Dolla in the Bank

June 28, 2011

The Irish are now saving at a rate of 12%, double the 6% that has been the national average for the last 50 years. We have now been asked, officially, by our Minister for Finance (one of them) to stop saving and start spending. It seems such a short time ago that they were asking us to do the opposite by setting up the SSIA scheme….those were the days.

The request has, predictably, gone down badly with the large numbers of people who have no money to spend. Still, if there are people out there who can afford to put away more money than usual, it stands to reason that those same people could afford to be spending it, all else being equal. But of course, all else isn’t equal. Economics 101 will tell you that when consumer confidence is low, money is stuffed under the mattress. People are saving for a rainy day because, most people feel, rightly or wrongly, like those rainclouds are looming in a much more real way than ever before.

But, the sentiment is correct, bringing down the exceptionally high levels of savings by getting people spending should help to speed up the recovery process, after all, it’s the domestic economy that’s struggling, exports are still doing well. The irony of course is that all these savings should mean the banks have plenty to lend out, which would allow businesses to develop and grow. But that, of course, is not the world (…country) we’re living in.

But this fearfulness is not the only reason why people aren’t spending. We’ve all recognised the ‘End of Bling’ as a real and ongoing trend. Consumers who have money don’t want to be seen to be wantonly throwing it around. One of the most successful fashion brands of the last year has been luxury brand Mulberry, who announced a 69% increase in revenue for the year to March 31st. Mulberry is seriously expensive, but very understated. The products are of high quality and classic design and are seen as genuine investment pieces.

This is one example of how I think brands, particularly high-end brands, can succeed in selling to ‘the people who still have money’.

Our basic needs don’t change. I buy into Maslow’s hierarchy as much as I ever did. What these needs mean within the context of the current climate is what we need to focus on. Where our need to belong used to be fulfilled by buying the latest x and having this year’s registration on the car, it is now fulfilled by not buying a new car at all, unless of course there is an exceptionally good reason to, one that ‘excuses’ the purchase. If buying a certain brand says something positive about us and therefore fulfils our esteem needs, then what that brand says can no longer be “I’m rich”. “I’m conscious of the environment”, or “I’m exceptionally good at getting a bargain” are both good alternatives.

Brands now need to give consumers more, better, richer reasons to buy them. Good value is a given, the added dimensions could be that they’re a good long- term buy, or good for the environment, or the brand is doing good in the world, or that they understand the consumer better than the other guy.

Regardless, one- dimensional brands can’t stand out in this climate.

Claire

 

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