Of stagflation and voluntary simplicity buyers: How to sell when the economy’s down but the prices are up

Published in Philippine Daily Inquirer, August 25, 2006

A period of stagflation happens when there is a stagnant economy marked with substantial increases in prices of consumable goods and services. Prolonged stagflation naturally results in massive consumer belt-tightening, increasing poverty and inflation that affect consumer reality and attitude including buying behavior. Needless to say, this has a tremendous impact in the way marketers need to convince consumers to part with their very limited and hard-earned money.

Today, ninety percent (90%) of Filipino consumers belong to the D and E households with a monthly household income of fifteen thousand pesos (Php 15,000) and below. This amount, at less than US$300, is estimated to feed, clothe, shelter an average family of five including educating their children.

While the Philippine GNP is kept afloat with OFW remittances, the domestic economy continues to reel from E-vat implementation; higher costs of food, utilities and oil prices; unemployment, under-employment and job security problems; political instability, power struggle and a state of seeming apathy.

Despite the seeming negative incidence of stagflation, the Filipinos penchant for shopping keeps consumerism alive in the country. With the Filipinos natural resilience in coping with hard times, shopping remains a passion yet marketers are increasingly challenged to present their goods and services in ways that fit the scrimping lifestyle of local consumers.

Coping with stagflation

Dr. Avraham Shama, a Lady Davis Fellow at the Hebrew University, in a longitudinal research on stagflation reveals that stagflation makes consumers change their consumption preferences. It also triggers consumers to judge products and services in a new way. Among the adjustments in consumer behavior include engaging in more comparative shopping, spouses weighing purchase decisions as a couple more than they ever did in the past, becoming less wasteful, becoming more energy conscious, valuing fuel economy in transportation, shopping for specials and bargains, buying cheaper products and private labels and shopping at cut-price stores more often than before.. During stagflation, consumers decision making are more calculated as one realizes how real disposable income has become stagnant or declined.

VS: The New Consumer

A stagflation economy automatically leads to the emergence of the new Voluntary Simplicity (VS) consumer, one who believes in material simplicity and conservation over conspicuous consumption; espouses the human scale that is, scaling down or humanizing one’s living and working conditions while advocating small is beautiful over big is better; believes in the use of appropriate technology over automatic application of high technology; realizes the importance of ecological awareness and conservation, selfdetermination and personal growth. These VS values, developed in seminal works by Elgin, Mitchell and Gregg and confirmed by reputed worldwide Yankelovich Monitor of Social Values and the Values and Lifestyles (VALS) Program of SRI International provide a clear profile of the VS consumer as follows: they prefer smaller products i.e. following the mindset that small is beautiful; opt for simple, more functional, efficient and quality products and smaller, more personal stores; like products that engage interest and involvement; are partial to do-it-yourself products; are keen on innovative outlets like flea markets; engage in wholesale and coop buying; like media and advertising executions that are informative. Also, likely to appeal to VS consumers are no-frill or DIY (do-it-yourself) goods; real estate housing brought down to the human scale with ecological design; organic environmentally responsible and energy saving products (e.g. organic and natural-based, recyclable materials, solar energy based); no-frill transport and carriers; value-based pricing; value driven and informative advertising, specialized and highly involving media; product trial or sampling; knowledgeable salespeople and smaller, more personal outlets.

Where And How To Catch VS Consumers

The voluntary consumer, as research show, is heavily functional oriented and value-minded. They have little attachment to imaging, ambiance, style and packaging. This does not mean though, that VS buyers pay for the lowest price all the time. On the other hand, they are willing to pay for higher prices provided the benefits derived from the product attributes tremendously outweighs the overall product cost.

VS consumers are personally involved with the products and services they buy and where they buy them. A local industry presentation made recently by Andrea Snook, Commercial Director of TNS Worldpanel, a world leader in custom research and analysis with a global network in 70 countries, complements the findings derived from longitudinal VS researches when it comes to channel design. In a 2006 TNS Worldpanel Philippines Who Are My Shoppers data, it was revealed that locally, shopping gains were only evident in the drugstores and supermarkets, with each channel recording an increase in basket spending at Php13 and Php36 pesos respectively while average spending posted Php192 and Php316 per trip. While convenience is the key driver among supermarkets as evidenced by shopping motivators like proximity to place of work and nearness to other kinds of stores; promotions on the other hand is the main driver for drugstores. TNS Worldpanel Philippines reports that good promotion offers and promotions that are clearly communicated are main shopping motivators in drugstores.

For as long as marketers are able to clearly articulate their product’s value and distribute these products and services in channels perceived to be value-driven, they should have a greater chance to reach a bigger segment of Filipino consumers bound to voluntary simplicity.