How The Crummy Economy Has Changed Spending Habits

piggy bank

Although there’s 30-five years between them, Jon Norton and Ron Gonen express similar values, motivations, and talents. One young, and one old, they approach life with a problem-solving perspective that helps them to live in a flexible, free-flowing way.

This strategy, which we call “liquid living,” is being deployed by people who are thinking creatively, shedding excess overhead, and shifting their priorities in response to the changing economy. The feelings behind these shifts turn up in the data among the total U.S. population from the BrandAsset Valuator, where we have noticed results like these:

  • 60-six per cent agreed with the statement, “Since the recession, I realise I am happier with a simpler, more down-to-basics lifestyle.”
  • 70-four per cent say they now keep track of their credit score and financial standing.
  • The top 20 per cent most simple and easy-to-use brands have 58 per cent more preference and 53 per cent greater usage than their competitors.
  • 60 per cent say they own energy-efficient appliances  (and 50 per cent are willing to pay a premium for such items).
  • 80-three per cent agreed on some level that the recession will have a long-term effect on how they allocate both time and money.

The shifts in how people spend time and money can be seen in many recent trends. For example, we see evidence of a move from a credit society to a debit society. In 2009, American credit card debt actually declined by 20 per cent, marking the first decline since 1998 as people shed the weight of excess debt. In 2009 Visa announced for the first time that its customers were relying more on debit cards than credit cards for their transactions. The FDIC found another spend shift—people were using earned rather than
borrowed money to make purchases without running up debt.

If the old American dream was “having things,” now it’s “having agility.” And in many ways, people are finding that as they become less materialistic they feel freer, less encumbered, and more available to opportunity. To get these feelings, people have set about systematically eliminating fixed costs and overhead expenses, preferring pay-as-you-go living. Trends affecting two old-line institutions—the post office and the phone company—illustrate the move toward thrift and agility. In 2009 the U.S. Postal Service, which is creeping toward a 50-cent first class stamp, experienced its largest mail volume decline in its 243-year history and has pulled up 20 thousand blue mailboxes from America’s cities (officials are also considering an end to Saturday delivery in order to cut costs). In this same time period, expensive “land line” phones have begun to disappear. According to Verizon’s estimates, these sets, which once hung on almost every kitchen wall, will disappear by 2025.

Fortunately, the spend shift isn’t pushing aside every old-fashioned institution. In early 2010 a New York Times/CBS news poll found that due to the recession, people were spending more time with family and friends or pursuing hobbies. One of the more popular “hobbies” seems to be sex, as condom and sex toy companies report higher sales. Other data showed the decline of the large “McMansion” suburban house (which is expensive and time-consuming to maintain) and a move back to America’s cities. USA Today noted the recession halted 40 straight years of double-digit growth in suburban living. The downsized home is another recent national trend. The U.S. Census indicated that the American single-family home declined in square footage, reversing five straight decades of expansion. Surveys by the National
Association of Home Builders found that 88 per cent of its members plan to build smaller homes this year.
Curious about the new nimble consumer, we modelled an index of “Liquid Life” brands and companies who represent the top 10 per cent on imagery such as “simple,” “independent,” “adaptable,” and “dynamic.” These companies (such as Geico,, and Progressive) sell goods and services that are supposed to defeat complexity, encourage mobility and agility (iPhone, Google Maps, and Foursquare), and help you make independent choices (WebMD, Hunch, and Yelp). These nimble, simple, adaptable brands outperformed their competition in an exceptional manner:

  • One of my favourite brands +456 per cent
  • Feel loyal to the brand +444 per cent
  • Would recommend to a friend +360 per cent
  • Use regularly +212 per cent
  • Prefer most +195 per cent

As people stripped away excess and complexity, they also moved away from artifice and displays of ego. This all shows up in our data, where things like envy and lust for expensive cars and homes declined by 26 per cent between 2007 and 2009. (Luxury brands declined by 19 per cent.)

Perhaps the single biggest symbol of this spend shift was the General Motors decision to abandon that 1990s emblem of excess, the Hummer. By the start of the Great Recession, auto buyers just didn’t want a car that represented such conspicuous consumption. (Of course, they may also have been influenced by reports that Hummer drivers got nearly five times as many tickets as the average driver.)

Alongside these shifts is the way thrift has blossomed to produce a socially sanctioned frugal lifestyle. In 2009, 58 per cent of Americans (and 67 per cent of Millennials) reported that they used coupons to make purchases. Booz & Company found that two-thirds of consumers frequently use coupons, value price over 
convenience, and believe saving is more important than spending. In another spend shift sign, dollar stores like Dollar General and Dollar Tree rose up in the ranks of the Fortune 500. And in BrandAsset Valuator, 95 per cent of Americans believed that even when the economy recovers fully, they’ll continue to put time and
effort into finding the best deals possible (with 42 per cent agreeing strongly).

shift book cover

Reprinted by permission of the publisher, John Wiley & Sons, Inc., from Spend Shift: How the Post-Crisis Values Revolution Is Changing the Way We Buy, Sell, and Live, by John Gerzema.  Copyright (c) 2010 by John Wiley & Sons, Inc.  All rights reserved.

To purchase your copy of Spend Shift, click here.

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