Jwt austerity index q1 2013 final

THE JWT AUSTERITY INDEX

A measure of how the UK is feeling and

dealing with austerity

Quarter 1 2013 Results

JWT Austerity Index

Introducing the Austerity Index

Methodology

The JWT Austerity Index is a composite measure created using five key consumer metrics. We use five metrics

because we believe the impact of austerity has many facets which cannot be captured in just one question. The

metrics we track are as follows:

• IMPACT: Two metrics focus on the immediate impact of austerity. The first assesses the severity of the effect on

standard of living and the second is an emotional measure – are consumers just surviving, or thriving?

• COPING: Two further metrics assess what consumers are doing to cope: how much effort are they making to

restrict discretionary expenditure and how difficult are they finding it to put money aside?

• OUTLOOK: Finally, we ask consumers how they expect to be coping in six months’ time.

Consumers score themselves out of ten on each metric. In each question, a high score indicates an impact of

greater severity. We create an index for each of the five component metrics by dividing those scoring themselves

in the more negative range (6-10) by those scoring themselves in the positive range (1-5) and then multiplying by

100. The Austerity Index is an average score calculated across all five of our austerity metrics.

We polled 520 UK consumers in March 2013 using JWT’s proprietary SONAR panel. The Austerity Index is a

quarterly survey – our next edition will be released June/July 2013.

Welcome to JWT’s Austerity Index

We’re living through the slowest economic recovery in our nation’s living

memory.

These are uncharted waters for brands. We have no precedents to fall

back on, no textbooks or handbooks on which we can rely this time. So

it’s never been more crucial for us to understand exactly how consumers

in the UK are behaving and changing in response to the new reality.

The Austerity Index is JWT’s solution: an in-depth quarterly research

survey that analyses the impact of prolonged economic adversity on UK

consumers and markets. The Austerity Index aims to diagnose Britain’s

emotional and rational reply to austerity, delivering the answers that

brands and organisations need today.

How severely are consumers being affected? Who is hurting the most?

What are the coping mechanisms consumers are deploying? Where are

Britons cutting back, trading down or even opting out of categories? And

how should brands respond?

JWT will be tracking these and other measures every quarter, from now

until the economy recovers. We will provide a unique battery of metrics

which will track the pace of that recovery, including our proprietary

Austerity Index metric. Let’s investigate what the nation thinks and feels

about austerity today.

Tracey Follows

Chief Strategy Officer, JWT London

April 2013

3

JWT Austerity Index

The Austerity Index

The Austerity Index: Our Benchmark Metric

0

200

400

600

Impact on standard of

living

Surviving, not thriving

Efforts to restrict

spendingHaving difficulty saving

Negative outlook next 6

months

Component Metrics of the Austerity Index

So here’s where it begins. Our first ever reading of the Austerity Index registers

287. This, an averaged measure of our five component metrics (see below), is our

benchmark.

What does this tell us right now? That three times as many consumers are finding

life tough at the moment as are not. No great surprise there. Where this figure will

come into its own, however, is when we start to track it over time, observing the

shifts as they happen and in the context of our changing economic circumstances.

We anticipate that our Austerity Index will become a barometer; a gauge for

Britain’s reaction. Our first data dip was run between 9-11 March, prior to the 2013

Budget announcement. And over the next few weeks, we will learn whether the

nation will enter a triple-dip recession. Watch this space to see how Britain

responds to these unfolding events.

Q1 2013

287

4

JWT Austerity Index

Austerity Index Components: Impact

Standard of Living

Index*

Surviving or Thriving?

Index*

Here we take a closer look at our five component metrics. The impact of austerity on British consumers’

lives is not insignificant: people are roughly twice as likely to feel that their standard of living has been

negatively affected than positively, and that they are just surviving rather than thriving.

This is underlined by the average scores our panel chose – both are heading towards the severe end of

the scale. Nevertheless, these numbers are a little less than we expected.

Our interpretation is that the nation has been living with austerity for so long now that their sense of its

impact has lessened. They have become somewhat inured to it. All the same, consumers will welcome

efforts by brands that demonstrate empathy and support, and who make attempts to alleviate their

ongoing financial stress.

214171

Are you/your family thriving,

standing still, or just surviving?

Average: 6.4 Average: 6.6

1= thriving

10= surviving

How much, if at all, has your/your

family’s standard of living been

affected by the economic climate?

10 9 8 7 6 5 4 3 2 110 9 8 7 6 5 4 3 2 1

1= very positively affected

10= very negatively affected

5

* High score / low score x 100

JWT Austerity Index

10 9 8 7 6 5 4 3 2 1

Austerity Index Components: Coping

Efforts to Restrict Spending Having Difficulty Saving

The UK is investing a good deal of energy into money management in order to minimise the impact of

austerity. Five times as many people are making significant efforts to restrict expenditure, as spend freely.

The number of those struggling to make savings is almost four times those who are not.

These are clearly key stress points for consumers, so brands should step in to demonstrate solidarity.

Incentives and deals that are communicated as compensatory gifts or treats will appeal to those who are

tired of having to continually watch the pennies. Others, who relish a sense of control will appreciate

efforts to help them spot and exploit money-saving or even money-generating opportunities. It may seem

counter-intuitive to encourage reduced spending, but the aim here is to ensure that what consumers can

afford is spent on your brand, rather than the competition.

Index Index

536

375

1= no effort whatsoever

10= very significant effort

1= not very difficult

10= extremely difficult

How much effort are you making to

restrict your discretionary

expenditure?

To what extent are you finding it

difficult to accrue any savings at

present?

10 9 8 7 6 5 4 3 2 1

Average: 7.6 Average : 7.7

6


JWT Austerity Index

Austerity Index Components: Outlook

Pessimism: Future Finances

(next 6 months)

Index

Our first small sliver of optimism:

Britons are fractionally more

hopeful for their prospects over

the next six months than their

current assessment suggests

(they scored themselves 6.6 on

our ‘surviving or thriving’

metric).

Whilst it’s important to

recognise and acknowledge that

consumers are struggling,

nurturing these small seeds of

hope may be an interesting

avenue for brands to explore.

Later, you’ll see our analysis of

how consumers feel when they

think about their finances right

now. Here’s a sneak preview of

that: 21% of people say they

actually feel hopeful.

Could brands tap into this

nascent streak of confidence and

encourage it to spread through

the population?

Index*

141

Taking everything into account, how

do think that you/your family will be

coping in 6 months’ time?

1= will be coping very well10= will not coping at all

Average: 6.0

10 9 8 7 6 5 4 3 2 1

7


JWT Austerity Index

Austerity Index: Who’s Hurting the Most?

Women: The media has been telling us for some time that British women have been

particularly hard-hit by the recession. It seems the women on our panel back up the

claim. Since 2010, women have lost more jobs than men; unemployment amongst

women over 50 rose by a third between 2010 and 2012. According to research

conducted last year by The Labour Party, women contributed £11bn of the £15bn

raised from changes to the tax and benefits system by the government since 2010.

Full-time workers: A surprise? Maybe not. JWT’s Super Stress Era trend research in

2013 found that 49% of Britons are worrying about their job security. They seem to be

working longer and harder as a result. A 2012 survey found that on average, British

workers are putting in 9 hours of unpaid overtime per week; another revealed that 60%

don’t take lunch breaks, and are eating at their desks instead. Meanwhile, wages still lag

behind inflation. This is an understandably frazzled group; working harder with little to

show for it.

We calculated our Austerity Index metric for a wide range of demographics. The following groups

report being under the most pressure. Brands with target consumers in these segments take special

note.

The Countryside: Rural communities are facing a plethora of hardships. In addition to

dwindling job opportunities and pressure on the agriculture sector there’s also the

sense that they are becoming increasingly isolated with the disappearance of everything

local. From pubs to farms, rural areas are experiencing a decline in their communities.

Brands can help through rural initiatives which support local producers as well as foster

and help strengthen community links in the countryside.

Low income households (earning under £20k): It will come as no surprise that for

low income households, there’s an uphill struggle. According to a recent study, more

than half of low income groups are failing to keep up with bills, with 7% behind on at

least one bill. They are likely to feel hard done-by and that they are suffering

disproportionately: 61% of this group told us they believe that only the poor are

affected by austerity. Iain Duncan Smith will not be able to look to this group for tips if

he tries to live on £53 per week; they spend £91 on average covering weekly essentials.

The Middle Aged (40-59 years): In the past, they may have feared the ‘empty nest’;

now middle aged parents are now seeing the reverse trend in play. Over three million 20-

34 years olds now live with Mum and Dad because of spiralling rents or difficulty buying

their own home. Children studying away from home need help with hefty tuition fees and

living costs. In addition, their own parents are living longer and need care. Meanwhile,

the retirement goalposts keep shifting. Middle aged people are feeling stretched and

worry that they’ll need to work well into their seventies in order to stay afloat.

502

410

383

319

318

8

JWT Austerity Index

How are we Feeling?

Lowest Austerity Impact:

Households Earning £40k+

Highest Austerity Impact:

The Countryside

All Adults: How does thinking about your personal finances make you feel?

Although the overriding emotions most consumers feel when they think about their personal finances

are linked to world-weariness and gloom, they also feel an element of being ‘in control’. Even when we

compare the emotions of the groups who scored at the polar extremes of our Austerity Index (below),

this sense of control is something they share.

We believe this is derived from the concerted efforts consumers are making to manage their

expenditure, as evidenced by our coping metrics. Tapping into this desire for control is another positive

way for brands to build engagement with consumers. Brands should look to empower, facilitate and

enable consumers to navigate austerity with helpful tools or tactics which will make their money stretch

further.

We asked our panel to ponder their personal finances and then tell us how it made them feel.

9

JWT Austerity Index

Perceptions of Austerity

Initial findings suggest our perception of the financial turmoil is even more severe than reality itself, at

least for the moment. Although we will not receive confirmation of whether or not the UK has entered

recession for the third time until later this month, 51% of Britons believe that we are already in one. A

further 25% are convinced we’re in a depression.

Most negative are the 40-59 year old age group. This correlates with our Austerity Index finding that

this group report themselves as the second most severely affected on our survey.

At the other end of the spectrum, the younger age group of 18-39s has the brightest outlook. This is

unanticipated, considering what we know of the challenges that face young people, such as finding

work, or buying a home to name but two. It could be naivety, or a belief that it’s a natural part of being

young to struggle financially, but it’s nonetheless striking to note that a good proportion of this group

have never known a working life without austerity.

Britain’s assessment of our current economic situation

- 82% of 40-59 year olds think we are either in an economic

depression or a recession

+ 16% of 18-39 year olds think we are in recovery or

prospering

1

0

JWT Austerity Index

Attitudes to Austerity

Austerity is driving up our stress levelsI am heartily sick of austerity - I can’t wait

for the good times to come back

Austerity has taught people how to live

with less

Austerity provides an opportunity for

brands to help consumers and win loyalty

Given the impact that it’s having on their lives, it is unsurprising that fewer people are able to see past

the dark clouds to any silver linings. But consumer attitudes do reveal some great opportunities for

brands to engage in positive ways.

An overwhelming majority of Britons are itching to get back to the pre-recession ‘good times’. So why

not help them to have little fun and treat themselves, without feeling like they’re breaking the bank?

JWT’s ‘Live a Little’ trend perfectly demonstrates the appetite for this kind of behaviour: 77% of Brits

agree that ‘Even if money is tight, I deserve to splurge on myself once in a while’.

And as we know that austerity is driving up stress levels, why not try to be part of the solution? Aim to

shoulder some of the burden for consumers. Not all approaches have to involve discounting:

simplifying choice and finding ways to save time and effort for shoppers, even in the smallest ways,

will ease the load and make life easier.

Many consumers are convinced that there’s a role for brands to play and they will be receptive to your

efforts. Over half are just waiting to see what ideas you can come up with that will make a positive

difference to their lives.

84% 84%

62% 55%

11

JWT Austerity Index

Household Spending & Finances

What will £50 buy?

We asked our

respondents how

much money they

have left over each

month to spend on

themselves, exactly

as they like.

The most popular

response was just

£50. But what does

£50 buy you today?

This is the amount of

money consumers

believe that one person

needs to earn to have a

good life in Britain

today – a third more

than the national

average for full time

workers of £26,500. (ONS, Year to April 2012)

35x

120g bars of chocolate

0.65x

tankBased on UK average price

of unleaded petrol,

tank size of a medium car

2x

Cheapest Premier

League match-day

tickets

Pints of milk

49.5x4x

Large

Domino's

Margherita

pizzas

Here we present our findings on what it costs to

get by in Britain today, across a wide range of

demographics.

Even for our lowest-income group, it costs a

whopping £91 per week just to cover off food,

petrol and other essentials. Some groups are

spending almost double that. These figures by

the way, do not include housing costs or bills.

The spend of pensioners initially looks

remarkably healthy. But it makes sense in the

context of findings from the Institute of Fiscal

Studies in 2012, which reported that the wealth

of elderly people has grown faster than that of

any other age group while their tax

contributions have simultaneously fallen.

Average weekly spend on groceries & necessities*

* Excludes mortgage/rent and bills

A Good Life

£35,179

£122

£129

£114

£119

£132

£114

£131

£98

£138

£108

£120

£104

£114

£129

£121

£91

£124

£174

Total

Male

Female

18-39

40-59

60+

Have children

No children

Working full time

Working part time

Pensioner

Not working

City dweller

Suburban

Rural

< £20 k

£21-39k

> £40k

12

JWT Austerity Index

9%

17%

17%

19%

24%

27%

35%

46%

53%

54%

58%

Switched credit card supplier

Used daily deal sites

Switched mobile phone tariff

Switched utilities supplier

Bought through a cashback site

Used digital vouchers/coupons

Used voucher codes online

Shopped at a discounter

Used loyalty points to pay

Researched prices online

Used paper money-off coupons

Coping Mechanisms

Austerity Britain is breeding a nation of savvy budget tacticians who rely upon a slew of strategies to

make their money go further. We found that 92% of Britons are deploying one or more of a range of

coping mechanisms to save money.

These findings suggest that being a thrifty consumer is now a way of life for many. A domestic

marginal gains theory is at work in homes up and down the nation: shaving off a few pennies here,

earning a pound there. Data shows that those in higher income households are even more likely to

have adopted these habits (95% of them) than those in the lower-earning demographic (89% are doing

so). It seems that when push comes to shove, Britain will cope with whatever austerity can throw at it,

by using every trick and tactic at its disposal.

No surprise, then, that 62% agree that austerity has taught us something: how to live with less.

Tactics Britons are Using to Make their Money go Further

% having done the following

92%using 1 or more

tactics

13

JWT Austerity Index

Making Life Easier…Making Life Harder

Friends & Family

Supermarkets

Brands

Your Employer

The Media

Transport Providers

Banks &

Financial Services

Utilities Companies

Government

Fuel Retailers

44%

-1%

-7%

-9%

-13%

-34%

-38%

-57%

-62%

-63%

They say we’re all in this together;

but are we? We asked our panel

who is making their lives easier,

harder or making no difference.

Consumers are unenthusiastic

about the performance of everyone

outside their family and circle of

friends, with particular ire reserved

for fuel retailers and utilities

companies.

Some of the categories at the

bottom of the pile are those which

have received media attention for

putting up prices whilst making

large profits or handing out fat

bonuses. First and foremost, this

suggests that consumers want

companies and brands to simply

play fair with them.

But there’s surely more that could

be done. We believe there’s a

major opportunity here for brands

to win favour with consumers.

Currently, when asked to name

specific brands who are doing a

good job of making life easier, they

struggle to think of anyone who has

done anything significant to help

them out. The most common

response was ‘none’.

How can your brand show solidarity

with struggling consumers? What

can you offer or do which will

actually make a substantial

difference to their daily lives?

Which of the following are doing anything to make

consumers lives easier?

We are compiling brand-level as well as category data. If you are interested in seeing detailed information on

your brand, please contact us. See end page for our contact details.

Composite measure of those who say X is “making life easier” less

those who say X is “making life harder” (%)

14

TRADING UP, TRADING DOWN

JWT Austerity Index

Trading Up & Trading Down

Books, newspapers & magazines

Toile

tries

Cable/Satellite TV

-77% -74%

-71%

-70%

-68%

-73%

-66%

-65%

-64%

-62%

-61%

-59%

-58%

-57%-54%-53%

-43%

-41%

-40%

-39%

-38%

-37%

-33%

-29%

-22%-21%

-18%-16%

Net percentage: Consumers trading up or spending more, less consumers trading down,

buying less or stopping purchase in category, due to economic conditions (%)Base: All buyers in category

Across every category measured, more consumers are trading down and cutting spend than

are spending more, as a result of the economic conditions we face.

percentages

-36%

16

JWT Austerity Index

Making Sacrifices

Tickets to live events

& attractions

30%

32%

27%

31%

28%

30%

26%

31%

43%

Music, film & games

Drinks in a pub/bar/club

Restaurant/pub meals

Cinema trips

Takeaways at home

Organic food

Lottery tickets

Private healthcare

Gym & fitness

Consumers are trimming the fat from their spending in a range of categories, but it is leisure that is

most severely affected. It’s clear why we are losing so many pubs up and down the nation and why

venues are having to go to ever greater lengths to get customers through their doors.

Consumers who have stopped buying items entirely (%)

40%

Base: All buyers in category

17

SPENDING BEHAVIOUR:

GROCERY

JWT Austerity Index

Trading Up, Trading Down: Grocery

6%3%

53%

18% 19%

1%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

2% 2%

23%

40%

17%15%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

For the majority, spending remains consistent

on grocery basics (staple items such as bread,

milk, cheese, cereals and tinned goods etc.).

It’s hard to cut out the essentials, although an

alarming 1% of our sample claimed to have

done so. Perhaps they have turned to foraging

or started growing their own. Nevertheless, as

the price of so many basic items continue to

rise, it seems likely that consumers are cutting

back more deeply in other areas in order to

maintain spend here. Own-label continues to

be a force to be reckoned with in this category,

with 19% trading down on the basics.

The confectionery category is significantly

impacted by consumers cutting back and

trading down away from brands. More

worrying is that more than one in ten people

has stopped buying entirely. Confectionery

brands need to find ways to persuade

consumers that they deserve their treats every

now and then, perhaps as a reward for their

budget managing efforts. Luring shoppers away

from own-label alternatives should be a key

focus for brands. Tapping into novel occasions,

like Halloween, may be a way to offset

decreased spend whilst innovation may lure

ex-buyers back to the category.

Grocery Basics

Sweets & Chocolate

19

JWT Austerity Index


2% 2%

25%

38%

24%

9%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

2% 2%

24%

39%

21%

12%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

A similar story in the biscuits and cakes

category, with a quarter of buyers turning to

cheaper products and over a third cutting

down on purchasing. There is more of a sense

of occasion to biscuits and cakes, so brands and

retailers could emphasise the social aspect of

consumption, to persuade consumers that

these are worthwhile indulgences. We know

that consumers are cutting back severely on

nights out as well as alcohol, so in-home

gatherings with tea and cake might be a

welcome substitute.

The crisps and snacks category also faces

tightening wallets. Although a quarter are

spending about the same, this figure is

outweighed by those who are cutting back,

trading down or have stopped buying. It could

be that some people are combining the need

to cut back on their spending with the

opportunity to try to live more healthily.

Consumers might up their snack expenditure if

they felt that they were still living virtuously

by doing so. Brands could demonstrate to

their customers that their snack products can

be enjoyed as part of a healthy, balanced diet

to help alleviate guilt.

Biscuits & Cakes

Crisps & Snacks

20

JWT Austerity Index


A whopping 73% of consumers are cutting

back, trading down or have stopped buying

alcohol entirely. This can largely be attributed

to rising alcohol duty as well as concerns over

health risks. Alcohol brands now face the

looming prospect of minimum unit pricing

further increasing the cost to consumers.

Lower alcohol variants would allow brands to

entice consumers back to the category with

more affordable products, whilst

simultaneously delivering a responsible

drinking message, which could go some way to

pacifying the prohibition lobby.

1% 2%

23%

42%

15%16%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Over half of consumers are cutting back or

trading down on soft drinks and more than one

in ten claim to have cut them out entirely. With

the media constantly hammering home the

dangers of obesity, and with sugar now

portrayed as public health enemy number one,

players in this category need to work harder

than ever. Even diet drinks are under the cosh,

receiving nearly as much bad press as their full-

sugar equivalents. Brands need to be 100%

transparent and focus on a moderation

message. Encourage consumers to offset their

little indulgences by reducing intake elsewhere

in their diet and by being more active.

2% 3%

31% 32%

20%

11%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Alcoholic Drinks

Soft Drinks

21

JWT Austerity Index

Our data shows the rising price of meat and

fish is clearly an issue for some; and the recent

horsemeat fiasco looks likely to drive prices up

even further as retailers look to local sourcing

to rebuild trust. It’s not just consumers’ purse-

strings that have taken a bashing, it’s their

confidence too. Trust can be regained over

time though, and messages on quality and

standards of husbandry and processing will be

crucial over the coming months, particularly as

we approach barbecue season.4% 5%

46%

30%

12%

2%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely


Of all the categories tracked by the Austerity

Index, fruit and vegetables fares the best.

Despite Britain’s reputation as the fat man of

Europe, it seems our five-a-day remains a

relative priority. Our research chimes with that

released by Nielsen: their 2013 Global Survey

of Fresh Foods revealed that Brits lead Europe

in consumption of fruit & veg. The category has

experienced serious growth over the last few

years – 24% between 2005 and 2010 according

to Mintel. Could austerity lead to a fitter,

healthier Britain?

8% 6%

56%

17%

12%

1%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Meat & Fish

Fruit & Vegetables

22

JWT Austerity Index


It is logical that organic food should be

considered dispensable by so many. It is no

great sacrifice to cut back when mass-

produced goods taste similar and, in many

cases, look "better". In addition, research

published by Stanford University in Autumn

2012 claimed that nutritionally, organic is no

better for us than standard produce. Yet the

recent horsemeat scandal in the UK has given

organic a little boost, and sales reached a nine-

month peak in February according to the Soil

Association. 6% of our panel are trading up or

increasing their spend too. Organic’s trump

card is trust and now is the perfect time to play

it.

3% 3%

27%26%

12%

30%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Household Products

A good chunk of consumers are spending less

or trusting to own-label and cheaper

alternatives to do their cleaning and laundry

jobs. Shoppers are realising they don’t

necessarily need to compromise, as own-label

products have upped their game in terms of

performance and quality. For brands, it’s

imperative to communicate value. Products

which perform across a number of surfaces and

can multi-task around the home will appeal to

cash-strapped shoppers. 2% 3%

49%

20%

25%

1%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Organic Food

23

JWT Austerity Index

Spiralling petrol prices (+38% increase

between June 2007-June 2012 according to the

OFT) are behind consumer efforts to cut back

on fuel use. Our data chimes with that of a

recent poll conducted by

moneysupermarket.com which found that 43%

of drivers were cutting down on journeys to

save money. Other money-saving tactics

include driving more fuel efficiently and using

eco-friendly models. The burgeoning rental

economy is allowing many city dwellers to opt

out of car ownership entirely. Some consumers

told us they are cycling or walking to save

money too.

13%

2%

37%39%

6%3%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely


Smoking prevalence has been in decline since

the 1950s in the UK. In recent years, price rises

have proved to be an effective tool in further

driving down numbers who smoke. As the

price of a packet of cigarettes approaches the

£8 mark, a 20-a-day smoker would be spending

approximately £2,700 a year to fund their

habit. Just under a fifth of smokers told us that

was enough to make them stop buying. A third

are cutting down and another fifth are trading

down, perhaps to cheaper brands or possibly

to the black market: according to ASH,

smuggling accounts for 10% of the cigarettes,

and 46% of the rolling tobacco smoked in the

UK.

2%3%

25%

34%

19%17%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Petrol

Cigarettes & Tobacco

24

JWT Austerity Index

Breathe easy. None of our respondents claim to

have stopped buying toiletries entirely; times

may be hard but we Brits shall be clean!

However, almost half are cutting back or

trading down to own-brands and cheaper

labels. Toiletries are everyday, essential items

and half of consumers see an opportunity to

make easy savings here. Innovation will be key

to keep consumers loyal to brands. The shower

experience could be a rich territory of focus;

according to Mintel many are switching to

showers from bathing due to both time-

pressures and water costs.

2% 1%

47%

22%

27%

0%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely


Toiletries

SPENDING BEHAVIOUR:

FAMILY NEEDS

JWT Austerity Index

That almost two-and-a-half times as many

people opt to cut back than trade down in

clothing, indicates that brand culture remains

uncompromisingly strong in personal style

choices. Fashion is so inextricably linked to

people’s sense of identity that it is hard for

consumers to switch to cheaper alternatives;

charity shops and supermarket clothing brands

still hold a vague stigma for some. Despite the

trend towards ‘fast fashion’, austerity is

nurturing an appetite for quality over quantity.

Brands should bear this in mind, and also

capitalise on their USPs and heritage to appeal

to their core markets.

2%4%

26%

42%

17%

9%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Almost half of people are spending about the

same on clothes for their kids. It is likely that

this is largely out of necessity as children grow

out of clothes and shoes. A healthy proportion

are cutting back or trading down though,

perhaps by handing down items to younger

siblings. Although pester power is undoubtedly

alive and well, according to Mintel, 68% of

adults decide on the retailer for buying their

children’s clothes. Brands must therefore walk

the tightrope between appealing to parents’

tight budgets and to children’s fashion tastes.

4% 4%

46%

27%

15%

2%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Trading Up, Trading Down: The Family

Clothing for Yourself

Clothing for Children

27

JWT Austerity Index


A third of parents are cutting back and a fifth

have stopped paying for babysitting or

childcare at all. Looks like nights out for Mum

and Dad are taking a hit. Or are they? Many

are turning to the grandparents for help.

Charity Grandparents plus recently reported

that 63% of them help out with childcare. For

other parents, it is proving more cost-effective

to stay at home than go back to work. At the

other end of the scale, it makes sense that

parents don’t want to compromise on the

quality of care they provide their children; this

is one category where the proportion of those

trading up or spending more creeps above

10%.

9%

6%

32%

29%

4%

19%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Our Austerity Index metric on saving shows

that swathes of consumers are finding it tough

to put anything aside for a rainy day at all at

the moment. In view of this, the fact that

almost half are maintaining or increasing the

amount they put away for their children,

suggests that many families are doing their

best to cushion kids from the impact of

austerity. Nevertheless, for the other half of

this group cutbacks are unavoidable. Are there

innovative steps that financial services brands

could take to help cash-strapped families keep

saving?

4% 4%

41%

27%

3%

21%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Babysitting & Childcare

Saving for Child’s Future

28

JWT Austerity Index

Independent schools have not been far from

the headlines since the recession hit, with

news stories ranging from fees soaring ‘at

twice the rate of inflation’, to the dropping

of selection criteria in order to fill empty

places. This is having a knock-on effect on

the state sector, as oversubscription for

places means some children cannot even

attend their local schools. Yet note that

more people are spending more or trading

up than in most other categories. For those

parents who opt in, their child’s future is

clearly an area they consider a priority

investment.

8% 9%

48%

20%

5%

10%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

University fees have soared within the space

of five years. According to the Money Advice

Service, student debt now averages £39,000

on graduation. Yet those parents who are

choosing not to underwrite their children’s

studies may be making the wisest decision in

the long run. Student loans are a cost-

effective way to borrow, with competitive

rates and long-term, means-related

repayment schedules. 6%4%

42%

24%

7%

17%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely


Education Fees

Supporting Children at College/University

29

JWT Austerity Index


‘Must have’ gadgets are contributing to the

growing cost of raising a child, so cutting back

in this category constitutes a significant saving

for many. Yet many devices, such as mobile

phones, are now seen as necessities for

youngsters. Having a mobile phone provides

some security for children old enough to leave

the house alone, and from the child’s

perspective it is the centre of their social world.

It should not be assumed that cutbacks in

purchasing means kids are spending any less

time with devices however. Anecdotally, we

hear that children are benefiting from their

parent’s upgrades, receiving hand-me down

tablets and Kindles.

4%3%

31%

33%

12%

17%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

As far as children’s pockets are concerned,

austerity is somewhat polarised, with just over

half receiving the same amount of money as

they used to or more, and the other half

receiving a dwindling allowance or nothing at

all. Perhaps the latter will reap the rewards. A

recent study by the Royal Economics Society

found that children given a generous allowance

are more likely to just spend it straightaway. A

recent MoneySupermarket.com survey found

that 97% of people thought schools should

provide financial education. Is there an

opportunity instead for brands to step in and

deliver that much needed service?

4% 2%

48%

23%

5%

18%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Child’s Personal Technology Devices

Pocket Money

30

JWT Austerity Index


Some parents see extracurricular activities as

CV-building assets for future prospects,

ensuring every moment of their child’s spare

time is filled with enriching and educational

activity. So much so, that the media has been

fretting about ‘overscheduled’ kids and

‘helicopter parenting’. Yet over half of parents

have been obliged to cut back or pull their kids

out of their activities due for financial reasons.

There’s another opportunity for brands to step

in here, to promote fruitful, rewarding use of

this newly freed-up time for the nation’s kids.

6% 5%

38%

27%

6%

18%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

There may well be a mindset of making do

with what we already have, but the

digitisation of much youth entertainment is

contributing to lessened expenditure in this

category. The much-loved Dandy comic

disappeared from the shelves at the end of

last year; the kids who might have read it are

now glued to a screen, whether it be TV or

tablet-shaped. According to a report in the FT

in December, the time children are spending

with devices has ‘rocketed’. Traditional

players in the category will need to fight tough

to stay relevant.

4%2%

35%

38%

9%11%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Toys, Books, Comics & Games

Extracurricular Activities

31

SPENDING BEHAVIOUR:

HEALTHCARE

JWT Austerity Index

Trading Up, Trading Down: Healthcare

The main threat to OTC medications is from

those trading down. Generic or own-label

alternatives can be substantially cheaper than

their branded counterparts so brands need to

maintain the flow of NPD as well as their

marketing efforts. Driving pre-emptive

purchasing could reap valuable rewards:

research in late 2012 revealed that 62% of

adults have expired medicines in their

bathroom cabinet.3% 3%

49%

18%21%

6%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Wales, Northern Ireland and Scotland currently

enjoy free prescriptions, but the cost of

prescriptions in England rose by 20p to £7.85 in

April 2013. Britons clearly view health as a

priority, with few willing to compromise on

prescribed treatments. Nevertheless, the trend

towards greater self-diagnosis and personal

health management should create more

opportunities for OTC brands, with more

consumers making health decisions for

themselves. 4% 3%

63%

15%

7% 7%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

OTC Medication & Remedies

Prescribed Medication

33

JWT Austerity Index

Trading Up, Trading Down: Healthcare

Private healthcare seems to stimulate an all-

or-nothing approach. More people stick to

their existing policies, or prefer to opt out

entirely rather than cut back on their cover.

This correlates with research showing that

the number of insured has fallen for the past

two years, after steady growth. Yet more

people are using their hard earned cash to

pay for private surgery and treatment when

they need it: self-pay spending by individuals

is up by 14% overall in real terms in the last

three years. This suggests that people have

become more reactionary than

precautionary when it comes to healthcare

spend – a trait that brands could draw on for

their positioning.

4%6%

39%

16%

4%

31%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Private Healthcare

34

SPENDING BEHAVIOUR:

LEISURE

JWT Austerity Index

Trading Up, Trading Down: Leisure

Live events and days out are taking a real hit,

with 78% of customers cutting back, trading

down or stopping buying. Venues are suffering

as a result; the Eden Project recently

announced it would have to cut jobs. Ticket

prices are tough to justify, particularly for

families. Providers need to highlight the social

capital consumers can derive from ‘being

there’. In 2012, one third of people surveyed

told us they deliberately attended an event,

even if they did not wish to go, just so they

could post an update about it on their social

networks.

2% 2%

17%

30%

8%

40%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

3% 3%

21%

38%

5%

31%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

UK cinemas have already pulled off a

“phoenix from the ashes” performance, with

healthy growth in revenues since the mid

1990s. Could another be required? According

to our data, a third are cutting back on trips

and just under a third have stopped going at

all. Cinemas face another wave of disruption

from internet downloads coupled with

increasingly speedy transfers to the small

screen. The sector is already hard at work on

experience-led innovation: 3D, 4D and even

5D appeals to families and event-style cinema

pulls in the cool crowds.

Live Events & Days Out

Cinema Visits

36

JWT Austerity Index


Recently published figures showed that Lottery

ticket sales had been holding up well to

austerity, with Camelot posting record half-

year sales in November. Yet a quarter of our

panel now tell us they have stopped buying

Lottery tickets entirely and a further third are

cutting down on their regular flutter.

The announcement that the cost of a Lotto line

will double later this year may well price more

players out of the game. 3%

1%

35%32%

4%

26%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Whilst some food delivery companies have

thrived thus far, by capitalising on the drift

away from restaurants, this sector is vulnerable

itself to an even cheaper alternative:

supermarket convenience meals. According to

our data the takeaway sector faces the loss of

almost one third of its customers and reduction

in spend by a further 46%. Takeaway outlets

and restaurants must exploit their authenticity

to convince consumers to continue spending

with them. 1% 2%

17%

46%

6%

28%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Lottery Tickets

Takeaway Food

37

JWT Austerity Index

As the demise of HMV illustrates, the outlook

for the music, film and games industry (both

hard copy and paid downloads) is not

promising. A third of people have stopped

buying in this category completely. Marketers

face a significant challenge in persuading

consumers to reinstate their expenditure. The

clear enemy here is ‘free’; whether 100% legal

or not, consumers have more and more ways

of finding the entertainment they seek for

nothing online. 2% 3%

20%

36%

8%

30%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Similarly, the fact that 40% of people are

cutting back on books, magazines and

newspapers will be a surprise to no one

when there is such a vast array of free

online content at our fingertips. And with

the advent of 4G, published media faces a

strengthened challenge from mobile

phones and tablets. Our devices already

effortlessly fill those little time windows

where we would once have looked to

print for entertainment . With greater

bandwidth, their capacity to keep us

amused will only be augmented.

1% 1%

30%

39%

9%

19%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely


Music, Film & Games

Books, Magazines & Newspapers

38

JWT Austerity Index


This is the third most affected category in our

index. Consumers are really cutting back,

seeing meals outside the home as something

they can easily forego. With family meals

reportedly in decline, brands in this category

could seek to be the glue that brings them back

together and simultaneously revive a neglected

institution. Perhaps they could highlight the

benefits of the shared experience of eating

together as a family: stronger relationships,

better nutrition as well as opportunities for

teaching and learning.

2% 2%

18%

43%

8%

27%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

According to media reports, somewhere

between 18 and 30 British pubs are closing

every week. Close to half of drinkers are

cutting back or trading down and a third have

stopped going to pubs, bars and clubs. People

are either drinking at home to save money or

not drinking at all, hence the industry’s shift in

focus to dry sales. Venues could focus on new

segments and occasions. We’re seeing a small

but growing interest in dry bars for instance;

free Wi-Fi could lure remote workers out of the

coffee shop; and some pubs which are quiet

during the daytime are seeing some success

through offering a place to catch up for mother

and toddler groups.

2% 1%

20%

39%

5%

32%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Drinks Out of Home

Meals Out of Home

39

JWT Austerity Index


Fitness and leisure is one of the first things to

go when money is tight. Understandable, when

many of us enthusiastically sign up for gym

memberships in January which then languish

unused. It’s easier than ever for consumers to

get fit without splashing out. Mobile fitness

and coaching apps abound. More and more

sports brands are offering free events and

clubs (such as NikeTown Runners); and guest

pass/taster offers from daily-deal sites allow

customers to keep switching up their routines

for little-to-no financial commitment. Sports &

fitness brands could capitalise on this, with in-

store classes and experiences to build brand

equity.

6%4%

23%21%

4%

43%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Although people still want their professional

salon beauty treatments, they are finding

ways to economise; visiting less often, leaving

longer and longer gaps between

appointments. This provides a big opportunity

for beauty products. With a plethora of DIY

goods such as boxed hair dyes and home spa

kits available, it is predictable that many

consumers should seek to maintain their

appearance through these cheaper means.

Blogs and Vlogs play a big part by offering

online tutorials for those who are less

experienced. Many brands are tapping into

this channel, providing free product and

support to independent bloggers in return for

reviews and product plugs.

1%3%

29%

39%

11%

17%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Gyms & Fitness

Hairdressing & Beauty Appointments

40

JWT Austerity Index


We are somewhat surprised to see the extent

to which the health and beauty category is

suffering, with 67% taking steps to minimise

their spend on products. This is despite much

talk of the “Lipstick Effect”; the theory that

women instinctively spend more on luxury

beauty in economic recession for evolutionary

reasons. Despite the view that women see

beauty items as small pleasures, many are

shunning labels for cheaper versions, and

trusting that they will perform similarly. Brands

can fight back by reminding consumers that

using their products at home could substitute,

and even replicate, expensive salon

treatments.

2% 2%

29%

33%

26%

8%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Health & Beauty

41

SPENDING BEHAVIOUR:

COMMUNICATIONS

JWT Austerity Index

Trading Up, Trading Down: Comms

Home broadband is one category which enjoys

something of a cushion from austerity.

Mercifully for broadband providers, internet

access has become almost as much of a

necessity as running water. However there are

still ways to spend less without giving up access

entirely, and almost a quarter are either

cutting back or trading down. Consumers are

likely to be searching for the cheapest deal

they can find. These services tend to be often

bundled and churn is an issue. Allowing

customers plenty of flexibility and

customisation in their subscribed services may

help to drive retention.

2% 2%

69%

13% 11%

2%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

It might be assumed that hardly anyone would

go without a mobile phone in this day and age,

but 6% of our panel claim to be giving up theirs

due to the cost. A further third are cutting back

or trading down on their spend. They may be

opting for cheaper tariffs or switching to pay-

as-you-go deals, but growing numbers of savvy

consumers are switching to their Wi-Fi

connection to use apps like Skype, Voxer and

Viber for making calls, and Whatsapp and

Facebook, BlackBerry or iOS Messengers to

text without using their phone-plan quota.

Workarounds are easily viable with a little

research and planning to make sure your

friends share the same platform.

3% 3%

50%

26%

12%6%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Broadband / Wi-Fi

Mobile Phone Subscription

43

JWT Austerity Index

Trading Up, Trading Down: Comms

Over half of the population are maintaining

spend on cable or satellite TV, so it is evidently a

priority. Restricted budgets over the past few

years have encouraged many to ‘nest’; spending

more free time at home to save money. That

said, 40% are choosing to cut back, trade down

or stop buying altogether. It is likely that this

group are downsizing their subscriptions, opting

out of premium services, or switching to

services such as Freeview and Freesat. 2% 1%

56%

16%10%

14%

Spending

more

Trading up Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

As a landline connection is necessary for home

broadband installation, and internet is a

modern-day must-have, it is unsurprising that

we see most consumers maintaining spend.

Yet fixed line services face an uncertain future,

and have been under attack from mobile and

internet telephony. Over 10% of households

now have no landline installed at all according

to TGI data. And according to a poll by

Moneysavingexpert.com, 80% of those under

30 don’t have or rarely use one.

2% 2%

63%

19%

10%4%

Spending

more

Trading

up

Spending

about the

same

Cutting

back

Trading

down

Stopped

buying

entirely

Cable/Satellite TV Subscription

Landline Phone Subscription

44

FINAL THOUGHTS

JWT Austerity Index

Key Takeouts

It’s time for radical thinkingThis austerity journey is taking us off the map. The answers to the questions that

austerity poses to brands will not be found in their back catalogues.

Furthermore, no category is immune. Now, more than ever, brands need to look

for radical solutions and innovate their way back to growth. Research released in

2012 revealed that investment in innovation by British businesses has fallen by

£24bn since the recession began. Tough times call for bold moves. Take

inspiration from the disruption caused by category innovators like Dollar Shave

Club in the USA.

Bring the FunOur data shows that more and more consumers are cutting back on their leisure

activities. Brands in this space have a mountain to climb to lure consumers out of

home, particularly since technology is making it so simple for us to socialise,

shop and enjoy entertainment from the comfort of our sofas.

Consumers do value experiences over material goods though, particularly ones

which provide them with social capital. So stressing the desirability and

exclusivity of leisure experiences that can’t be replicated at home is one way to

tempt them. For non-leisure brands, the opportunity lies in boosting the fun they

can have at home, fostering social occasions and making ‘austerity entertaining’

more appealing. Can your brand deliver or enhance engaging in-home

experiences for families or friendship groups?

Do Something to HelpConsumers’ relentless focus on value is threatening brand loyalty as they

continually seek out lower prices. It’s essential that brands display empathy with

their plight, but more importantly, they must show that they can actually do

something positive to help. This is a wide-open opportunity, with no brand

currently standing out as the people’s champion. Tapping into the consumer

desire for control in these turbulent times is a positive way to build relationships

based on mutual respect.

Look out for our second wave of the Austerity Index, coming in June/July 2013.

46

All non-proprietary icons are attributed to

thenounproject.com collection unless

otherwise specified below.

p2 UK map: VectorTemplates.com

pp3-7 Gauges: infogr.am

p8 Word clouds: Taxgedo.com

p16 Spiral chart: infogr.am

For more information contact:

Marie Stafford

Planning Foresight Director

JWT London

1 Knightsbridge Green

London SW1X 7NW

+44 (0) 7656 7000

[email protected]

#ideaswithintelligence

Economy & Finance

Jwt austerity index q1 2013 final