dr daniel hampson

Navigating turbulent economic conditions: lessons from the UK and US retailing

Dr Daniel Hampson

daniel.hampson@mbs.ac.uk

5th March 2015

http://geert-hofstede.com/countries.html

http://geert-hofstede.com/countries.html

Consumer confidence indices

Consumer confidence

PRESENT SITUATION INDEX

FUTURE EXPECTATIONS INDEX

EMPLOYMENT SITUATION ECONOMIC SITUATION

PERSONAL FINANCE BUYING CLIMATE

EMPLOYMENT SITUATION ECONOMIC SITUATION

PERSONAL FINANCE

The Brazilian Economy; world’s 7th largest

The Brazilian Economy; recent volatility

The Brazilian Economy; recent volatility

The Brazilian Economy; recent volatility

The Brazilian Economy; recent volatility

The Brazilian Economy; declining consumer confidence

Re

cessio

n

The “Great Recession”; UK 2007-09

UK consumer confidence

Re

cessio

n

Research time-line

2008 2012 2016… 2010 2011 2009 2014 2013 2015

Managerial focus groups

In-depth qualitative survey

(USA, n = 254) Case-study research

In-depth triadic interviews

UK survey (n=1,211)

UK survey (n=1,300)

US survey (n=1,400)

US survey (n=1,350)

RECESSION

The team

Professor Peter McGoldrick

Retail Marketing

Dr Anthony Grimes

Marketing Communications

Dr Emma Banister

Consumer Culture Theory

Dr Daniel Hampson

Economic Psychology

Agenda

Psychology

Legacy

Heterogeneity

Society

More saving

More own labels

More spatial price

search

More purchase

planning

Less spending

Less ethical

consumption

Less store loyalty

Less impulsive

spending

Agenda

Psychology Legacy

Heterogeneity

Society

Ability to buy

Economic psychology

Willingness to buy

Extrinsic

Introjective

Intrinsic

1. Economic psychology

Perceived financial risk

Income/job insecurity

Value of illiquid assets

Cost of living

Permanent income/life-cycle

hypothesis/consumption smoothing

1. Economic psychology

Consumers tend to see only the nominal value of money

-2,0

-1,0

0,0

1,0

2,0

3,0

4,0

5,0

Jan2013

Feb Mar Apr May Jun2013

Jul Aug Sep Oct Nov Dec Jan2014

Feb Mar Apr May Jun Jul Aug2014

Average weekly wage

1. Economic psychology

Money illusion

-2

-1

0

1

2

3

4

5

Jan

20

13

Feb

Mar

Ap

r

May

Jun

20

13

Jul

Au

g

Sep

Oct

No

v

Dec

Jan

20

14

Feb

Mar Ap

r

May

Jun

Jul

Au

g 2

01

4

CPI

Average weekly wage

1. Economic psychology

Paradox of thrift Cordon, W.M. (2012). “Global imbalances and the paradox of thrift”. Oxford Review of Economic Policy, 28(3), 431-443.

1 Psychology: extrinsic

Kamakuru, W.A. and Du, R.Y. (2012), “How economic contractions and expansions affect expenditure patterns”, Journal of

Consumer Research, Vol. 39 No. 2, pp. 229-247.

Theory of relative consumption

1 Psychology: extrinsic

Frugality injunctive norm Hampson, D. and McGoldrick, P.J. (2015). “Consumer price consciousness: contemporary role and antecedents”. In review at

European Journal of Marketing.

1 Psychology: introjective

Alonso, L.E., Rodríguez, C.J.F. and Rojo, R.I. (2013), “From consumerism to guilt: economic crisis and discourses about consumption in Spain”, Journal of

Consumer Culture, DOI: 10.1177/1469540513493203.

Deci, E.L. and Ryan, R.M. (2000), “The ‘what’ and ‘why’ of goal pursuits: human needs and the self-determination of behavior”, Psychological Inquiry: An

International Journal for the Advancement of Psychological Theory”, Vol. 11 No. 4, pp. 227-268.

Social sanctions are replaced by internal coercion

1 Psychology: introjective

Moral obligation

Strutton, D. and Lewin, J. (2012), “Investigating consumers’ responses to the Great Recession”, Journal of Consumer Marketing, Vol. 29 No. 5, pp. 378-388.

1. Psychology: intrinsic

Smart-shopper self-perception Piercy, N.F., Cravens, D.W. and Lane, N. (2010), “Marketing out of the recession: recovery is coming, but things will never be the same again”, The Marketing

Review, Vol. 10 No. 1, pp. 3-23.

1. Psychology

https://www.youtube.com/watch?v=uCKgCkubGc0

1. Psychology

1. Psychology: intrinsic

“less is more lifestyle” Kotler, P. (2011), “Reinventing marketing to manage the environmental imperative”, Journal of Marketing, Vol. 75 No. 4, pp. 132-135.

1. Psychology: intrinsic

Thrift as fashion

“Shift their pride from new and expensive products to bragging about how little

they have spent by keeping older products”

1.Grewal, D., Roggeveen, A.L., Compeau, L.D. and Levy, M. (2012), “Retail value-based pricing strategies: new times, new technologies, new consumers”,

Journal of Retailing, Vol. 88 No. 1, pp. 1-6.

1. Psychology: an integrative model of recessionary thrift

Money worry

Price consciousness

Consumer guilt

Frugality injunctive

norm

Smart-shopper

pride

Hampson, D. and McGoldrick, P.J.

(2015). “Consumer price

consciousness: contemporary role

and antecedents”. In review at

European Journal of Marketing.

Agenda

Psychology

Legacy Heterogeneity

Society

2. Legacy

“When income rises, frugality gives

way to profligacy”

Nunes, J.C., Drèze, X. and Han, Y.J. (2011), “Conspicuous consumption in a recession: toning it down or turning it up?”, Journal of Consumer Psychology,

Vol. 21 No. 2, pp. 199-205.

2. Legacy

“New era of discretionary thrift”

Flatters, P. and Willmott, M. (2009), “Understanding the post-recession consumer”, Harvard Business Review, Vol. 87 No. 7/8, pp.

106-112.

2. Legacy

“New age of frugality”

Piercy, N.F., Cravens, D.W. and Lane, N. (2010), “Marketing out of the recession: recovery is coming, but things will never be the

same again”, The Marketing Review, Vol. 10 No. 1, pp. 3-23.

2. Legacy

“Permanent ‘scars’”

Lamey, L., Deleersynder, B., Dekimpe, M.G. and Steenkamp, J.-B.E.M. (2007), “How business cycles contribute to private-label

success: evidence from the United States and Europe”, Journal of Marketing, Vol. 71 No. 1, pp. 1-15.

2. Legacy

“Unemployment ‘scars’ because it ‘scares’”

Knabe, A. and Rätzel, S. (2011), “Scarring or scaring? The psychological impact of past unemployment and future unemployment risk”. Economica, Vol. 78

No. 310, pp. 283-293

2. Legacy: permanent scarring of economic crises

Schewe, C. D., & Meredith, G. (2004). Segmenting global markets by generational cohorts: determining motivations by age. Journal of Consumer Behaviour, 4(1),

51-63.

Generational cohorts

2. Legacy: cyclical asymmetry

Re

cess

ion

Lamey, L., Deleersnyder, B., Dekimpe, M. G., & Steenkamp, J. B. E. (2007). How business cycles contribute to

private-label success: evidence from the United States and Europe. Journal of Marketing, 71(1), 1-15.

2. Legacy

Agenda

Psychology

Legacy Heterogeneity

Society

Back to business as usual

“New normal”?

Cyclical asymmetry

Agenda

Psychology

Legacy

Heterogeneity Society

3. Heterogeneity

Beyond the “discretionary thrift” narrative

Alienating core market segments

3. Heterogeneity

Hampson, D. P., & McGoldrick, P. J. (2013). A typology of adaptive shopping

patterns in recession. Journal of Business Research, 66(7), 831-838.

The Maximum Adaptors

The Minimum Changers

The Eco-Crunchers

The Caring Thrifties

3. Heterogeneity (misunderstanding)

3. Heterogeneity (misunderstanding)

3. Heterogeneity; UK grocery retailer market shares

2008 2015

29.0%

5.0%

5.2%

31.3%

3.3%

3.0%

Agenda

Psychology

Legacy

Heterogeneity

Society

4 Society

Financial stressors:

Cost of living

Unemployment

Job insecurity

Wealth insecurity

Value of liquid assets

Stability of pensions

…

Santiago, C. D., et al. (2011). "Socioeconomic status, neighbourhood disadvantage, and poverty-related stress: Prospective effects

on psychological syndromes among diverse low-income families." Journal of Economic Psychology 32(2): 218-230.

4. Society

Eustress

Adaptive

Distress

Maladaptive

4. Society

Financial distress:

Material deprivation

Anxiety and depression

Social problems

Child delinquency

Aggression and domestic violence

Santiago, C. D., et al. (2011). "Socioeconomic status, neighbourhood disadvantage, and poverty-related stress: Prospective effects

on psychological syndromes among diverse low-income families." Journal of Economic Psychology 32(2): 218-230.

Life events Expected e.g., getting married

Unexpected

e.g., redundancy

Consumer –related

Perceived risk

e.g., financial risk

Service encounter

e.g., queues

Post-purchase

e.g., complaining

Stressors

Eustress

A positive

psychological/affective

response to a stressor

Distress

A negative

psychological/affective

response to a stressor

Adaptive coping

Engagement

e.g., problem-solving

Positive affect

e.g., pride

Maladaptive coping

Disengagement

e.g., denial

Harmful consumption

e.g., compulsive buying

Negative affect

e.g., guilt

Cognitive appraisal of

stressor Behavioural and

affective outcomes

Moderating variables

Affect dispositions

Locus of control

SES

Demographics

Personality

4. Society: a model of financial distress?

Agenda

Psychology

Legacy

Heterogeneity

Society