Consumers in recession

Promotions may be trimming margins for the leading pub and restaurant operators, but they are helping to keep customers coming through the doors. That's not to say that consumers are only going for the cheapest offers.

Research from Trajectory, the forecasting and consumer trends specialists, presented at last week's Peach Network 'Consumers in Recession' seminar highlighted widely different reactions to recession, particularly between middle class and lower income 'blue-collar' households - and although middle England is cutting back, it is only going so far.

Trajectory's managing partner Paul Flatters said that for many people the recession had yet to have any direct effect, but anxiety about the future was changing the way they lived.

Around 80% of people had so far avoided the worse aspects of the credit crunch, defined by having a home repossessed, moving to a cheaper house, having credit refused or experiencing higher mortgage payments, while over 70% said their incomes had either remained the same or had risen in the last year, with only just over a quarter saying they were actually worse off. However, most were cautious about future spending.

A major contrast, said Flatters, was a difference in attitude between the middle classes and 'blue collar' households. The less well-off, he said, would get back to their old ways if they were able to and in general were not taking any long-term lessons from the tougher environment.

They were working around their problems, looking for low-cost alternatives and 'sweating the system', seeking out discounts and coupons wherever they could. For them fixed price, 'all-you-can-eat-for-a-fiver' type, promotions were the most effective.

The middle classes, he suggested, were taking longer-term decisions that could change their habits more fundamentally. Many were cutting down on unnecessary spending and discovering there was a lot of fat to trim.

For some it had been a wake-up call that all the ostentatious and conspicuous spending of recent times had to stop and this was an opportunity to do something about it. They recognised things had got out-of-hand and were now taking pride in slimming down their expenditure. Going out to eat midweek was a common casualty.

However, that didn't mean everything was going to go. Some things still mattered. He gave the example of a woman from Surrey interviewed in a focus group who was happy to trade down from a Range Rover to an Audi to save a few hundred pounds a month, but no way was the gym membership or gardener going to go.

While they will shop around for value, they are normally sticking within what they see as 'acceptable' parameters. For them the offer of a promotional deal from one of their favoured restaurant brands gives them an excuse to eat out, and more importantly helps them to decide which one to choose.

It's not so much trading down as trading within their accepted portfolio. It seems that if they fancy an Italian, it's going to be a visit to Strada, Pizza Express or Zizzi, for example, and the one with the deal is the one more likely to clinch the business.

Families on lower incomes are looking for certainty when it comes to what they can expect to spend when going out. All-in deals work for them, but for those better off, price is still only part of the package.

The big conclusion in this for the eating and drinking out market is that there is still everything to play for, although things may never be the same as they were before.

If middle-income consumers are going to modify their habits long term, pubs and restaurants will need to change theirs too.

Contact Paul Flatters, Trajectory: paul@trajectorypartnership.com;
www.trajectorypartnership.com