In the Harvard Business Review, Eric Janszen considers the current economic climate and discusses the challenge of selling to debt-averse consumers.
Janszen insists: "The successful consumer-oriented companies in coming years will be those that can figure out how to make do without the former life of the economic party: the monthly payer."
As the author points out, consumer spending financed by debt is over and the monthly payer is no longer active now the credit and housing bubbles have burst.
To win over debt-averse consumers, Janszen advises
businesses to follow companies that succeeded in previous downturns by "promoting value and utility over luxury and brand".
He adds: "Consumers won’t be able to buy as many goods as before, but they’ll react positively to marketing that allows them to feel their newfound thriftiness is a lifestyle choice rather than a constraint imposed by the economy. Messages that centre on family, life simplification, and getting back to basics will appeal."
Janszen believes that misuse of consumer credit is gone for good and that the reinflation of the credit bubble and "a return to the old days" is not possible.
He explains: "When a nation’s businesses and households take on too much debt and the economy stumbles, the cash flow needed for financing dries up, defaults rise, and a vicious cycle of falling incomes, asset prices, and collateral values begins. That cycle ends only when asset prices, debt levels, and incomes get back into balance."
Selling to the Debt-Averse Consumer
Eric Janszen, Harvard Business Review, July-August 2009
