Few people know the dining scene – and the spending habits of those who frequent it – better than Tim Zagat, who dreamed up the idea of a customer-driven food survey with his wife Nina in their New York apartment more than 30 years ago.
The result was the Zagat Survey, a widely followed directory of not only restaurants but also hotels and shops in more than 70 cities worldwide.
Zagat research confirms the effect of the recession on eating habits, with 36 per cent of diners surveyed choosing less expensive restaurants to eat in, 22 per cent skipping starters or desserts to save money, and 19 per cent cutting back on expensive alcohol.
“People are still eating out – just differently,” Mr Zagat says. “Restaurants may take a hit when it comes to month-long reservation waiting lists, but the bottom line is that people still have to eat.”
It is not just the restaurant sector where the recession has caused shifts in spending. Economies may be rebounding, but consumers continue to think twice before spending, while at the same time seeking out value-for-money deals.
For some businesses, decision-making during recovery can be tougher than the more straightforward crisis-management strategy employed during recessionary times. Increase production too soon, and you could waste millions on unsold stock. Do nothing, and you risk losing significant revenue opportunities and market share if the recovery is stronger than expected. So how should organisations deal with the changes in consumer behaviour caused by recovering markets?
It is important to recognise that consumers in different sectors behave in different ways. In retail, for example, middlemarket consumers spent the early part of the recession shifting allegiance from their regular shopping haunts to the discount stores. Some discounters, such as Primark and Matalan, continue to benefit from this new custom, though according to the KPMG/Synovate Retail Think Tank (RTT), many shoppers are now drifting back to their former favourites.
“In part, their return has been based on disappointments in the quality versus price or choice comparison,” says Tim Denison of RTT. “Discount food chains generally lack the breadth and depth of range that many have grown accustomed to.”
Retailers understand that consumers can be fickle, according to Mr Denison. In response, some discounters have reshaped their business models. Wal-Mart, for example, is remodelling its stores to retain middle-market shoppers, and plans to begin an eco-labelling programme to appeal to green-minded shoppers.
“Some of the changes we see are not only a result of the recession but the outcome of fundamental trends that started years ago,” says Jerry Wind, professor of marketing at the Wharton School of Business, University of Pennsylvania. “The empowered consumers, fragmentation of markets, enormous advances in technology, especially web 2.0 mobile applications, media proliferation and the enormous increase of social media and networking … all these trends have been enhanced by the financial crisis and recession.”
In part, this is because consumers have lost trust in the traditional ways of doing business, says Prof Wind, who believes that the economic recovery is an opportunity to build better and more trustworthy strategies with customers – “to show clients that you love them”.
Since the financial crisis began, a number of business leaders have been vocal in calling for measures to rebuild public trust and reconnect with customers. “The most significant change to come out of the recession is the need for transparency,” agrees David McQuillen, a former Credit Suisse vice-president who is setting up a customer experience team at a new bank.
“The recession laid bare the truth that companies were not being entirely honest with their customers or delivering great service,” he says. “Now customers are looking for companies they can trust – and the internet gives good companies the power to show transparency, though clear details about their products, pricing, service and customer satisfaction levels.
“In the post-recession world, this kind of transparency is going to be one of the most important trends that a company can embrace. And if they don’t, transparency will be inflicted on them by third parties.”
Mr McQuillen argues that transparency can be a source of competitive advantage. He points to two examples: Quirin, a German bank that posts its fees on its websites and allows customers to browse profiles of their relationship managers and select the one they like best; and Australia’s UBank, which uses social media to conduct relationships with its customers that go beyond just managing their money.
The airline industry was another casualty of the recession, with customer satisfaction figures falling at most carriers. In response, United Airlines, which scored particularly low in customer satisfaction according to figures from the University of Michigan, decided to refurbish every aircraft in its fleet, which includes tackling what are known as “NEF items” – the broken trays and fused reading lights that, customers believe, are “never, ever fixed”. United now checks its aircraft for cosmetic repairs every 20 days, where previously that kind of sweep took place every 100 days.
Mr Zagat’s advice is to listen, learn and adapt. “The most successful restaurants are listening to their consumers and adjusting to meet their changing demands and habits, and offering bargain and fixed-price menus that get customers in the door,” he says.
He says that, in New York alone, more than 600 restaurants offer dinner for under $30 (£18), and 400 offer dinner for under $25, while some high-end chefs are opening casual spin-offs that cost a lot less than their main restaurants.
“The good news is that we continue to count more openings than closings,” Mr Zagat adds.
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