Marketing Home Products

From bank meltdowns and housing market slumps to bail outs and fears of inflation, it’s hard to ignore the effects the recent recession has had on our lives. During the height of the recession, unemployment peaked at 10.1% and consumer spending dropped significantly in all sectors. Nearly three years after it began, much has been written on the long term effects of the recession and what Americans have supposedly learned from it.

A significant finding in recent months concerns the effect the economic downturn has had on the wealthiest Americans and their purchases in the luxury category. Spending by wealthy Americans (those with annual household incomes above $200,000) has returned to pre-recession levels while spending by middle and low income Americans is still low. In the housing market, despite a 20% decrease in existing home sales between $100,000 and $500,000, sales of homes valued at more than $750,000 increased.

But the rich aren’t spending their money in the same way they used to. A study by the Harrison Group found that the shopping behaviors of the affluent have become more price conscious. Even though many of these people didn’t lose their home or job during the recession, they saw how others were affected around them and have changed their habits because of it. Affluent consumers now report using coupons, waiting for sales and buying less expensive brands more frequently than they did a year ago. Brands are having significantly less effect on luxury consumers. Forty-one percent of luxury consumers currently believe that the brands they wear say a lot about who they are as a person compared to 51% in 2008, and only 32% of luxury consumers are willing to spend more for the style and fashion of designer brands as compared to 51% a year ago.

Affluent consumers are also more distrusting of salespeople and advertisements that focus on the brand image and luxury status. These consumers instead desire one-of-a-kind items and experiences that create fond memories. They demand personal value from the products they purchase. Harrison Group vice chairman Jim Taylor says that “In the end, the increase in spending we foresee is not a return to the wanderlust of the past, but rather, an expression of sensible, resourceful, self-confident consumers expanding their portfolio of needs.”

It is also important that companies understand the changing face of the luxury consumer. In the new Ad Age Insights White Paper, “The New Wave of Affluence,” a Digitas study reports that a person’s financial standing before they are 35 is a significant indicator of what their financial standing will be later on in life. If a person reaches the $100,000-$200,000 income level before they turn 35 (labeled Emerging), they have a greater chance of crossing the $200,000 mark into the Affluent category later on in life. Because those currently in the Affluent category are spending more conscientiously now, it is the Emerging group that is most likely to see an increase in demand for luxury brands. These young professionals have secure jobs that will lead to affluence later in life and have fewer responsibilities such as mortgages and children, leading to ample disposable income to splurge on the luxury goods. And because individuals in the Emerging category are widely plugged into interactive and social media, they can be much easier for companies to reach than older, Affluent consumers.

In the post-recession environment, it is no longer acceptable to assume customers will buy luxury products solely for the brand they flaunt. As affluent consumers begin to reject their old habits of spending based on brand image, companies must be able to communicate and deliver real value to their consumers.

Anything to avoid driving. That’s what many Americans now favor, seeking living communities where walking, biking or jogging is encouraged… especially if it means errands may be run sans car.

According to a report by the National Association of Realtors, “Americans favor walkable, mixed-use neighborhoods, with 56 percent of respondents preferring smart growth neighborhoods over neighborhoods that require more driving between home, work and recreation.”

Interestingly, they’re willing to sacrifice larger footprints in order to live in such environments, further supporting the trend of smaller space living.  As America “right sizes,” home owners and apartment dwellers prefer quality over quantity and purchase home products to follow suit, making the most of their small spaces.

A recent Wall Street Journal article announced that Febreze has joined the “$1 Billion Club,” noting the company’s recent success. While the housing market has certainly brought a lot of home products down with it, certain small aspects of daily home life are in fact flourishing. Febreze has managed to prosper during a stark decline in the industry, which has some people in the field scratching their heads.

What caused the trend? Some experts have suggested that more people are spending more time in their homes as a way to save money; as part of the aftermath of the recession, eating out less, driving less and spending less time at the mall have become increasingly important for a lot of families. Still, data suggest that people still splurge from time to time… just not in  the same ways.

Many families have started to spend their money on accessories for the home, giving reason to Febreze defying market trends lately with its recent profit gains. It seems perfectly reasonable that a family that spends most evenings indoors will want the home to look, feel and, as we’re seeing now, smell nice. The recent movement to all things green may also be at play here, as Febreze has been effectively labeled as a green product: simple and clean.

This news confirms the fact that Procter & Gamble are on a serious roll. The company reported just last year that it had acquired Ambi Pur, which would allow the corporate giant to spread its fresh air from 17 countries to 84. The expansion may prove to be a wonderful business decision, since many developing markets have been showing an ever-increasing demand for products like Febreze, which has helped to offset the slump in sales surrounding more developed markets.

Regardless of what the future holds for Febreze, businesses and consumers should take note: new consumer trends are reshaping industries in unexpected ways. This could be just the kind of push back that the home product market needs.