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Inc.: Understanding the Consumer of the Future

John Gerzema of Young and Rubicam talks about how the Great Recession will change consumer buying habits. This interview was originally published in Inc

Many people have been financially devastated by the recession. Probably most were spooked by it. Is that enough to end consumerism as we know it?

When you consider layoffs, downsizing, delayed raises, and reduced hours, more than half of all American workers have suffered losses. This very real pain has driven us to reconsider our definition of the good life. People are finding happiness in old-fashioned virtues — thrift, do-it-yourself projects, self-improvement, faith, and community — and in activities and relationships outside the consumer realm. Our data show large numbers saying money is no longer as important to them. Seventy-six percent say the number of possessions they own doesn't affect how happy they are.

Does it mean consumerism is dead? No. But we are moving from mindless to mindful consumption. That's a fact of life when housing values will no longer provide an ATM to fund our spending and people are working longer to repair lost wealth. From now on, we will spend money that is ours, not the bank's. Therefore, our purchases will become more considered.

When we talked to people about this for the book, many of them sounded almost relieved. It was almost like the game was up.

Your data also show that people increasingly seek to make purchases from companies that reflect their values.

Seventy-one percent of people said, "I make it a point to buy brands from companies whose values are similar to my own." Nearly the same number rejected companies whose values don't match.

If, as you say, consumers are pinching pennies to rebuild lost wealth, will they really be able to afford to shop at a values-oriented business like Whole Foods?

I know Whole Foods is superexpensive. But regardless, people are being more discerning. There is a flight to quality -- where quality could mean craftsmanship, ethics, or feeling good about the purchases you make. Wal-Mart now does local sourcing for many of its products. In downtown Detroit, which is a wasteland, urban farmers are creating greenmarkets; they are becoming the corner convenience stores for people who can't afford to go out and shop in the suburbs. In Kansas City, we discovered something called "cow-pooling," where you get together with a bunch of people and basically buy a share in a cow, to get the freshest quality organic meat. Businesses are going to innovate in how they bring prices down so people can shop the way they want.

How can companies target populations that might hold different values?

It's a mistake to assume that our country is composed of big blocs of people who hold wildly varying values. You could make quite a long list of values held in common across all social and economic groups. Transparency, honesty, kindness, good stewardship, even humor, work in businesses at all times.

Still, did your respondents mention any values that surprised you?

Self-reliance was a big thing. More and more consumers are moving from consumption to production. People are raising chickens in their backyards. Home canning was up during the recession. There's a rise in the barter economy, where people are trading goods and skills instead of spending money. Sixty-four percent of Americans want to do more things and make more things themselves. There's a huge opportunity in providing the tools, materials, and skills to do that.

Your data show that kindness and generosity are among the qualities customers increasingly demand most from business. Yet customer-facing employees often feel overworked and beaten down, and in many instances customer service seems worse than ever. How do companies solve that problem?

The data on kindness really jolted me, because I have been doing this since 1993 and I have never seen a desirable attribute move that much. At the same time, trust in companies and brands has declined. What this says to me is that customers are tired of being sold. They are telling companies, "You need to get who I am. You need to empathize with my plight." Look at Hyundai's buyer-reassurance program. Hyundai grew more than 12 percent in a dismal auto market by saying that if you lose your job, you can return your car. Businesses have to make gestures that go beyond words. Persuasion no longer works.

Customer service is more important than ever. We have noticed that when employees are empowered to provide the best service, they are much happier in their jobs. For managers who think they have to squeeze pennies by making customer service workers handle more calls per hour, this can be a challenging concept. But if you take an extra minute today to really solve a customer's problem, you'll save yourself two or three callbacks tomorrow. Your employees will become more skilled and motivated, and your costs will go down over the long run. In the same way that proper nutrition enhances facial complexion, a values-driven culture enhances your company's outward appearance.

You cite research that many Americans no longer consider products such as televisions, dishwashers, and air conditioners to be necessities. How do makers of products newly rendered unnecessary rethink their marketing and value proposition?

There were data from the Pew Research Center showing that people are starting to shift their concepts about what they can live without. In our data, people are saying they don't need all these fixed costs. So they are dropping landline phones. They are getting rid of their cars and using services like Zipcar and RelayRides. They are using Hulu instead of having a cable bill.

It is a challenging world for anyone selling a $1,000 item that is the latest version of something already in the American home. You have to convince people that your product provides a better experience and that advances in energy efficiency and quality will yield some kind of savings.

If social responsibility becomes table stakes, then that's great for society. But if everyone is triple-bottom-lining it, how do companies use their good deeds to compete?

Companies have to be innovative in leading with values the same way they have to be innovative in their products and services. In our research, Microsoft outscores Apple in reputation, leadership, and being the "best brand." Much of that has to do with the philanthropy of Bill Gates, who represents a wise and generous kind of capitalism. If you allow your founder, your executives, and your workers to be personally identified with making the world a better place, they will burnish the image of the company.

Also, look at your company's expertise and ask, What value does this have to society? Microsoft has this really innovative program called Microsoft Elevate America, which is retraining over two million Americans in technology over three years. Wal-Mart beat out FEMA offering relief during Hurricane Katrina, because Wal-Mart is really good at logistics.

After 9/11, irony was famously — and erroneously — declared dead. Did the recession finally kill it?

Irony isn't dead. There's always going to be room for Jon Stewart. Cynicism is dead.

Will there always be exceptions to the less-materialistic argument? I'm thinking about all those folks who lined up to buy the new iPhone.

People are buying the iPhone because it's awesome.