By Janet Eden-Harris 

Consumers are fickle. Anyone who has ever tried to make a living selling to this diverse and unpredictable group understands the odds.  It’s been particularly challenging during the past two years as we’ve watched even the hardiest of consumer groups batten down the hatches and declare their love affair with consumption officially over.

As the early signs of recovery started to blossom, those of us at Market Force Information wanted to see if we could get an early read on this dynamic group of consumers to try to understand what’s likely in store for 2010. They’ve been impacted by the recession in meaningful ways that have reshaped how they think, and how they buy. And if their responses hold true, many of these impacts will be long lasting. But the good news is that we didn’t see a case for abject pessimism. Quite the contrary. There are significant pockets of opportunity and signs of pent up demand.

Who we talked to

Market Force is privileged to have a ‘Force’ of almost 300,000 independent contractors—consumers—that provide services to retailers, restaurants, and other consumer goods companies that range from Mystery shopping, to Price auditing, Merchandising set up services, and Theater checking. Even better, this Force is representative of the consumers we all covet the most:

• About ¾ of this Force network are women
• More than half make more than $50,000 a year
• 90% are between the ages of 25 – 64
• 80% work either full or part time
• Half have families living at home

We had almost 3,000 respond to us in December 2009 to tell us of their plans for spending in 2010.

Cause for optimism: half full. And half empty.

To inform our research, we first contacted Dr. Val Srinivas, founder of market analyst firm Decitica.  In groundbreaking research his firm conducted earlier this fall, he found that consumers fell into four basic groups around their spending patterns:  The Steadfast Frugalists, Involuntary Penny-Pinchers, Pragmatic Spenders, and Apathetic Materialists. 

It takes hard work and good deals to win with Steadfast Frugalists

Frugalists are seriously committed to self-restraint, engaging in prudence with enthusiasm.   They make up about one-fifth of the American consumers, representing all income and age groups. They are more likely than others to spend a lot of time in pre-purchase deliberations.  Appeals for great discounts or deals will really work with this group, who take it as a point of pride to find a good deal. 

Involuntary Penny-Pinchers are bearing the brunt of the downturn

About twenty-nine percent of the population has been severely affected by the recession, with household incomes skewing less than $50,000. This segment has been forced to embrace thrift like never before.  Appeals to value and small ways to splurge in inexpensive ways will often resonate with this group.  

The Pragmatic Spenders will fuel the recovery

Income has blunted the effects of the recession on this segment which makes up about 30% of all consumers.   While they curbed their spending during the recession out of uncertainty and fear, they are the most capable, both psychologically and financially, to willfully resurrect their past spending patterns. Not surprisingly, they skew a bit older, and over a third of the people have HHI greater than $75,000.

Apathetic Materialists love to splurge

 The remaining 20% of consumers have not embraced the new frugality to the same extent as others.  Skewing younger, they are the least driven by price: only eight percent admit to being very focused on value.

Consumer spending outlook

Armed with this consumer segmentation as backdrop, we went to our independent contractor Force to ask directly:  what are your plans for 2010?  When they answered for themselves, they were predictably conservative. Only 1 in 4 said they’d spend more. But when we asked what they thought their FRIENDS would do, that jumped to one-third. The gap between what they say they’ll do and what they say their neighbors will do is a good sign. One out of 3 consumers buying more in the short term will fuel a lot of spending.

Now let’s take a look at their response to a different question:  ‘We know you’re being frugal. But do you think you’ll splurge at all in the next three months?’

Almost 7 in 10 said yes.  The HDTV/BlueRay leads consumer picks for splurging, along with other entertainment forms like video games and music, and computer accessories. People want to splurge on travel, which will come as good news to that industry. And a significant number of consumers say they’re going to be splurging on clothing and accessories. Welcome relief to many retailers in that industry.

Which leads us to the next million dollar question:  what motivates consumers to spend? Responses from these 3,000 consumers told us that they get excited by cool, innovating products. Nothing new revolutionary there.

But go on to admit that if they find some unique luxury—the perfect pair of jeans, a great purse — they’ll stretch to buy them. Great news for specialty retailers looking to get consumers motivated again.

They talk about how they like to reward themselves for some accomplishment — losing weight, getting a promotion, getting into graduate school, or for some special event that’s coming up. Some also talk about the motivating factor of a long-term payment plan with low or no interest that lets them justify a purchase that they can’t quite afford in the short term.

Again, hopeful signs that consumers are looking for ways to start doing just that — consume. It won’t be the profligate spending we all enjoyed earlier in the decade, but we have reason to hope for better days in 2010.