How should strategic managers handle the frugal customer?

The psychological effect of the customers after the 2008 global recession has been more towards personal austerity measures. Consumers want to be more prudent in their spending. This has become the dominant characteristics of the consumers in most markets; especially among the online consumers. The online consumers exploit the internet for purposes of exploring the offers in the market and obtaining the most attractive offers in record time. This introduces a key dynamic in strategic management: price competition.

As consumers become more frugal in their spending, brands have to capitalise on offers and discounts in order to attract and retain their customers. One of the organisations that have successfully embraced the culture of the frugal customer is Tesco. Tesco’s strategic management approach emphasises on providing value for customers by ensuring that the consumers are provided with the best quality at the lowest possible price. In fact, the company operates with the commitment that it will source for the best discounts in the market for its loyal customers. The success of Tesco provides a clear indicator that the UK customers are increasingly frugal in their approach. The US consumer culture is similar to that of the UK according to a recent research by Accenture.

In its research on consumers of holiday services, Accenture established that 42% of US consumers state that they rarely expect to pay the full price for holiday packages. This implies that they will readily go out in search of the best holiday discounts before making a decision on which ones to purchase. More than 67% of the US consumers were also noted to be willing to buy goods from different websites or stores for purposes of making the best bargains. In other words, price is an important factor and may often override the benefit of convenience. In addition to this, 72% of the US consumers confirmed willingness to try out a new website or retailer if they are to get bargains better than in the rest of the market. Again, price appears to override issues of trust and reputation of the brand.

But while the frugality of the consumer could be a source of threat to the strategic managers, there is also a silver lining. In exchange for being able to obtain the best offers in the market, consumers are increasingly more willing to volunteer personal information. Brands can exploit this opportunity to build their database through the wilful participation of the consumers. 54% of the US consumers are willing to offer personal information in exchange for a possible benefit of being offered the best deals realisable in the market.

Also consistent with the view that customers are increasingly frugal is the finding that 78% of discounts and coupons tend to result in a surge in customer engagement, information sharing, and actual sales. Brand managers can also exploit this characteristic by building trust with customers as the brands that will always give them the best deals in the market. They can also exploit willingness of consumers to share personal information for purposes of improving their strategies; especially the market segmentation and direct marketing strategies.