Report Outline

Overview
Catalyst
Summary
THE FUTURE DECODED
Introduction

TREND: Macro economic indicators increasingly point towards recession in a number of countries

Global Share Price Index highlights the negative movements in international share price movements against key events in the global economy
Many regions and countries are lowering economic growth forecasts with a recessionary environment likely to prevail, and in some cases worsen, well into 2009
Unemployment is increasing as companies look to cut costs
Poorly performing housing markets have created new uncertainty and consumer caution
Consumers are aware of the very real issues facing their housing market and are concerned about the value of their home
Commodity prices have become an unpredictable threat to consumer and business spending
Food prices fluctuations are a particular concern
Fuel prices declines have brought relief but this may be a temporary reprieve
Key takeouts and implications: "recession" is a term no longer used in the future tense
TREND: Record low levels of business and consumer confidence will create a difficult operating environment for 2009
A consumers' wealth/financial status has a significant impact on their outlook
Feelings of wellbeing are most influenced by wealth among consumers in the Asian region
Wealth affects feelings of wellbeing less among consumers in the US and Western Europe, particularly Scandinavia
The downturn has had a discernable impact on consumer lifestyles
Consumer confidence across many nations reached historical lows in 2008
Business confidence has followed a similar pattern to consumer confidence
Key takeouts and implications: rebuilding consumer confidence is essential to reignite consumer-facing markets

INSIGHT: As financial wellbeing declines, consumers' attitudes towards investments and savings changes

Consumers are trying to save more money but this may not be possible as economic pressures build
Much uncertainty exists surrounding the recessionary consumer's saving and spending patterns
Prices are falling and the possibility of a deflationary environment exists
Declining interest rates have offset the desire to save
Banks have passed on interest rate cuts on the saving side but are unwilling to cut lending or mortgage rates
Consumers plan to take a responsible attitude to their finances over the next six months
Consumers are switching to safer, more trusted investment options
Consumers are very concerned about the eroded value of their savings
Those who have greater financial awareness are far more concerned about the value of their savings
Banks need to attract and importantly retain savers if they are to regain financial strength
Key takeouts and implications: consumers want to take a more responsible attitude to their finances but lack knowledge and guidance

INSIGHT: Consumers choice of financial services provider is impacted by economic conditions

Both for savings accounts and current/checking accounts financial stability is most important for consumers
Consumers display a degree of inertia in changing their current accounts, seeing it as difficult
The cost of borrowing is the most important factor for consumers choosing a credit card
Consumers are looking for price competitiveness and transparency from their insurer
Key takeouts and implications: clearly communicating the message of financial stability is key to retaining trust

INSIGHT: Consumers have lost trust in financial institutions in light of the recent financial meltdown

Reputation and leadership are important drivers of trust in institutions
The financial crisis of 2008 had a very damaging impact on perceptions of the financial services industry
Online price comparison sites are the most trusted financial services company in the current climate
Key takeouts and implications: the failure of financial institutions to pre-empt the crisis has shattered consumer's confidence in their ability to make financial decisions on their behalf

INSIGHT: The nature and frequency of credit card purchases will be affected by the downturn

High levels of indebtedness have created significant problems during the 2008 credit crunch
Lenders are being forced to approve fewer applications
Consumers' credit card spending is falling
Consumers may be reducing their new card spending but are not reducing their outstanding balances
Consumers are reluctant to use credit to maintain their lifestyle

Key takeouts and implications: consumer resistance to ongoing credit card usage poses difficulties for the CPG industry and card providers alike

INSIGHT: Value/cost is becoming an increasingly important factor in shopping preferences

There has been a large shift towards more cost/value conscious food and non-alcoholic beverage choices in 2008
Recession is fuelling the shift from on- to off-trade food and beverage sales
Value driven alcoholic drinks purchases have been less pronounced than food in 2008 in both the off- and on-trade
Value is more important in choices for at-home consumption but the majority of consumers still exhibit little change in behavior
Personal care products offer emotional comfort and indulgence that gives them a degree of recession resistance
The importance of price in shaping product choice is high for household care products
Consumers will pro-actively search out best value options
Online shopping has benefitted during the recession as a preferred value channel for consumers
Private label is a beneficiary in the current economic environment
Key takeouts and implications: price cuts can be a blunt instrument and consumers' value-for-money impulses should be targeted carefully

ACTION POINTS

ACTION: Adopt an 'informative' approach to marketing promotions with particular emphasis on the savings you can offer

Avoid exacerbating the impending sense of panic
Avoid falling into the trap of unsustainable price cuts and endless promotions
Talk about "value for money" not "price"

ACTION: Maintain or increase marketing investment to help offset the difficulties of operating in a recessionary environment

Risk and return must be actively balanced in recessionary marketing
Falling media rates are fortuitous in helping marketers keep the momentum in their messages
Explore alternative channels for delivery of marketing messages and invest in channel marketing tactics and new territories


ACTION: Be pro-actively open about the communication of a wide range of trust issues

Regain the trust and confidence of consumers with a more personalized approach to service
Speed of reaction to a crisis is vital to prevent negative fall-out

ACTION: Embrace the internet as a trusted source of information and viable sales channel rather than something to be feared

Make more information available via company websites
Use the internet to develop new 'online communities'
CPG companies must upgrade their online presence and offer value for money in their e-shopping endeavors

ACTION: Learn from companies that are trusted by consumers

Online aggregators are a resource to be courted for both CPG and financial services companies
Financial services aggregators hold a greater degree of trust than the industry's individual players
Simplicity and straightforward jargon-free talking has been key to the success of financial services aggregators
Banks and insurers must also take action to build relationships with these online aggregator sites to ensure their offerings have a strong presence

APPENDIX

Methodology
Further reading and references
Ask the analyst
consulting
Disclaimer

List of Tables

Table 1: Consumer survey: confidence and perception of housing market difficulties in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008
Table 2: Consumer survey: the perceived importance of wealth or income in creating a feeling of wellbeing or wellness in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008
Table 3: Number of wealthy individuals (000s), Europe, the US, and Asia-Pacific, 2002-2011
Table 4: Consumer survey: perceived impact of the economic downturn on consumer lifestyles in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008
Table 5: Consumer survey: the extent that consumers are making an effort to save more money in light of the economic downturn in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008
Table 6: Consumer survey: willingness to use credit to maintain lifestyles in light of the economic downturn in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008
Table 7: Consumer survey: tendency to make food and beverage purchases on the basis of value/cost more or less frequently in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008
Table 8: Consumer survey: tendency to choose alcoholic drinks in pubs, bars or restaurants on the basis of value more or less frequently in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008
Table 9: Consumer survey: tendency to choose alcoholic drinks for at-home consumption on the basis of value or cost more or less frequently in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008
Table 10: Consumer survey: tendency to choose cosmetics and toiletries on the basis of value or cost more or less frequently in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008
Table 11: Consumer survey: tendency to choose household cleaning and or laundry products on the basis of value or cost more or less frequently in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008

List of Figures

Figure 1: Recessionary consumers' behavior is affected by a number of basic drivers and inhibitors
Figure 2: Global Share Index highlights the negative movements in international share price movements in 2007 and 2008
Figure 3: Unemployment is set to rise in most Western countries in 2009
Figure 4: In Europe, Spanish consumers have been particularly affected by a housing market downturn
Figure 5: Wealth or income have a high degree of importance in creating wellbeing, especially in emerging markets
Figure 6: The number of wealthy individuals in Asia is converging on numbers in Europe
Figure 7: Less than 30% of consumers across 15 countries feel that their lifestyle are immune to the current economic downturn
Figure 8: Consumers are making efforts to save in light of the current downturn
Figure 9: Consumers are feeling the effects of the downturn on their personal finances
Figure 10: Consumers intend to continue saving more and reducing their credit card spending over the next six months
Figure 11: The value of savings is of great concern to consumers
Figure 12: Those consumers who consider themselves to be of above average financial intelligence are very concerned about the value of their savings
Figure 13: Financial stability is crucial in the choice of savings account provider
Figure 14: ING Direct: when savings don't feel so good
Figure 15: Consumers are concerned by perceived difficulties involved in changing current account
Figure 16: The cost of borrowing on a credit card is at the forefront of consumers' minds
Figure 17: Transparency of product features and price is important to a consumers' choice of insurer
Figure 18: Reputation and leadership are important aspects of trust building which is why the financial services industry is in a problematic situation
Figure 19: Less than 10% of wealth managers were most concerned about a potential recession as of September 2007
Figure 20: Online price comparison sites and banks are the most trusted financial institutions
Figure 21: Consumers, at least attitudinally, are reluctant to use credit to maintain (pre downturn) lifestyles
Figure 22: Food and beverage purchases have been based on value/cost more often in 2008
Figure 23: Consumers' on-trade alcoholic drinks choices have exhibited little change based on value considerations during mid-2008
Figure 24: The off-trade's existing cost advantages have inspired little extra change in consumers alcoholic drinks choices
Figure 25: In the US, Whole Foods Market has initiated several programs that show consumers "how to shop Whole Foods Market on a budget", including advertising through social media
Figure 26: In the US, National City has launched a website of "real stories" from its customers, telling how bank personnel have gone out of their way to help
Figure 27: Moneysupermarket.com has been a key success in the financial services aggregator sector