The postcrisis consumer John Gerzema
[Music]
thirteen trillion dollars in wealth has
evaporated over the course of the last
two years we’ve questioned the future of
capitalism we’ve questioned the
financial industry we’ve looked at our
government oversight we’ve questioned
where we’re going and yet at the same
time this very well may be a seminal
moment in American history an
opportunity for the consumer to actually
take control and guide us to a new
trajectory in America I’m calling this
the great unwind and the idea is a
simple simple idea which is the fact
that the consumer has moved from a state
of anxiety to action consumers who
represent 72% of the GDP of America have
actually started just like banks and
just like businesses to deleverage
to unwind their leverage in daily life
to remove themselves from the liability
and risk that it presents itself as they
move forward so to understand this and
I’m going to stress this it’s not about
the consumer being in retreat the
consumer is empowered in order to
understand this we’re going to step back
and look a little bit at what’s happened
over the course of the last year and a
half so if you’ve been gone this is the
easy cliff notes on what’s happened in
the economy okay
unemployment up housing values down
equity markets down commodity prices are
like this if you’re a mom trying to
manage a budget and the oil was a
hundred and fifty dollars a barrel last
summer and it’s somewhere between 50 and
70 do you plan vacations how do you buy
what’s your strategy in your household
will the bailout work we have national
debt Detroit currency valuations health
care all these issues facing this you
put them all together you mix them up in
a bouillabaisse and you have consumer
confidence it’s basically a ticking time
bomb in fact let’s go back and look at
what caused this crisis because the
consumer all of us in our daily lives
actually contribute a large part to the
problem this is something I call the
5020 paradox
it took us 50 years to reach annual
savings ratings of almost 10 percent 50
years do you know what this was right
here this is world war two you know why
savings was so high there was nothing to
buy unless you wanted to buy some rivets
right so what happened though over the
course of the last 20 years we went from
a 10%
rate to a negative savings rate because
we binge
we bought extra car large cars
super-sized everything we bought
remedies for restless leg syndrome all
these things together basically created
a you know a factor where the consumer
sort of drove us headlong into the
crisis that we face today the personal
debt to income ratio basically went from
65 percent to 135 percent in the span of
about 15 years so consumers got over
leveraged and of course our banks did as
well as get our federal government this
is an absolutely staggering chart it
shows leverage trended out from 1919 to
2009 and what you end up seeing is the
whole phenomenon of the fact that we are
actually stepping forth in basically
leveraging future education future
children in our households so if you
look at this in the context of
visualizing the bailout what you can see
is if you stack up dollar bills
first of all 360,000 dollars is about
the size of a 5 foot 4 guy but if you
stack it up you just see this amazing
staggering amount of basically dollars
that have been put into the system to
fund and bail us out so this is the
first 315 billion but I read this fact
of the day that one trillion seconds
equals 32,000 years so if you think
about that the context the casualness
with which we talk about trillion dollar
bailout here and trillion there we are
stacking ourselves up for long term
leverage however consumers have moved
they are taking responsibility what
we’re seeing is an uptick in the savings
rate in fact 11 straight months of
savings have happened since the
beginning of the crisis we are working
our way back up to that 10% also
remarkably in the fourth quarter
spending dropped to its lowest level in
62 years almost a 3 point 7 percent
decline visa now reports that more
people are using debit cards than
they’re using credit cards so we’re
starting to pay for things with money
that we have and we’re starting to be
much more careful about how we save and
how we invest but that’s not really the
whole story because this has also been a
dramatic time of transformation and you
got to admit over the course of the last
year-and-a-half consumers have been
doing some pretty weird things because
it’s been pretty pretty staggering that
we live through if you take into account
80% of all Americans were born
after World War two this was essentially
our depression and so as a result some
crazy things have happened
I’ll give you some examples let’s talk
about dentists vasectomies guns and
shark attacks okay
dentists report molars
you know people grinding their teeth
coming in reporting the fact that they
have stress and so there’s an increase
in people having to have their fillings
replaced guns gun sales according to the
FBI who does background checks are up
almost 25% since January vasectomies are
up 48% according to the Cornell
Institute and lastly but a really good
point
hopefully not related to the former
point I just made which is it shark
attacks are at their lowest level from
2003 does any anybody know why we’re no
ones at the beach so there’s a bright
side to everything but seriously what we
see happening and the reason I want to
stress that the consumer is not in
retreat is that this is a tremendous
opportunity for the consumer who drove
us into this recession to lead us right
back out and what I mean by that is that
we can move from mindless consumption to
mindful consumption right if you think
about the last three decades the
consumer has moved from savvy about
marketing in the 90s to gathering all
these amazing social and search tools in
this decade but the one thing that’s
been holding them back is the ability to
discriminate by restricting their demand
consumers can actually align their
values with their spending and drive
capitalism in business to not just be
about more but be about better we’re
going to explain that right now based on
why anarse brand asset valuator
proprietary tool of vml and Young &
Rubicam we set out to understand what’s
been happening in the crisis with the
consumer marketplace we found a couple
of really interesting things we’re going
to go through four values shifts that we
see driving new consumer behaviors that
offer new management principles the
first cultural value shift we see is
this tendency towards something we call
liquid life this is the movement from
America is defining their success on
having things to having liquidity
because the less excess that you have
around you the more nimble and fleet of
foot you are as a result Dec laws say
consumption is in debt Class A
consumption is the whole idea of
spending money
makes you look a little bit anti-fashion
the management principle is dollars and
cents so let’s go look at some examples
of this debt class a consumption that
falls out of this value first thing is
we see something must be happening when
p-diddy vows to tone down is bling but
seriously we also have this phenomenon
on Madison Avenue in another place is
where people are actually walking out of
luxury boutiques with ordinary sort of
generic paper bags to hide the brand
purchases we see high-end haggling in
fashion today high-end haggling for
luxury and real estate we also see just
a relaxing of ego and sort of a
dismantling of artifice this is a story
on the Yacht Club
that’s all basically blue collar blue
collar Yacht Club where you can join the
Yacht Club but you’ve got to work in the
boat yard is sort of condition of
membership we also see the trend toward
tourism that’s a little bit more low-key
right Agri tourism going to vineyards
and going to farms and then we also see
this movement forward from dollars and
cents what businesses can do to connect
with these new mindsets are really
interesting a couple things that are
kind of cool one is it frito-lay
figured out this liquidity thing with
their consumer they found their consumer
had more money at the beginning of the
month less at the end of the month so
what they did is they started to change
their packaging larger packs at the
beginning of the month smaller packaging
at the at the end of the month really
interestingly too was San Francisco
Giants they’ve just instituted dynamic
pricing so it takes into account
everything from the pitcher matchups to
the weather to the team records and
setting prices for the consumer another
quick example of these types of
movements are obviously the rise of
zinga zinga has risen on the consumers
desire to not want to be locked into
fixed costs again this theme is about
variable cost variable living so micro
payments have become huge and lastly
some people are using Hulu actually is a
device to get rid of their cable bill
so really clever ideas there that are
kind of being taken a hold and marketers
is starting to understand the second of
the four values is this movement toward
ethics and fair play we see that play
itself out with empathy and respect the
consumer is demanding it and as a result
businesses must provide not only value
but values increasingly consumers are
looking at the culture of the company
looking for their conduct
marketplace so what we see with empathy
and respect lots of really hopeful
things that have come out of this
recession and I’ll give you a few
examples one is the rise toward
communities in neighborhoods and
increase emphasis on your neighbors as
your support system also a wonderful
byproduct of sort of really lousy thing
which has been unemployment is a rise in
volunteerism that’s been noted in our
country we also see the phenomenon some
of you may have boomerang kids
these are boomerang alumni where
universities are actually reconnecting
with alumni and helping them with jobs
sharing skills and Retraining we also
talked about character and
professionalism we had this miracle on
the Hudson in New York City you know in
January and suddenly Sully has become a
key name on BabyCenter so from a value
and value standpoint what companies can
do is connect in lots of different ways
Microsoft is doing something wonderful
they’re actually vowing to retrain two
million Americans with IT training using
their existing infrastructure to do
something good also a really interesting
company is gore-tex gore-tex is all
about personal accountability of their
management and their employees to the
point where they really kind of shun the
idea of bosses but they also talk about
the fact that their executives all of
their expense reports are put on to
their company internet for everyone to
see complete transparency I think twice
before you have that bottle of wine the
third of the four laws of post crisis
consumerism is about durable living
we’re seeing on our data that consumers
are realized this is a marathon not a
sprint
they’re digging in and they’re looking
for ways to extract value out of every
purchase that they may witness to the
fact that Americans are holding out of
their cars longer than ever before nine
point four years on average in March a
record we also see the fact that
libraries have become a huge resource
for America did you know that 68% of
Americans now carry a library card the
highest percentage ever in our nation’s
history so what you see in this trend is
also the accumulation of knowledge
continuing education is up everything is
focused on betterment and training and
development and moving forward we also
see a big dy eye movement I was
fascinated to learn that 30% of all
homes in America are actually built by
owners that includes cottage
and the like but 30% so people are
getting their hands dirty they’re
rolling up their sleeves they want these
skills we see that with the phenomenon
of raising backyard hens and chickens
and ducks and when you work out the math
they say it doesn’t work but the
principle is there that it’s about being
sustainable and taking care of yourself
and then we look at the High Line in New
York City and excellent use of
reimagining existing infrastructure for
something good which is a brand-new Park
in New York City so what brands can do
in companies is pay dividends to
consumers be a brand that lasts offer
transparency promise you’re going to be
there beyond today’s sale perfect
example of that is Patagonia Patagonia’s
footprint chronicles basically goes
through and tracks every product that
they make and gives you social
responsibility and helps you understand
the ethics that are behind the product
that they make another great example is
fidelity rather than instant cash back
rewards on your credit or debit
purchases this is about 529 rewards for
your student education or the
interesting companies SunRun I love this
company they’ve created a consumer
collective where they put solar panels
on households and create a consumer
based utility where the electricity that
they generate is basically pumped back
out into the marketplace so with
consumer driven co-op
so the fourth sort of post-crisis
consumerism that we see is this movement
about return to the fold it’s incredibly
important right now trust is not
parceled out as we all know it’s now
about connecting to your communities
connecting to your social networks in my
book I’ve talked about the fact that 72%
of people trust with other people say
about a brand or a company versus 15% on
advertising so in that respect
cooperative consumerism has really taken
off this is about consumers working
together to get what they want out of
the marketplace let’s look at a couple
of quick examples the artisanal movement
is huge everything about locally derived
products and services supporting your
local neighborhoods whether it’s
cheese’s wines and other products also
this rise of local currencies realizing
this difficult to get loans in this
environment you’re doing business with
people you trust in your local markets
so this rise of this sort of local
currency is another really interesting
phenomenon and then they did a recent
report I thought was fascinating they
actually started in
certain communities the United States
start to publish people’s electricity
usage and what they found out is when
that was available for public record the
people’s electricity usage in those
communities dropped then we also look at
the idea of cow pooling which is the
whole phenomenon of consumers organizing
together to buy meat from organic farms
that they know is safe and controlled in
the way that they wanted to be
controlled then there’s this other
really interesting movement that’s
happened in California which is about
carrot mobs the traditional thing would
be to boycott right have a stick well
why not have a carrot so these are
consumers organizing pooling their
resources to incentivize companies to do
good and then we look at what companies
can do then this is all the opportunity
about being a community organizer you
have to realize that you can’t fight and
control this you actually need to
organize it you need to harness it you
need to give it meaning and there’s lots
of really interesting examples here that
we see first is just the rise of the
fact that Zagat’s is actually moved out
of and diversified from rating
restaurants in to actually rating
healthcare so what credentials does the
GATS have well they have a lot because
it’s their network of people right so
that becomes a very powerful force for
them to make their brand more elastic
then you look at the phenomenon of Koji
this Koji doesn’t exist it’s a moving
truck right it’s a moving truck to LA
and the only way you can find it is
through Twitter or you look at or you
look at Johnson and Johnson’s mom Bruce
Asians write a phenomenal blog that’s
been built up where J&J basically is
tapping into the power of mommy bloggers
allowing them to basically create a
forum where they can communicate and
they can connect and it’s also become a
very very valuable sort of advertising
revenue for J&J as well this plus the
fact that you’ve got phenomenal work
from CEOs from Ford to Zappos connecting
on Twitter creating an open environment
allowing their employees to be part of
the process rather than hidden behind
walls you see this rising force in sort
of total transparency and openness that
companies are starting to adopt all
because the consumer is demanding it so
when we look at this and we step back
what I believe is that the crisis that
exists today
a is definitely real it’s been
tremendously powerful for consumers but
at the same time this is also a
tremendous opportunity and the Chinese
character for crisis is actually the
same side of the same coin
crisis equals opportunity what we’re
seeing with consumers right now is the
ability for them to actually lead us
forward out of this recession so we
believe that values driven spending will
force capitalism to be better it will
drive innovation it will make
longer-lasting products it will create
better more intuitive customer service
it will give us the opportunity to
connect with companies that share the
values that we share so when we look
back and step out at this and see the
beginning of these trends that we’re
seeing in our data we see a very hopeful
picture for the future of America thank
you very much
[Applause]