The second quarter of 2008 presents a unique opportunity to retailers, as many consumers will soon find themselves with more money in their wallets. But are retailers truly prepared to capitalize on the influx of disposable income in uncertain economic times?
Approximately two-thirds of total sales in the U.S. economy is consumer household spending (the other third reflects business spending). This is why the Bush Administration and Congress have agreed to an economic stimulus package that will put rebate checks in the pockets of certain U.S. households (incomes up to $75,000/year for singles, and $150,000 for married couples) beginning May and June. The amounts range from $300 to $1,200, depending on marriage status and presence of children. Commerce, too, will get a stimulus, with incentives for equipment purchases for small businesses, and 50 percent bonus depreciation provisions for larger enterprises.
The question on every retailer's mind today is this: Will consumers and businesses use these funds and incentives to go shopping? And let's not forget other timely opportunities, including income tax refunds and holiday gift cards and certificates which consumers still have yet to redeem.
Retailers have an opportunity now to create marketing campaigns to sell their products and services based on this unexpected windfall. Analysts indicate that the economic stimulus package will be among the top three selling events of this year (along with holiday and back to school) and the 1-2-3 order is yet to be determined. While the retail industry tends to find comfort in marketing based on a consistent seasonal event calendar, this is a new event in the mix and one that affords tremendous opportunity if consumers can be persuaded to go patriotic and shop.
On the other hand, most Americans feel uneasy about their jobs, the value of their homes, their credit card balances, and the cost of living (and driving cars). They may very well be conservative with whatever monies the federal government sends their way.
For retailers and other consumer brands, there is a lesson that was learned during the past holiday season: don't rely on price to carry the day in sales. Most retailers who compete for foot traffic (and click-throughs) by advertising a "My Discount Is Bigger than Your Discount" strategy will invest a lot for a questionable return.
However, retailers who strategize their tactics, offers, messages, and targets by leveraging customer data and acting on the insights provided there will increase response and effectively manage limited resources.
For example, retailers have a lot to gain from "upstream" spenders who are not current customers -- those who traditionally shop pricier brands but will dip "down stream" when economically challenged. Retailers can use communications to nurture, engage, and drive frequency with these prospects. Likewise, retailers can drive loyalty among historically frequent customers, before they migrate "down stream" to lower-priced brands.
Off-price retailers -- those whose business is to compete on price -- can tout their price advantage to a price-sensitive market, and gain greater share of wallet.
The strategy is to distinguish those upstream active/at-risk shoppers from downstream infrequent shoppers, as well as to engage and welcome them into the brand at a service level that complements their high-spend potential.
One thing is for certain. Woe to the marketer who stands still. Someone in the competition is treating the recession as an opportunity.
About the author
Kelly Mahoney is senior vice president, retail practice leader, at Harte-Hanks. San Antonio, Texas-based Harte-Hanks (NYSE:HHS) is a worldwide, direct, and targeted marketing company that provides direct-marketing services and shopper-advertising opportunities to a wide range of local, regional, national, and international consumer and B2B marketers. Mahoney can be reached at 1-978-436-8782 or via email at email@example.com. Visit the Harte-Hanks Web site at www.harte-hanks.com or call 1-800-456-9748.
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