Even the bad times are good? By John Gilbert

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John Gilbert, business analyst from JGFR, reviews the financial year of 2011 and considers the role marketers should play in 2012 to help build consumer confidence.

For the majority of consumers 2011 proved to be a tougher year than expected. A year ago inflation and job expectations were dominating and there was talk of an interest rate rise to help reduce inflation. Headline GfK NOP confidence (CCB) had slipped 2 points during 2010 to -21, a level that pointed to low / no growth.

At the start of the year the rise in VAT to 20% ensured that inflation and weak spending confidence would continue to be on-going issues, resulting in headline confidence slumping 10 points to -31 in the 4 months to April.

In May the Royal Wedding and good weather resulted in a surge in confidence, with the CCB jumping 10 points – its second highest rise on record. Alongside some improvement in the jobs data and strong consumer confidence in key European markets it appeared optimism may be returning.

Alas the media had already turned very pessimistic about the economy and the thrust of government policy. The ‘Growth Budget’ announced in the spring was soon at risk as spring turned to summer and the threat of euro break-up started to engulf policy making. A negative feedback loop became established with the prominence given to bad economic data dominating the news agenda and feeding into sentiment. Between June and August the CCB measure gave back the 10-point gain of May and since then has stabilised around the -31 level – only 8 points off the record low of July 2008 – and pointing firmly to recession. The Nationwide CCI – with a greater focus on jobs – is already at its 2008 lows.

As analysts and marketers considered the vital Christmas spending season – which is generally being reported in dire terms – consumers showed a welcome bounce in spending confidence in the November CCB to the highest level since June, suggesting that Christmas and the January sales may not be quite as bad as predicted. However spending confidence is nevertheless 22 points below a year ago which highlights the squeeze many households are under. Compared to a year ago fewer households are saving (40% v 43%) and more making do (46% v 43%) and struggling (13% v 12%).

The impact of the past year of austerity is reflected among different segments. The gap in confidence between men (-28) and women (-34) that has grown in the past two years continues. High levels of inflation impact more on women.

Low earners (household income of £14,500-24,999) show the biggest year-on-year fall in confidence (down 19 points) to -39. Confidence among the top household income band (£50,000 and over) is also down sharply, losing 14 points to -23. Among the lowest household income band (under £14,500) and middle earners (£25,000-£49,999) confidence has fallen less – both down 6 points to -37 and -24 respectively.

Regionally the relative strength of confidence in London and the South during 2010 has fallen back in 2011. Overall in the South confidence is down 12 points to -29 more than in other regions. In the past 3 months confidence is highest in London (-26) and the East Midlands (-28). It is weakest in Northern Ireland (-37).

For the Baby Boomer generation – many now in or at retirement – the economic landscape in the past year has become a minefield. Low savings rates, reduced annuity rates, volatile stock markets, and high inflation have all undermined confidence. A tough job market has added to the challenges of generating income. New government cuts in benefit will also impact more on this age cohort where confidence has dropped 10 points to -38 during the year – 4 points lower than among the over 65s (down 8 points to -34).

Among the most financially active age cohort (30-49 year olds) confidence is down 8 points on the year to -32.

With great expectations of Generation Y/ the Millenials (16-29 year olds) in driving change in the coming decade based on their experience of social media, the gloomier economic outlook for this group provides a reality check. Confidence has fallen 13 points during the year, the most of any of the 4 age-cohorts, with confidence (-17) at its lowest since June 2009.

The world confronting the Generation Y /Millenials will be one far less structured than for previous generations with the key to success being continually through improving life and knowledge skills. In this context sport will provide an important catalyst for changing young peoples’ lives. This was highlighted in the annual Beyond Sport summit (http://www.beyondsport.org/) held recently in Cape Town bringing together over 1,000 delegates from around the world discussing ways to build new corporate structures that are seen as the way forward to reduce unaffordable state welfare, education, health and judicial budgets. Marketers will increasingly have to look at adding a social impact aspect to their promotions through increasing links with charities. 61% of the public would support a charity that makes a difference to young peoples’ lives through sport.

With the focus next year on the Olympics and Euro 2012, the prospect for sport boosting consumer optimism is considerable – and indeed to contribute to the UK’s growth agenda. Even at times of austerity the national mood will become more unified by shared experiences – reflected in the success of Comic Relief, Children in Need and Sport Relief. For marketers, they have an influential part to play in helping to drive the developmental role that sport adds to the lives of young people, and to help shape the mood of the nation through difficult times.