention as the virus itself. This hoarding behavior was an early marker of a shift in consumer behavior. Once the realm of doomsday preppers, a whole swathe of people have taken to stockpiling food and necessities. In fact, their regular spending on groceries is way up - although they're probably not spending on anything else. About 35% of consumers fall into this group, which tends to comprise families. Think about your typical Costco shopper.
2. The Cut Deep persona.
About 27% of consumers are on what amounts to a spending freeze. This group is mostly 45+ and is more likely to be facing uncertain employment along with a dramatic crash in retirement savings. Extreme frugality is the MO here, spurred largely by pessimism about the future. They're spending only on the essentials and doing so less frequently. You can expect them to cancel their subscriptions, switch to store-brand varieties, and avoid updating their wardrobe. Leisure activities are on the out, too.
3. The Keep Calm and Carry On persona.
A roughly equal set of consumers are pressing on pretty much business as usual. These tend to be the white-collar workers and families who have kept their jobs and aren't really affected financially or personally by the pandemic. They're the ones buying an extra item or two at the grocery store, but being mindful not to hoard - although they may be on Twitter complaining about other people doing so.
4. The Hibernate and Spend persona.
This group is synonymous with "self-care", "treat yourself" and "retail therapy". They're generally younger and not saddled with consumer debt or mortgages; if they are, they have the disposable income to handle them. This means they'll be able to weather any economic impact from the pandemic relatively well. This group is spending up big on groceries and is likely to be doing more online shopping as well. Brands matter to them: quality is part of the experience. Only about 11% of people fall into this category.
There Are Geographical and Demographic Factors, Too
The economic impact of the virus varies from state to state, and regionally as well. Tourism hot spots like Florida, Nevada, or Hawaii will see a large casual workforce struggling to get by, while states like Michigan, Ohio, and Kentucky will see the impact of factory closures ripple through their towns and cities. States like South Dakota, Utah, Wyoming, and Texas are relatively unaffected as whole - although if you zoom in, you'll see a different story. The near-collapse of the oil industry is having a significant impact on Houston, and Texas' high number of people without health insurance means that things could quickly take a turn. The lesson here for marketers is to think locally - even more so than usual.
If We're Shopping, It's Digitally
With all but the essential business closed, most shopping has shifted online, and our purchases are reflecting the fact that we're all quarantining at home. Unsurprisingly, home improvement spending is up as we finally get to those long-ignored projects. Video streaming, gaming purchases, and online education are also up as we try to keep ourselves - and our families - entertained while we're sequestered at home. Meal kits, alcohol, and food delivery purchases are predictably on the up as well. On the other hand, purchases in just about every other area have declined.
So how can businesses adapt?
- Adjust your marketing to reflect these newly arising market segments - and be ready to keep adjusting as consumer sentiment inevitably shifts as the economic and healthcare landscape does. Keep your marketing targeted and local so that it stays relevant.
- Devise ways to make your product or service accessible online. Build out your online store presence, offer online seminars or "conferences", or provide a digital version of an analog product.
- Tap into the social side of things. Consumers are desperate for connection right now, and bringing them together can be a big business.
- Try to get ahead of any cancellations. Reach out to customers with an offer to pause or "gift" a subscription, propose new rates, or adjust your payment terms to make them easier to meet.
The world is changing under our feet, and consumers are tentative about where they spend their hard-earned pennies. Make sure that your marketing - and your product or service - reaches them where they are, and is able to nimbly change direction if the market, or consumer behavior, dictates.