The most powerful example of consumer sentiment and its impact on the economy is Sachin Tendulkar’s cricketing career. It is a widely documented fact that Tendulkar's career coincides almost exactly with the Indian economic revolution that began in 1991 with Manmohan Singh's liberalisation reforms. The newly rich Indian middle classes of the 1990s saw Tendulkar as the embodiment of their aspirations and data and statistics show that the rise in our economy nearly coincides with the ups and downs in his career graph.
More recently, we have all seen the impact that de-monetisation and GST have had on consumer sentiment and willingness to spend.
Consumer sentiment is an important economic indicator that measures the degree of optimism that consumers feel about the overall state of the economy and their personal financial situation. If the consumer has confidence in the immediate and near future economy and their personal finance, then the consumer will spend more than save.
When confidence is low, consumers tend to save more and spend less. Consumer confidence typically increases when the economy expands, and decreases when the economy contracts. However, there is also a view that consumer sentiment leads the economy, as opposed to lagging it.
But what is the construct of consumer sentiment and how is it formed? Human beings are unique because of our instincts and emotions. These constitute our innate tendencies. But not all our conduct is based on our innate tendencies. On the basis of inner dispositions, some additional acquired dispositions are formed as a result of interaction with the environment. The inner and acquired dispositions cohere together and are welded into an organised whole.A sentiment is thus a combination of the inner and acquired disposition.
Given that the response to the environment is a large part of the story, sentiment could also be referred to as ‘concentrated and organised emotion’ of the larger collective.
What are the characteristics of a Sentiment?
1. Sentiment is an acquired disposition and changes frequently
Sentiment is a product of an acquired course of experiences pertaining to what is happening in the environment. As a result, it also changes based on what the environment mirrors. We find that consumer sentiment changes every quarter, due to critical events and incidents in the environment.
2. Sentiment is predominantly an emotive disposition
A variety of emotions constitute a particular sentiment. The mind integrates a number of instincts and emotions in one whole, creating a higher sum total of the sentiment. For instance, the way consumers feel about the country’s economy, the central Government and its policies, the stability that their state Government provides them and the local events in their cities could all impact their overall sentiment
3. Sentiment can be used to predict behaviour, particularly in high investment categories
A sentiment is an enduring affective-conative attitude and significantly influences conduct. This leads to behaviour that can be predicted once the sentiment is known. For instance, investments intrinsically are an indication of how consumers look at the short and long term future and their propensity to invest can be predicted with a high degree of accuracy, based on an understanding of the sentiment. However, understanding the sentiment in the country can also become a predictive model, largely for high investment categories, as these spends are sensitive to the vagaries of the economy, political changes and social events etc.
4. Sentiments are also directed to particular categories or products or brand
While there is a larger sentiment that governs consumer confidence and willingness to spend, there is also a sentiment that drives consumer behaviour in specific categories. For instance, a positive overall sentiment could still result in a poor propensity to spend in a particular category. This could be because of specific events or happenings in the category. For instance, during the Nirav Modi scandal, the category of diamonds saw a sharp decline in terms of consumer preference. In addition, there is also a seasonality to consumer spending patterns in a category, which sometimes leads them to prioritise one high investment category vis-à-vis another. For instance, the spending on holiday travel and hospitality ties in with the summer holiday months, the festive season sees a spurt in the sale of certain categories such as household appliances, automobiles, jewellery.
We have seen that sometimes even when the overall sentiment is negative, consumers’ coping strategy is about ‘breaking free’ and ‘making up’ for the sense of compromise and compensation, that they otherwise experience. And some categories are better poised than others to deliver this need. Or in other instances, we have found that despite the overall sentiment being positive, we are looking at a distracted consumer, who is considering or vesting his/ her energy in too many categories. In such cases, brands have to work way harder to convince consumers to spend on their categories, despite the positive sentiment.
What is critical to understand is that it is not just possible to predict and pre-empt consumer spending in categories basis an understanding of the consumer sentiment, it is also possible to predict consumer coping strategies and navigation mechanisms as well. And this can go a long way in creating sharp consumer centric marketing strategies for brands.
Therefore, as a marketer, how do you ride the wave of consumer sentiment, and take strategic decisions that are relevant for your category and brand?
In high investment categories, it is important to assess spending patterns every quarter on the basis of the consumer’s view of the larger economy and where are we headed. Here, we also need to consider the consumer’s assessment of the political situation and how positively they feel about the central and state governments. The view of the micro context also needs to be studied to understand the immediate reality that impacts consumer behaviour.
And finally, by understanding consumer’s financial commitments, disposable incomes and attitudes to key categories in question, we can predict the overall sentiment of the nation, the mood and sentiment of the various regions and centres within the country, the key categories in focus every quarter and the trends that are likely to shape behaviour in these key categories, every quarter.
Case study on the effectiveness of understanding consumer sentiment in the country
Tanishq, Diwali 2016
• In the year 2016, until the month of August, the consumer demand for jewellery was tepid. The growth of the brand was below targets.
• This is when Tanishq decided to undertake a consumer sentiment study to understand consumer attitudes to the biggest jewellery buying festive season of Diwali.
• The study revealed that the consumer sentiment was about having a big and bold Diwali. Consumers wished to go all out and make it a grand and special occasion.
• The conversation was centred around gold and not diamonds. They wanted to splurge on gold and they wanted big, heavy and impactful pieces of gold jewellery.
• Consumers rued the fact that while the sanction for consumption was growing, the sanctity of the festival was on the decline. They wished for the festival to be “like it should be”- colourful, impactful, collective and compete, with gifting of jewellery.
• This was counter intuitive to many in the Tanishq team, who were expecting a lacklustre Diwali. However, the team decided to go with what the consumer sentiment was telling them.
• Tanishq launched the Tanishq wali Diwali campaign. All teams at Tanishq geared up for a bumper Diwali and they decided to own the festival of “Diwali”. They also decided to showcase big pieces of gold jewellery and gifting.
• The Tanishq wali Diwali TVC caught on like wild fire on all mediums.
• The campaign recorded the highest sales in a single day, on Dhanteras.
• Tanishq witnessed a whopping 39% growth during the festive season, and achieved the highest sale in a single month.
• Post the Diwali campaign the brand had the highest awareness score ever.
• The Client met their yearly targets for the first time in 5 years.
Consumer sentiment understanding helps ride the wave of the concentrated and organised emotion of the country and creates winning brand stories. The year 2019 is going to be the year of the national elections and understanding the consumer sentiment could play a critical role in helping ride the choppy and uncertain tides of what is coming.
(The author is a partner, Quantum Consumer Solutions.)