BCG - The Boston Consulting Group

• Preface
• Executive Summary
• No Ordinary Recession for Consumers
• Uncertainty Drives New Sentiments and Spending Behaviors
• What, Where, and Who: De-averaging Required
• Eight Winning Strategies for Hard Times
• Appendix: Methodology and Product Categories Covered in the BCG Consumer Sentiment Survey
• For Further Reading
• Note to the Reader

For several years, The Boston Consulting Group has been tracking an important phenomenon in consumer sentiment and spending—a pattern that we call trading up and trading down. We continue to track this behavior as a vantage point for understanding consumers during the current economic cycle.

There is no doubt that the global recession has radically changed how consumers approach spending, saving, debt, and long-term investing. The great objective is to find the best value at the lowest price. The intensity of this focus on value is reverberating around the world, putting enormous pressure on retailers and their suppliers. Yet the shift in consumer behavior has also introduced new opportunities for smart companies to gain share in both developed and developing markets.

This special report on how consumers are reacting to the economic crisis uses BCG's own research to capture overall trends around the world as well as in specific countries. Our seventh annual consumer survey, which began in October 2008 and extended into February 2009, covered Japan, the Untied States, and Western Europe—developed economies that we have studied for years—as well as the developing economies of Brazil, China, India, Mexico, and Russia. In all, we surveyed some 13,800 consumers on a total of 19 product groups covering 150 to 170 product categories. Then, in March—when the crisis was just beginning to spike—we went back to refresh our data with snapshots of the developed markets, including Canada. This survey yielded an additional database of just over 8,000 consumers.

Together, our readings of the pulse of the world's markets over the past six months provide a dynamic picture of what consumer sentiment has been like and where it is trending as the downturn marches on. We asked consumers to describe their attitudes toward spending, environmental issues, and life in general. We also asked them whether, when, and why they might consider trading up in the current economy, how they feel about trading down, and what emotional satisfaction they gain from buying goods and services.

As consumers steel themselves for a potentially lengthy global recession, concerns about their sentiments have taken on a new urgency. How can companies win them over in such turbulent and uncertain times? Our findings will help companies begin to answer some of these critical questions:

• How is the economic crisis affecting consumer behavior around the world?
• What impact will it have on consumer product and service categories in 2009 and beyond?
• Is this the end of trading up and the lucrative luxury and "masstige" sectors?
• Are there opportunities for differentiated products in the middle market for consumers who downshift from trading up?
• Will consumers continue to buy green products during the downturn?
• For how long will emerging markets, such as China and India, continue to offer opportunities that have disappeared elsewhere?
• What will it take to win in a trading-down market?
• How can consumers be encouraged to keep spending in particular categories and to choose one company's products over another's?

Catherine Roche is a partner and managing director in the Düsseldorf office of The Boston Consulting Group.

Michael J. Silverstein is a senior partner and managing director in the firm's Chicago office and the former leader of the Consumer practice.

Patrick Ducasse is a senior partner and managing director in BCG's Paris office and the leader of the Consumer practice.

Natalia Charpilo is project leader in the firm's Munich office.