Global economic survey looks at confidence (or not), money habits, fears and attitudes across 18 markets

KUALA LUMPUR — Leading global market intelligence firm Synovate today released data from its global economy and prices survey, revealing which markets were most optimistic and pessimistic about their country’s and their personal prospects, where people were intending to or already had switched brands and which market categories were most likely to suffer as people come to grips with living on a budget.

Synovate’s Global Director of Knowledge Management and Insight, Mike Sherman, said that it was fair to say that this will be one of the most challenging years on record.

"The old rules no longer apply. But in times like this, brands should show what they’re made of. Some will fall by the wayside, some will survive and others will thrive.

“To make sure a brand is one of the winners, marketers first need to know what people are doing, feeling and buying. That’s why Synovate asked more than 11,500 people across 18 markets of the world,” he said.

Hope or nope?

Sherman added: “Much of what happens in the economy is based on how people feel. If they are buoyant, they spend. If they feel there’s no hope, they sit on their cash or find a low-risk way to put it to use.”

Synovate found out which markets are most optimistic and which are feeling bleak

Leading the pessimism pack is the United Kingdom (three quarters of all respondents agreed that the economy is going downhill and is going to get worse before it gets better), followed by the United States (69%), Belgium (69%) and France (66%). Looking across the whole survey, the most pessimistic markets were the United Kingdom (UK), the United States (US), some European countries (particularly France, Belgium and Turkey) and Hong Kong.

This was backed up by subsequent answers to whether personal economic situations will get worse in the next year (most pessimistic were Turkey at 56%, the UK at 46% and France at 44%) and thoughts about the economy of the country over the next twelve months (half of all respondents think things will get worse in their country, led by Hong Kong at 74%, UK at 73% and Greece at 70%).

The more positive markets were Denmark (20% agree that the economy is strong), Brazil (14%) and Malaysia (13%). Similarly these markets were most positive when asked about their personal prospects over the next year, with nearly two thirds of Brazilians (65%) believing they will do better and 52% of Danish respondents saying things will be the same. When asked about their country’s economy over the next year, 52% of Brazilians say it will get better, followed by 45% of Malaysians and 31% of Danes.

In the case of Denmark, the relatively favourable position is due to a small public debt and a very low unemployment rate, said Managing Director of Synovate Denmark, Klaus Mikkelsen.

"As a result, the room to manoeuvre for the Danish Government is quite large — for instance some tax reductions became effective 1 January 2009.

“Of course this has a knock-on effect on the attitudes of the Danish consumers.”

Keeping us up at night

So what are people most frightened of? What’s driving insomnia across the world? Fully a third of all respondents chose “Losing my job / household income earner losing job”, as the top choice. This was followed by “Nothing, I am not worried” chosen by 14% of respondents and “Not being able to afford sufficient food for my family” chosen by 12%. Of course there was significant variation across markets.

While losing jobs is far and away the biggest fear, it’s intriguing to take a look at what ranked first and second as each market’s fears. In Canada, the fear of losing money from investments won out over everything else with 23% nominating it as their number one nightmare. It ranked second in Taiwan at 16%.

Paying medical bills is a clear concern in Bulgaria (ranked second with 23% choosing it) and Greece (second, 15%), while it’s all about housing for the UK (not being able to pay mortgage or rent ranked first at 22%), US (second ranked, 23%), Belgium and France (both 20%) and Greece (equal second, 15%).

Hong Kong is a stand out, being the only market to rate giving up luxuries as a top-two fear (14% of people chose this). Brendan Shair, Synovate’s Managing Director in Hong Kong, puts this down to two factors.

“Hong Kong is something of a brand and luxury-obsessed place. Luxury is more of a norm here, an expectation. Also, many Hong Kong people have not yet felt the immediate impact of this financial crisis on their everyday lives. The survey results show that they are quite pessimistic for the future, but they still have jobs and money in their pockets. So, at the moment, people are spending as per usual and giving up luxuries might seem like a hardship.”

Denmark and the Netherlands are the only two markets that ranked “nothing” as their highest choice.

Money habits you can bank on

It’s one part of the puzzle to know how people are feeling. Another important piece is to know what they doing. The survey asked people if they had to make cuts in the past six months and also whether their saving, spending and investing habits had changed.

An overall 59% of respondents across all markets surveyed have made cuts in their spending in the past six months. The top five markets were Turkey (80% or four in every five people have made cuts), the US (78%), Greece (77%), Bulgaria (75%) and France (71%).

Ali Muharemoglu, Managing Director of Synovate in Turkey, said the speed of the Turkish response to the financial crisis comes from practice.

“In the past 15 years, Turkey has seen three major economic crises. This means that Turkish people are fast to react to these conditions and their first response is to claw back on spending; all spending, even necessities.”

Indeed, the survey found that 55% of Turks are spending less on necessities than they were six months ago and 53% are saving less.

By contrast, the French are pulling in their heads in terms of spending but 40% are still managing to save more than they were six months ago. Thierry Pailleux, Synovate France’s Managing Director said this is a direct, and typical, French response.

“Traditionally France has one of the highest saving rates in the world. So during a downturn the reflex action is to save even more in case it gets worse. The French financial system supports more ’life-insurance’ based investment than it does equity investment on the Stock Exchange,” he said.

The nations that have cut back on luxury spending the most are the US (82% are spending less) and the UK (78%). These two countries are also changing their habits the most in terms of impulse buying (82% in the UK and 76% in the US now do this less), showing people are coming to grips with living on a tighter budget.

Just over half (51%) of all respondents say they are now comparing prices before making a decision, led by Greece (70%), Belgium (68%), France and the UK (both 67%), and the US (66%).

The markets that show the fewest changes in habits are Denmark and Hong Kong.

Categorically speaking (or, which categories are feeling the pinch?)

Of course, by definition it’s a challenge to compare categories to each other; they are separate categories for a reason. But it’s fair to say that some have been or will be harder hit by spending cuts than others. The survey asked people whether they have been spending more, less or the same across 12 categories including dairy, alcohol, canned goods, cosmetics and others.

Overall, 27% of people say they have spent less on cosmetics, more than any other category, but it must be noted that the survey covered both genders.

Following cosmetics was soft drinks (29% say they have spent less) and alcoholic beverages (25%).

Mike Sherman made the point that compromises may be made in quantity, quality or both.

"Take alcohol as an example: The people who have compromised their spending the most are the French (48%) and the Brits (46%). These are both countries where drinking is part of the culture, albeit in differing ways. I suspect the story behind these numbers is that people are choosing to drink cheaper, rather than drink less.

"Then there are the people who will still allow themselves little luxuries like perfume or new music or whatever. These consumers may compromise across categories, for example preferring own-brand groceries so they can still treat themselves to personal items.

"Marketers really need to understand the motivations of the people they are trying to sell to, to get inside their heads. This is always the case, but never more so than when times are tough.

“The mistake would be to assume that everyone will respond in the same way,” he said.

Brands: Make mine a no-name

Mike Sherman noted that this is equally a time of danger and of opportunity for brands, as many consumers are open to change in times of crisis.

"There are more changes in brand leadership in a downturn than in good times. Clearly there are good opportunities for generic or cheaper brands; and for the more expensive brands it is a time to build on loyalty and protect, maintain and build on position.

“Either way, the brands that market themselves the most appropriately during this time will do the best. It’s all about building a recession-proof brand. Fast.”

The Synovate Economy and Prices survey also asked people whether they had already switched to a cheaper brand, were planning to switch to a cheaper brand or planning to use the same brand across the same 12 categories.

In general, more people have already switched to cheaper brands than are still planning on doing so. However, there is still significant numbers of people planning to switch and room to manoeuvre for marketers.

Take canned goods as an example. An overall 10% say they are still planning to switch to a cheaper brand, 18% already have and 58% will stay with the same brand(s). People who still intend to switch can be found in Malaysia and Mexico (both 14%) and the US, Belgium and Russia (all 13%). Those who have already switched are in France (44%), the US (36%) and the UK (33%).

Bob Michaels, US-based Senior Vice President of Synovate’s Consumer Insights group, pointed out that in virtually all categories, the US is among the highest in terms of proportion of consumers who say they have already switched to cheaper brands.

“The challenges for marketers are multiple: Ensuring coverage of multiple price points to retain customers who are seeking cheaper brands, effectively targeting shoppers who are price sensitive versus those who are less so and doing so differentially by product category, capturing consumers who are now open to new brands and building loyalty - and then retaining that loyalty through the inevitable economic recovery.”

Recession? What recession?

The survey also explored some attitudes to the economy via a series of statements. Some people will always feel immune to the news and 28% of all respondents agree that ’I find the economy boring and don’t pay much attention’. This was most prevalent in Turkey (42%), Hong Kong (41%) and Malaysia (40%). However, the flipside is that seven in ten people (69%) obviously think the economy is worth paying attention to. Eighty-nine percent disagreed with the statement in the US, followed by Taiwan at 85% and the UK at 82%.

Tony Smith, Head of Synovate’s Financial and Business Services research team in the UK said that Britons are highly interested in the economy, and more specifically, how it affects them.

"This has been on people’s minds for some months now and the survey data shows that people are getting on with living on a budget. We are keeping an eye on the economy, we care about the economy, we are taking control of our spending (88% disagree with ’I am worried, but I just can’t stop spending’).

“We even seem able to cut back on beer and wine, although I noticed that no one is cutting back on hot beverages just yet. It seems we will always need a cup of tea to get through a crisis,” he said.

Peace of mind comes with full pantries for 17% of all respondents. These people agreed with the statement ’I have started storing food in case prices go even higher’. The top three markets agreeing were Mexico (37%), the US (33%) and Brazil (32%).

Bob Michaels said: “Warehouse clubs and bargain aisles in supermarkets are increasingly prevalent in the US. Not surprisingly, with the recent history of commodity price increases, a sizable minority - one third - of Americans say they are stocking up on food items.”

Economic instability and the uncertainty that accompanies it are changing lives too. More than a third of all respondents agreed that they have changed a major life decision due to the current economic situation.

Curiosities

* 48% of Mexicans and 44% of both Brazilians and Malaysians are worried by the amount of money their partners spend
* Despite its relative economic health, or perhaps because of it, 74% of Hong Kong people think the city’s economy will worsen in the next 12 months, the most pessimistic view of all 18 markets
* People are more pessimistic for their country than they are for themselves. Most people seem to understand the issues but do not believe they are personally as impacted as others around them
* 22% of Americans gave up going out for meals with their partner or family as their first spending cut
* 81% of Danes have not had to give up anything to date