Business communication must address crisis realities

You will need to recalibrate and refocus your business communications based on “a new logic” defined in a Wharton Business School study just released, which suggests the end of conspicuous consumption and the notion of luxury as an entitlement.

The severity and uncertainty of today's economic crisis will be more pronounced and last longer than the outcomes of other post-Depression downturns. While spending will resume, Wharton says, it will be “without the vigor” characteristic of the roaring 2000s.

Wharton marketing professor Wesley Hutchinson says the Great Depression “changed consumer behavior and attitudes for a generation," and set a “precedent for a very large shift" to come from today’s economic crisis. These new behaviors include the following.

• Consumers will learn to become more frugal.
  
• Conservative spending practices “are likely” to become a post-recovery standard.
  
• Bad credit management habits will be replaced by an “overextending” wariness.
  

Consumers who “learned to trade up when times were flush are now learning to trade down. They realize they were wasting money on higher-priced goods and services.” They are finding a new sense of well-being in becoming more discerning shoppers. "There will be more of a premium placed on seeking value," says Wharton marketing professor Stephen Hoch.

This will not be an ephemeral shift. Consumers won’t “go back to spending like they did, at least not anytime soon," Erin Armendinger, managing director of Wharton's Baker Retailing Initiative.

The consumer mood is clearly downbeat, says Paco Underhill, author of “Why We Buy: The Science of Shopping.” " The level of depression is pervasive. This is a very dark period," which is defined by income security rather than income, and broadly falls into three consumer groups.

• Lost their jobs and are downwardly mobile, crosses social lines from the Wall Street banker to the GM worker. "This is traumatic.”
  
• Not at immediate job-loss risk, but friends have lost jobs. They are cutting back; take pride in comparison shopping.
  
• Relatively untouched: have paid-off mortgages, portfolios may be down sharply, have adequate cushion. Cutting back because conspicuous consumption seems like bad manners.

The changing consumer psychology also cuts across age groups.

For the sub-30-year-old Generation Y, who “believe spending is limitless…. This is the first financial trauma of their lives…. They have no idea of budgeting."

For the 30-to-45 Generation X, the decline in housing values is the challenge.
Baby boomers also are caught by the challenged of collapsing housing values. "They forgot to save, and thought their houses were doing the saving for them." Their expectations for retirement will be downscaled.

The way to cope psychologically with these changes is for each group to understand that “no acquisition in life that is transformative…. Nothing changes you into somebody you weren't before that purchase happened," Underhill suggested.