Today, I spoke to John Gerzema, who is the Chief Insights Officer for Young & Rubicam Group. He is the author of The Brand Bubble, and his latest book is called Spend Shift. I’ve spoken to John before when his previous book came out back in early 2009. In this interview, John talks about consumer values in the new economy, and more.
What is the values-driven post-recession economy? What does it consist of?
In our research and travels across America, we were pretty encouraged to see how people are making positive changes in their lives in the post-crisis economy. Awakened by the crisis, people are returning to old-fashioned values, such as self-reliance, thrift, faith, creativity, hard work and community in order to build new lives of purpose and connection.
The Spend Shift is a realization that while we are less rich, we can be more powerful. Even as people find themselves less rich, they are deploying their dollars in a more calculated and strategic way to influence institutions like corporations and government. They realize that how they spend their money is a form of power and they are using it to communicate their values and reward those companies that truly reflect them whether they are pro-environment, anti-bail-out, or concerned about some other issue. In this way, each dollar resembles a vote and every day is Election Day for companies that provide goods and services.
In our research, 71% of American consumers make it a point to buy from companies whose values are similar to their own; 66% avoid buying brands from companies whose values contradict their own”. Given that consumer spending drives 70% of America’s GDP, this social interest in aligning values and consumption is an important trend for companies to understand.
What are the five shifting values and consumer behaviors that are remaking America and the world?
#1: The New American Frontier celebrates the value of optimism, resiliency and character rooted in America’s sense of equality and fairness and underlying optimism in the face of adversity. The pursuit of the American dream is rooted in our cultural belief in redemption and second chances. Yet given the enormous inequities in income, education and healthcare, this value-shift acknowledges the reality of an increasingly un-level playing field. To counter this, we increasingly prize populist solutions, where opportunities rise up, rather than trickle-down. We saw this evident in the grassroots entrepreneurialism emerging in inner-city Detroit. A resurgent civic pride is uniting a small but undeterred community of citizen-entrepreneurs set upon rebuilding their city with new industries and local cooperation. While others see a post-apocalyptic landscape, artists, small business owners and urban farmers have flocked to Detroit to take advantage of inexpensive land and limited municipal oversight to create a grassroots marketplace that is rising like saplings from a clear-cut forest. When the average price of a house is $ 18,000, there is no speculation, only raw opportunity. What we witnessed would suggest not to short the Motor City.
#2 Don’t fence me in is the value of self-reliance, education and continuous betterment as people reclaim control by seeking new skills and knowledge. Here the American value of hard work and sacrifice is re-imagined and celebrated as people ‘re-tool’ with new skills, knowledge and resourcefulness to navigate a continuously turbulent world. Part of not being fenced in is a shift from take to make — from consumption to production. In Dallas we found backyard chicken farmers and people using the Dallas public library to learn new skills. Texas is emblematic of a ‘do it yourself’ nation that is shifting from acquisition to inquisition: 68% of Americans now have a library card, the highest percentage ever. Personal responsibility and resourcefulness are the new virtues: Twenty-three million Americans grew their own food. Dallas had to hastily pass an ordinance for the exploding number of suburban chicken farmers.
#3 The badge of awesomeness prizes nimbleness, adaptability and thrift as a means to avoiding exposure and preserving freedom and control. It is a phrase we picked up in an interview with Maura McCarthy, co-founder of Blu Homes, which makes modular, pre-fab homes. People are eliminating want from need and becoming faster, lighter and more agile. And with less excess there is more flexibility. From time banks and micro-payments, to renting and Zipcars, people are moving from fixed to variable living to shield from adversity and be more available to opportunity. Visa reports that debit cards now outpace credit card usage. And whereas having things defined success before the Great Recession, today less is more. The average size of the American home declined for the first time in three decades suggesting the era of the McMansion is waning.
#4 Block Party Capitalism is about shifting our spending the American virtues of character, and accountability and locality. Here, America is increasingly moving back to prizing what’s on the inside, and the emphasis on performance, craftsmanship, and provenance. We are returning to the virtues we see handcrafted goods, the rise of artisanal foods and the local community as both a social and economic crossroads. Integrity and performance are now what matters, over hype and image.
#5 An Army of Davids. Is the value shift that celebrates community cooperation and amplification. In Tampa we learned how individuals are finding strength in numbers by scaling their talents through meetup groups, and in carrot mobs, where people band their spending together to reward businesses who do the right thing. Here cooperative consumerism gives scale to individuals who, enabled by the tools of social media are creating new businesses and rebuilding community values. 52% of Americans believe that “since the recession there is greater opportunity for small business owners to compete with large companies more now than there used to be”. An Army of Davids — celebrates the dignity of the individual and their right for self-expression and community, which together are empowered by technology and social media to amplify the value of the individual to the community and vice-versa.
What did some of the CEO’s say about the spending shift?
We interviewed executives from our fifty companies, including people like Robin Chase (Zipcar), Andrew Mason (Groupon), Tony Hsieh, Rob Kalin (Etsy) and Lynn Jurich (Sun Run). And I guess what struck us most is how intuitively they are grasping the post-crisis consumer. Many are quite naturally living these beliefs about their business models and culture. From kindness and empathy, to community and faith — these values are increasingly competitive terrain for differentiation and growth in a society that is seeking companies to act responsibly and to practice sustainability.
Why weren’t values as important years ago, or were they?
They were as important, but they were superseded by our lust for stuff. We could afford it so let’s just buy it. At the same time, we saw in our data that people began changing their borrow and spend ways before the recession actually happened. As the spending and consuming went haywire, the social and economic issues which had been building for years — began to come into focus. From climate change, lack of trust in institutions, growing personal and public debt and a culture of acquisition – all were major concerns that the ‘Great Recession’ simply amplified.
And now with stagnant wages, housing values and limited access to credit, we shifting from a credit to a debit society. This means dollars are now precious and lust has been replaced with choice. Mindless consumption has become mindful. In the space opened by the crisis, consumers adapted first, shifting their spending priorities to emphasize “needs” over “wants.” and therefore, choices take on greater meaning, because the money their spending is truly theirs’.
What are some issues that might arise with this new shift?
I think we’re going to see the maturation of corporate social responsibility. Call it CSR 2.0. Previously CSR is followed by the phrase ‘initiative’ which is corporate code speak for “a tactic to make us look good.” Values will need to go past words into actions. They will need to be built into the culture and business models of companies. And they will need to be open and available for the public to critique. The definition of a ‘public company’ will take on an entirely new meaning.
The trends inherent in The Spend Shift also suggest that America is an emerging market for values-led innovation. People now shop for quality over quantity and seek-out goods and services from suppliers who match their sense of ethics. If consumerism (of all things) can influence ethics in the marketplace, capitalism could be forced to be about better instead of more. In this respect, the ‘Great Recession’ may end up being the best thing to ever happen to America.
Lastly, it was quite an optimistic and encouraging experience to have interviewed the people and the businesses for this book, People are living the change that has taken place because of the great recession and prove that the consumer is adaptable, business is adaptable and the future is not as dim as it appears.
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John Gerzema is Chief Insights Officer for Young & Rubicam Group. He is the author of The Brand Bubble, and his latest book Spend Shift. One of the early founders of account planning in American advertising, John has guided brand strategies to global business and creative acclaim. Previously, John ran Fallon’s international network and founded offices in Tokyo, Singapore, Hong Kong, and Sao Paulo. He holds a master’s degree in integrated marketing from the Medill School of Journalism at Northwestern University and a B.S. in marketing from The Ohio State University.
