Ask the outside consultant

  • Updated: April 2, 2008 - 3:45 PM

Q In light of the economic slowdown, spiraling housing prices and a real threat of inflation, in what ways are consumer spending habits going to change toward adult luxuries?

JIM MASLYN

MOTOPRIMO MOTORSPORTS

A Consumer spending depends on two factors: how deep and widespread the slowdown is, and the target market for the products in question. So far, the current slowdown and anxiety about the near term seems not to be affecting the upper-income tiers as much. Accordingly, while holiday sales overall were disappointing for retailers, many reports indicated that sales of luxury products were strong.

This makes intuitive economic sense and means that, for the time being, those at the top of the economic ladder will likely continue their previous spending patterns with little change. This may mean that those targeting the middle and lower rungs could at some point be in for tough times. But there may be prevention strategies in which the business can mitigate the effects.

One such strategy involves adjusting how products are positioned. When middle-income consumers are flush with cash, positioning something like a snowmobile as a treat or a way to have an intense experience may be effective. But when times get tighter, such a position may lose its effectiveness. While not to say that the need for treating oneself completely goes away, smart marketers also think about how to promote different, less expensive parts of the product mix -- accessories, for example -- to fill those needs during tough times.

JOHN SAILORS

ASSISTANT PROFESSOR OF MARKETING

UNIVERSITY OF ST. THOMAS

OPUS COLLEGE OF BUSINESS

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