Tom H. C. Anderson - Next Gen Market Research

Market researchers need to have an educated opinion on the economic situation - Mine is more positive than most you’ve been hearing.

I was asked the other day by someone when, based on our market research, I thought the economic upturn was coming. This person wasn’t very familiar with market research, perhaps that’s why she asked me about the economy. I say she asked me in spite of being a market researcher, because unfortunately most US market researchers seem to know very little about economics. In truth market researchers are (or should be) economists, and economists are market researchers.

If you’re a market researcher and you think the US is becoming “socialist”, or you don’t know the difference between the definition of “liberal” when used in US politics vs. European Politics, it may be a sign that you need to purchase some books on economics. Ok, going to get past the ranting and on to the reason for the post.

In late January I saw results from a ‘global’ study done by my former employer, TNS, called the “Financial Crisis Study” which gauged perceptions of the economy. I believe they sampled from four countries, US, UK, Germany and France. At least to me the analysis were not too exciting nor surprising. According to TNS “One of the most significant findings of the new report confirms that a majority of respondents across all countries believe that the crisis will continue for at least another one or two years“.

A lot of things could have made the report more interesting, such as longitudinal benchmarks, but what would have made it far more interesting would have been to include respondents from Iceland. Why? Because Iceland has gone all the way to the edge, they are bankrupt! How about using them as a benchmark (PhD students looking for an interesting/original thesis question/idea look into doing your research around the Icelandic economy or consumer sentiment there).

So I reached out to a couple of friends from graduate school who are Icelandic. I’ll quote directly from one of them (Magnus):

Things are not so good here in Iceland now as you have seen in the news. For some reason we are “bankrupt” now, so I, my family and friends and future generations are paying for years to come for the “rich” people and bad government that are responsible for this (they don’t think so though)… But anyway, I’m still fine, working for the government is not to bad after all. I know few people though that have no job now and the struggle is just starting for lot of people, many with lot of depts. already…The money basically disappeared we had to freeze all our projects and we still don’t know what projects will start and what will put on ice for longer time. Many companies are closing or getting bankrupt and we can see it in the supermarkets things are not so good. It might be that they are changing what they buy but there are also regulations about currency exchange now and business have changed everywhere, you have to pay cash but bank guaranty is not easy now as it used to be. Prices of everything have gone up also but part of it is the bad currency exchange rate now. So, less money and everything more expensive now…

Sounds kind of horrible huh? So when do my friends in Iceland think they will recover/begin the turn around (Suzie Orman I think has said 7 years for the US)? You guessed it, same as everywhere else, one or two years!

We will recover, I think that’s no question. We have lot of energy, clean water, fish in the sea, high level of education and good infrastructure that hopefully will be fixed after this. We will recover, I think that’s no question. We have lot of energy, clean water, fish in the sea, high level of education and good infrastructure that hopefully will be fixed after this. So I think we will recover well and fast when the recovery starts. When that will happen is hard to say, one, two or more years… It will depend on the rest of the world, UK is on the edge now and many countries will go into long period of bad economy I think. But as I said I think we will start early to recover and do it fast (but pay our depts. for very long time though)

Well, as I said, there is less money and the prices are getting higher. Off course this affects everything, I look more at prices in the supermarket and will think more about what I do in the spare time. Well, maybe not too much, I travel if I can as I have done until now and still go to concerts, hunt/fish, go to movies, drink beer etc…

The others also gave the standard average of about two years.

OK, so now putting aside complex financial analysis for a while I’ll give you my more optimistic analysis of the US economy, and subsequently global economy, which is based on consumer insights and consumer psychology.

Psychologically two things working against the economy recently were politics (Bush Administration coupled with a long drawn out primary and presidential campaign), the cold/dark winter weather also affects us (if you don’t believe this check out annual drops in manufacturing productivity in winter 30%).

 Americans save less than any other country, most recently negative savings rate actually. While we can close the purse strings for a while, purchasing has become more than a cognitive process, purchasing is a need beyond the products and services we pay for. US consumers buy when we feel good, and buy to feel good.
Obama doesn’t want to talk too optimistically yet, cause that will set his bar higher. He wants us to know we are in a bad place, that way he can look better later. Perfectly understandable. Eventually he will start speaking more positively. As all economic news is bad these days, any news that isn’t negative will be seen as positive. Eventually (soon) there will even be positive news. More sun and warmth of April will bring more optimism, and together in spite of a stimulus package these will cause the start of the turn around which will of course begin in the US.

Just my Bull-Shitake, but I think it’s better than some other theories I’ve heard. Look at the Asian financial crisis. They never fixed anything, but things got better rather quickly. Money moves faster nowadays. My friends in Iceland and people on the street in UK, US and Germany all having the same two year projection doesn’t make sense from a statistic/financial point of view, but it does from a psychological one.

So don’t sell react too negatively to bad news and sell your SUV again, remember gas prices didn’t stay high as long as you thought. Don’t worry the economy will get better faster than you think as well!

[Note: I do believe off-shoring, especially Knowledge Process Off-Shoring and IP theft will hurt us in the long run. But I'll leave that for another post].