The Frugal Customer This Christmas

It’s not just the kids who love the presents they get at Christmas time. Small businesses, especially those in the retail sector, have always seen December as the culmination of their year and the period in which they get on top.

But this year, some SME’s around the country might be finding a bit more coal under their trees than usual. The behaviour of Australian consumers is dynamic and constantly changing, which presents problems for businesses who are trying to strategise and market their products.

This Christmas, any business trying to harness the Festive Spirit are going to have to approach their customers differently to reflect a very different mood.

Research conducted in Australia and abroad is pointing towards a more frugal consumer. Despite the onslaught of Christmas sales, the consumer is planning on handing over as little cash as possible. Latest CommSec data shows that the traditional benchmarks for consumer sentiment – gambling, cigarettes, and alcohol – are all well down for the year. Other areas where sales have slumped include mobile phones, petrol, furniture and overseas travel.

However it’s not bad news for everyone, as Aussie consumers take a “barbell” approach to their spending – at one end of the scale they are cutting back, while compensating at the other end.

Spending has increased significantly in many other areas like domestic travel, computer products, cars, and small luxuries such as shoes and digital cameras.

Whatever the reasons behind it, it appears consumers are opting out of spending big on the so-called “sinful pleasures” and rewarding themselves for it.

In the same way, spending at cafes and restaurants – which are traditionally hard hit by the conservative consumer – has actually increased.

Despite the good news for some, all signs are pointing towards a conservative trend which is gaining momentum. Consumers are more conscious buyers, more specific in their purchases and more willing to shop around, especially online. Businesses are consequently going to have to stay on top of their approach to marketing and adjust their strategies.

So how can you hold on to your customers when the consumer landscape keeps changing?

A big mistake many small businesses make is to jump straight into discounting. While throwing a discount on may be appropriate sometimes, it’s not always a good quick-fix tactic, as it often takes value away from the product.

Instead of reducing its value, focus on value-adding within your business. Use the Christmas period to reward your customer for their loyalty and add free gifts with purchases, or other value-adding benefits.

Free Christmas wrapping, throw in a card, gift certificates our low value bonuses could be an option.

At times like this, when consumers are savvy and increasingly heading to online retailers, it’s important to hold onto your existing customers. That means knowing who your customer is and how best you can get them to stay.

It’s also important to stay clued in about consumer trends. For example tourism operators should see this information and start thinking – since we’re struggling with foreign inbound tourism, and domestic travel is on the rise, perhaps it’s time to alter our focus.

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