Trying to Put the Toothpaste Back Into the Tube

Now that the recession seems to be ending and the slow recovery process is under way, a new vision of the post-recession economic environments is beginning to take shape.  And, the picture is a lot different than it was before the economy’s free fall.

The WALL STREET JOURNAL on Aug. 6, 2009, has two Page 1 articles that, in my opinion, offer a glimpse of how buyer behavior will effect changes in the post-recession marketplace.  One article focused on a movement among the coffee cafes to keep laptop users out of the stores – at least during peak traffic periods. The other article, perhaps far more meaningful, reports on Procter & Gamble’s introduction of a new low-priced “Tide Basic” detergent product.

The coffee café piece reflects a fundamental change in the customer strategy of such establishments.  Starbucks, the king of the coffee cafes, has long has a policy of encouraging people to come in with their laptops and cell phones and set up shop.  But Starbucks and its competitors are caught in the profitability squeeze, and, as the article reports, the cafes are losing money giving “free office space” to people who don’t spend enough money while working on their laptops and occupying valuable space.   In the new era, if you want to set up shop in a coffee café you’d better do it in the off-peak hours or be prepared to keep buying food and drink as a form of “rent.”

The P&G story is far more significant in terms of post-recession buyer behavior.  It marks a fundamental change to a long-standing customer strategy.  P&G has always been the premium-priced marketer.  It was the creator of the “new/improved” products.  It continued to upgrade – in both quality and price.  When it took over Gillette, it increased prices across the board.

However, today’s consumer is more conscious than ever of prices and the availability of lower-priced private label products.  Dollar stores are everywhere.  Moreover, we have an aging population – many on fixed incomes – who have seen major deterioration of their wealth.  For the first time in many years, people are actually trying to save money because they were so traumatized by the recession.

In the WSJ article, it was pointed out:  “Many people for the first time are clipping coupons, trying cheaper brands and buckling down in ways they never had before.  Economists aren’t sure how long the trend will last.  But a recent report from Information Resources, Inc, identified a new class of fiscally cautious consumers.  Some 52% of respondents said that in the coming months they plan to buy store brands to save money; 47% plan to eat at restaurants less frequently and 48% plan to use home beauty treatments rather than visit a salon.”

While we would like to believe that when recession ends everything will return to normal.  It’s not going to happen.  Major buyer-behavior changes have been unleashed.  Once the toothpaste (in this case Crest) has been squeezed out of the tube, it’s darn-near    impossible to put it back in.