Timing of Consumer Recovery Determines "Go-To" Market Strategy

As we move through the year, consumers in many of the major economies are slowly gaining confidence. Yet, they remain cautious in terms of spending. Despite the recent gains posted in consumer sentiment/confidence surveys in the United States, Eurozone, United Kingdom, and Japan, reflecting cautious optimism that the bottom of the recession may be in sight, confidence levels still remain in the recessionary range and are not likely to rebound significantly in the near term. More news of deteriorating job markets, tight credit conditions, and the overall reduction of household wealth are factors weighing on consumers' minds that are preventing them from abandoning their prudent spending behavior. In general, necessity spending will remain a priority to consumers until more economic stability is evident, especially within the job market.

Source: IHS Global Insight Global Consumer Market Service

The pattern of recovery differs across regions, with consumption growth in Asia-Pacific rebounding quicker than many other regions, while Emerging and Western Europe experience a slower progress to recovery. Consumption growth in Asia-Pacific will reach over 4% on a compound average annual basis from 2009 to 2014, and over 5.5% excluding Japan. Consumption growth in Emerging Europe will post 3.6% growth over the same period, with growth returning to its pre-recession rates only after 2011.

The timing and speed of a recovery in consumer spending have important implications for multinational consumer goods manufacturers and retailers as they prepare their near- and medium-term strategic plans to optimally allocate marketing and promotional resources across regions. For example, an opportunity in a region where a recovery is expected to be more robust, such as in Asia-Pacific's emerging markets justifies aggressive strategies with the aim to capture new segments. This marketing approach may actually involve shifting resources away from other, previously dynamic regions (i.e., Emerging Europe), where consumption growth will not reach pre-recession rates in the near term. Whereas in mature regions with a slower road to recovery, i.e. Western Europe and North America, focus can be given to expanding within the existing customer base and maintaining, as well as increasing, market share.

Monitoring and understanding the changing nature of total consumption growth across regions only offers a cursory perspective of the dynamics at play in each of the regions. Analyzing the regional differences for detailed category components, (e.g. spending on home appliances, entertainment services, etc.), or building custom category sales forecast models that identify and measure the direct impact of relevant economic drivers allow for a more tailored and informed approach to implementing marketing and promotional strategies. Thus, consumer good and retail firms will be better positioned to meet the changing global consumer market demands.