Marketing Matters
Hemlines, Movie Tickets May Tell State of Economy
Why should marketers be interested in the sales of men’s underwear, the shortness of women’s skirts and the intensity of Marine Corps recruitment ads?
Some people say these and other unusual indicators can predict the future of the economy.
Predictions abound this time of year, and if you want to study deeply, the Financial Forecast Center provides six-month forecasts on many topics.
It offers predictions on money rates, stock indexes, the consumer price index, retail sales, industrial production, corporate profits, energy and commodity prices, employment and income, just to name a few.
However, Patrick Newport, an economist with IHS Global Insights, threw cold water on predictions when he recently told the Motley Fool, “Anybody who says they know what’s going to happen doesn’t know what they are talking about.”
Still, I was intrigued by a list of bizarre economic indicators that Business Insider compiled. That’s what gets us to hemlines, underwear and the Marines.
You might recognize the Hemline Index. Developed during the 1920s, it theorizes that the shorter women’s hemlines are, the better the economy. Retail buyers discount the theory, but longer skirts did become fashionable after the 2008 downturn.
The Underwear Index states that sales of men’s skivvies drop when the economy tanks. Mintel, a retail research firm, confirmed a 2.3 percent sales decline during the recent financial crisis.
Estee Lauder Chairman Leonard Lauder conceived the Lipstick Index, which says women will buy lipstick instead of more expensive accessories during hard times.
New Yorker magazine says a better-looking restaurant wait staff is a sure indicator of recession. Hot waiters and waitresses go with a cool economy on the theory that the eye-catching servers would be in better jobs otherwise.
The Popcorn Index theorizes that more people go to the movies to escape reality when the economy is sour. Not surprisingly, the 2009 recession year was one of the best ever at the box office.
The Beer Consumption Index examines at-home beer consumption compared to imbibing at restaurants and bars. Recent anecdotal evidence: European employment in breweries, bars and restaurants fell 12 percent from 2008-2010, compared with a 2 percent drop in total employment.
The Marine Index looks at the tone of advertising messages. In tough times, when interest in enlistment can outweigh the need for Marines, the Marine Corps’ ads start to show some of the really difficult aspects of service, thus discouraging some potential enlistees.
If you want some more truly scientific indicators, I suggest studying the London-based Consensus Economics, which polls 700 of the world’s leading economists.
“History has shown that the most realistic predictors (of future economic activity) are consensus-based surveys,” said Richard DeKaser, deputy chief economist at the Parthenon Group in Boston.
But lipstick sales, hemlines and other off-the-wall research makes for far better water-cooler talk.
Are Baby Boomers Grinches or Big Spenders?
The economic impact of the baby boom generation has become the subject of significant debate.
Marketers should study this huge population sector to determine whether their goods or services fit baby boomers’ needs and wants.
As boomers approach retirement, they are castigated as people who will bankrupt Medicare and Social Security.
The real estate industry, struggling with oversupply, sees masses of boomers trading down in house size to accommodate empty nests and cranky knees.
And now the Federal Reserve blames boomers for a predicted stock market slump over the next decade.
“To finance retirement, they (boomers) are likely to sell off acquired assets, especially risky equities. A looming concern is that this massive sell-off might depress equity values,” wrote Zheng Liu and Mark Spiegel of the Federal Reserve Bank of San Francisco.
The Employee Benefits Research Institute projects that the average married boomer couple is about $30,000 short in retirement savings. Even with Medicare, the average boomer couple needs $300,000 to cover the lifetime cost of health care.
“People who haven’t saved enough for health-care costs will deplete their assets,” said Michael Markiewicz, a partner at New York-based Fogel Neale Partners.
New York Times columnist Thomas Friedman weighed in with this comment to NPR: “We shifted from the Greatest Generation that operated on sustainable values — saving and investing — and handed power over to the Baby Boomer generation who lived by situational values, borrow and consume.”
Attitudes changing
The Consumer Intentions & Actions survey conducted monthly by BIGresearch shows that boomers might be becoming more economically conservative.
More boomers than any other generation have begun agreeing with this BIGresearch statement: “Over the last six months, I have focused more on what I need rather than what I want.”
“It seems the message of Depression-Era parents has finally taken root in the Boomer brain: save money and live within your means,” said Matt Thornhill, founder of the Boomer Project.
However, I have found a big exception — grandchildren. The majority of today’s grandparents are working-age baby boomers, and they can’t say no when it comes to their precious grandchildren.
According to the MetLife Report on American Grandparents, households headed by a person 55 and older spent $7.6 billion on infant food, equipment, clothing, toys and games. That’s up 71 percent since 1999.
Boomer grandparents spent $2.43 billion on primary and secondary school tuition and supplies, a three-fold increase since 2000, and the spending doesn’t stop there. Households headed by people 55 and older spent $863 million on used cars as gifts last year, up from $224 million in 2000.
Several factors fuel this growth:
They have the money: Boomer households command 46 percent of the nation’s total household income.
Better incomes: In the last decade, household income for families headed by someone 55 or older increased by $659 billion, while 25- to 44-year-olds’ household income declined by $312 billion.
Heads of households: A grandmother or grandfather heads one in three households.
Therefore, marketers shouldn’t characterize boomers as self-centered and greedy, especially as regards their grandchildren, and they should study carefully what boomers’ overall spending patterns are.
Consumers May Spend Less This Holiday Season
The holiday shopping season is upon us, and expectations are modest at best.
Available research about holiday spending holds lessons for all marketers because it gives insight into broader consumer behavior.
Look for a 2.8 percent increase in total holiday sales, says the National Retail Federation’s 2011 Holiday Consumer Intentions and Actions Survey – in part because of more consumers in the marketplace.
However, it also projects the average spending on gifts and seasonal merchandise to decline to $704 from last year’s $720.
Research firm NDP Group has data showing that only 9 percent of consumers plan to spend more this holiday season. Two-thirds said they would hold the line.
Accenture’s holiday forecast said 71 percent of consumers plan to be “careful” or “controlled” and 88 percent said they will spend no more than last year.
“Persistently high unemployment, an erratic stock market, modest income growth and rising consumer prices are all combining to impact spending this holiday season,” said Jack Kleinhenz, the retail federation’s chief economist.
“Mid- to upper-income shoppers will lead the falloff, and they have been supporting growth. But pain is now moving up market” said Frank Badillo, senior economist for Kantar, a worldwide business consultancy.
Who will be the winners and losers?
The National Retail Federation forecasts that department stores with unique private label offerings will see a 2.4 percent increase in traffic. It also projects more customers for clothing and accessory stores, drugstores, supermarkets, discount stores and craft and fabric stores.
Holiday volume should mean one-half million temporary jobs.
According to an Ipsos Public Affairs poll, women more than men (49 percent to 39 percent) plan to cut back on spending.
The 18- to 34-year-old crowd is likely to spend more than adults ages 35-plus, though, the same poll showed.
Retailers with a strong mobile presence will win. PayPal predicts 46 percent of U.S. smartphone and tablet computer owners will make a holiday purchase with their mobile devices.
According to ad network Mojiva’s Mobile Audience Guide, a majority of mobile users will seek product information, search for coupons, read product reviews or seek store information via their devices this season. Top purchases on mobile devices will be toys and games (52 percent), electronics, music and movies (51 percent) and clothing (40 percent), Mojiva says.
All the while, folks still want bargains. Whether online or in stores, coupons and savings via loyalty cards and in-store promotions are important to most shoppers, says several surveys.
Online retail activity is also predicted to increase. “Last year 60 percent of the shoppers we surveyed said they intended to do some holiday shopping at Walmart, 45 percent at Target and 40 percent at online-only sites,” said Mary Brett Whitfield, senior vice president and director of shopper insights at Kantar. “This year, that’s changed considerably, with just 52 percent saying they plan to shop at Walmart, 43 percent at Target and 45 percent at online-only sites.”
All of these details tell marketers that they must study their customers closely, anticipate their needs and understand their behaviors. Research leads to sales and, hopefully, to holiday cheer.
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