What Kind of Consumer Are You?

What Kind of Consumer Are You?

Before the recession started, you could pretty much divide people into two groups: those who spent money like drunken sailors, and sensible folk who rewarded themselves with well thought-out purchases as they put money away for retirement. Val Srinivas, the founder of market strategy and research business Decitica, which commissioned a report on consumer spending habits in the recession, reckons that the recession has “shaken the bedrock of American consumerism” and that four types of consumers have emerged from the reshaped landscape:

- Steadfast frugalists (aka tightwads) whose miserly ways have been reinforced by the widespread shift

- Involuntary penny pinchers who have little or no capacity to save for emergencies and yet bare the brunt of the downturn

- Pragmatic spenders, cautious consumers chastened by the soured economy, who will become a little more cautious with their spending

- Apathetic materialists, generally twentysomethings who have not had much time to amass savings to shield them from the financial maelstrom

But are these profiles permanent? Srinivas says that depends on the consumer. Steadfast frugalists are the most indelibly altered because they are reinforced in their convictions about self-discipline. The involuntary penny pinchers might change their money-saving habits when faced with greater income in the future, but they are likely to be penny pinching for a while yet, considering their current income. Pragmatic spenders are likely to cautiously get their feet wet in the spending game again, once the world is a rosier place. Apathetic materialists are the most likely revert back to their same old spending patterns if conditions permit.

A survey of these consumers reveals that their willingness to spend depends on a variety of factors. Respondents said that they would be willing to spend big under the following circumstances:

When I have enough money saved -- 57%
When the prices of things I want reach attractive levels – 45%
When our family income increases meaningfully -- 38%
When I have paid a substantial portion or all of my credit card debt -- 33%
When I recoup a significant portion of my investment losses -- 26%
When the unemployment rate begins to decline – 19%
When consumer confidence picks up substantially – 19%
When I feel it in my gut -- 17%
I will not be increasing my spending no matter what – 14%
When economists say the recession is over 12%
When I have recovered my real estate losses – 7%
When I see my friends spending -- 5%

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