Media Balance Key To Win Wary Consumers

As VP of global consumer insights at Nielsen, James Russo tries to keeps in touch with consumers — what they are saying, what they thinking and, perhaps most important, how they are behaving. And, right now, he reports in this interview with TVNewsCheck Editor Harry A. Jessell, even those with jobs are not a confident or happy lot, which means they are not inclined to shop. And that, of course, is new bad news for U.S.’s struggling, consumer-driven economy and the marketers and media within it.

But amid the pessimism there is also opportunity, Russo also says. Those at the top end of the socio-economic scale — those households earning $100,000 a year or more — are shopping and are spending more money than last year, he says. Marketers can reach them and others with less to spend by understanding they are all less impulsive and more value-conscious than they were in the anything-goes pre-recession days.

As for mass media, “TV is still the pick,” he says, but consumers are complementing their TV viewing with a never-ending exchange of tips on shopping and brands via social media. TV needs to be part of that conversation.

An edited transcript:

What’s the mood out there these days?

It’s very uncertain. When you think about the headwinds that are confronting consumers — a weaker labor market, especially as you look across some key consumer segments; a still weak housing market; wage growth that is very, very minimal; a lot of inflationary pressures — there are a lot of concerns. So consumers are very uncertain.

It’s being reflected in their shopping from the standpoint of increased levels of planning and their being very pragmatic. It’s been this way for some time, but it seems to be getting weaker and increasingly negative.

The Nielsen Consumer Confidence Index was lower in the second quarter of 2011 than it was during the depth of the recession. How do you account for that?

With the start of the recession in December of 2007, we see the drop in confidence. There was that immediate reaction, and it never bounced back. So it was always in this malaise, if you will. It was weak around that 80-83 marker. So without the bounce back, consumers were restrained. Then with a lot of the debt level concerns, a lot of discussion around a double-dip recession, that just dropped us down a little bit lower.

When we ask them about their level of optimism going forward for the next 12 months, it’s the most pessimistic that we have seen going back to 2008. The downward trend, that negative outlook for the future, started in the third or fourth quarter of last year. So this is not a reaction to recent news.

So what is the message for the marketers? How are they supposed to react to this kind of information?

They need to know the opportunities are there, but you have to drill a little deeper. An interesting dynamic is the polarization among consumers. This is very dramatic and has been very consistent. It has to do with the household income levels. What Nielsen knows is households earning over $100,000, which is about 20% of households, they’re increasing their shopping trips and they’re increasing their retail spending about 4%. Households below $100,000, their spending is declining by about 4%. It’s much less if you look at below $50,000. That number there is more in the range of down 6%-8%. We also know that this recession has been very hard on consumers around the ages of 20 to 25 or across some of the ethnic groups.

What you have is kind of a tale of two consumers. In these affluent consumers, they are spending, but they are planning more and they have changed their habits. They are still going to discretionary retailers. We see that with the Whole Foods and some of the department stores and so on. Others are shopping dollars stores and club stores.

So, for the marketer, it’s just understanding who is buying your product and knowing where they live. There is so much evidence to support that you can do well in this economy. You have to work harder, you have to have a strong value proposition. So I want to be very clear on that: There are opportunities. This is not doom and gloom for everyone. 

Another important dynamic to understand in this new consumer economy is that the value for the consumer is not just about price. A lot of times there is a connotation of value equals price, and it is important for a consumer no doubt, but they’re weighing decisions. It’s fascinating to see. They’re looking at the health benefits, the safety benefits, convenience, taste, whatever it might be. All those benefits consumers are factoring in into their purchase decisions.

So maybe marketers want to go beyond the sizzle a little bit to actually explain what they’re selling?

What we know as a result of this recession is that you have the attention of the consumer and what a great opportunity that is. The other side of that is that consumers also have the vehicles in which to be heard — and a lot of times that’s social media. So they can blog about their retail experience or their brand experience. They can tweet about it. They can put it on Facebook. They really are seeking help when they go to social media networking sites. There’s a lot of that exchange and communication that’s going on. So there is definitely opportunity for marketers.

What about broadcasting and other legacy mass media? What lessons should they draw from what you’re saying?

They want to understand that at-home behavior. They want to understand that consumers are consuming media simultaneously. We know about 70% of Americans are not only watching TV, but they’re also on their smart phones or on their mobile phones or on their iPads. There’s this simultaneous interchange. Understanding those dynamics of interconnectivity is incredibly important.

So you would tell the old media to get on top of the new media and be a part of the conversation?

Yes, but to establish a balance. A lot of times, we like to chase what’s new. We like to chase the growth and a good example of that is the growth in new media — social media versus traditional media or even online versus brick and mortar. You have to balance both because if you look at traditional media, TV is still the pick. It still has the reach and frequency that social media does not have, but you don’t have the two-way exchange, the engagement that social media provides. So, yeah, it’s looking at a more holistic approach to your strategy that’s only going to increase. It’s not moving towards one and forsaking the other. That’s not the way to win in this new environment.

How quickly can it turn around? Could we be sitting here a year from now with happy consumers?

A consumer is fickle, right? The consumer is like the equity markets. The pendulum shifts from one end to the other. We know in 2008, when the consumer moved to the sideline, the pendulum shifted one way and we haven’t really moved back to pre-recession levels, and there are a lot of factors that are preventing that from happening — availability of credit and so on.

So this conversation around a new normal is fascinating because there’s so many factors to support that we are not going back to 2005 and 2006. What happened was there was this great recession; nine million job losses happened as a result of that. So things will improve. They always will, but not for some time.

We’re coming up on a presidential election year, which means there will be a lot of mudslinging by the candidates in campaigns and in the media. Does that kind of negativity have a depressing effect on the economy?

Before the recession, the early part of 2008, Nielsen was tracking the verbiage that was being used across the media outlets — mainstream news, cable news — to see what correlation it had on consumer confidence, and there is  a correlation. It’s common sense when you think about it. If you’re going to hear negative news, it’s going to affect your sentiment.

What trumps this whole conversation is the labor market. If the labor market picks up and we see some significant levels of hiring in the 200,000 to 250,000 a month range, that trumps everything. That trumps the rhetoric. That trumps what’s coming out of Congress. That trumps the election because that’s ultimately what the consumer is going to be concerned about. So, yeah, the news media does have an influence, but people internalize it in terms of their day-to-day lives.