How To Take Care Of Yourself During Difficult Times

► Consumer Sentiment

How The Consumer Economic Disconnect Affects Your Marketing

The recent US election underscored how much trust has eroded. As a result, individuals have become more tribal in their beliefs.

Over the 40 years before the pandemic, consumer sentiment about the US economy tended to follow key macroeconomic indicators. These metrics include GDP, unemployment, stock prices and inflation.

Since the pandemic, there has been a large gap between consumers’ perception of the economy, as measured by the University of Michigan Survey of Consumers, and the actual economy as measured by key macroeconomic indicators.

In the chart below, the blue line shows how consumers behaved based on economic indicators and the yellow line shows how consumers believe the economy is doing.

While real consumer spending has continued to increase at an annual rate of 3.4% since January 2021, compared to an average of 2.4% between 2010 and 2019, they still believe the economy hasn’t improved.

Despite recent worries that the US economy was slowing down, macroeconomic indicators performed above average.

• Real GDP growth adjusted for inflation was 3.0% for the past 4 quarters ending 3Q24;
• The top-line unemployment rate was 4.1% as of September 2024, below its 21st-century average of 5.7%;
• The stock market increased by 23%; and
• Real median weekly earnings were up 0.3%, with the highest gains made by lower-wage workers since 4Q2019. (Source: Brookings – Oct. 24, 2024.)

The difference between economic reality and consumer sentiment continues to exist. So, a large proportion of Americans don’t believe that these indicators reflect their personal reality.

I get it!

Every time I go food shopping, I’m surprised at how much whatever I’m buying costs. So, I’m pretty sure you face similar sticker shock depending on where you live and the local products available near you.

While some of these price increases result from the real increase in the cost of goods and production, other companies have taken advantage of price changes to expand their profit margins.

As a marketer, you may not be able to influence your company’s pricing, even though price is one of Marketing’s 4Ps.

Actionable Marketing Tips

• Monitor the environment. Determine how customers view your product set and broader offering relative to competitors, near substitutes, and other alternatives. Where possible, talk to customers directly.
• Assess your customer base. Examine whether it has changed. If so, how has it changed and what does this mean for your business. Assess how these changes relate to your overall sales as well as specific products. Have there been any key changes? This may require looking at your data on a more granular basis.