Trading Down Has Companies Looking Up

An article in yesterday’s San Jose Mercury News entitled “In Recession consumers turn to small indulgences,” reinforces what I’ve been telling clients and students for months:

First, there are companies who are doing well in this gloomy economy, such as Hershey’s, Kraft Food, Wal-Mart, Dollar Tree, as well as some that would not necessarily have come to mind, like running shoe and bicycle helmet manufacturers, coin dealers and gardening tools from BBQ Bazaar.

Second, a key behavior is for people to trade down from their prior behavior. So people who used to eat out at high end restaurants now move to mid-range eateries; those who used to frequent mid-range eateries go down a notch to lower end restaurants; those who used to go to the lower end restaurants now head to McDonalds or Taco Bell. Or folks who might have eaten out previously are now enjoying a nice dinner at home–a trend that not only helps the grocery chains, but stores like Target as well who are positioning themselves as the key player to help people dress up their “at-home” experience.

This trend is true across many industries–such as hotel and travel, automobile sales and leasing, or clothing. It’s not that people are no longer spending; it’s that they’re spending their dollars much more selectively.

As marketers we need to help our clients focus on reaching the new consumers–those that have traded down to where we are today–rather than those who used to aspire to move up and associate with our brands. The market’s out there–it’s just dressed differently, with a different set of faces, goals, and challenges than we’re used to.

But the opportunity is there for companies to move up by capitalizing on the movement to trade down.

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