A recent study of current consumer spending habits found 33% of consumers plan to maintain reduced spending habits, while 43% are undecided.

Based on the results of the study, it's clear many consumers are either sticking with their "new normal" or are still forming their new spending habits and don't plan to fully return to their old spending habits.

The study of over 1500 US consumers by market research firms Chadwick Martin Bailey and iModerate Research Technologies found that although 24% of consumers only made minor cutbacks to their spending during this economic downturn, another 33% who reduced their spending plan to continue with their new slimmed down budgets even during an economic comeback.  The largest group is the 43% of consumers who have reduced their spending and have not yet decided if or to what extent they will go back to their old spending habits.

The study identified four distinct groups of spending categories:

1) Investments in My Quality of Life (vacations, home improvement, dining out and home furnishings). There is no easy substitute for these items. Some tend to be more of an experience vs. a possession therefore, they are less likely to be cut back, and more poised for a rebound as people feel their financial situation improve.

2) Things I Don't Think About
These include activities for children and subscription services such as cable TV/Internet and magazines. People are less likely to cut back on things that they need to "opt out" of, as opposed to purchase decisions they need to make every time they buy. They are also less likely to cut back on experiences (especially for/with their family), than things.

3) Things that Entertain Me
This category includes spending on video games, books and electronics. In the end, people still have time to fill.  In many cases they are looking for more efficient ways to fill it: best balance of utility (i.e. fun) and price.

4) Guilty Pleasures
This category includes spending on items such as jewelry, designer clothes and shoes. Items seen as "frivolous" purchases, particularly those where consumers can't rationalize a tangible value, face the most difficult road to rebound. This trend was consistent across income levels: even more wealthy people need better reasons to buy. However the aspiring affluent are particularly vulnerable, people with expensive tastes, but with incomes that aren't large enough to be recession-proof.

The "Things I Don't Think About" category, which includes items like cable TV and subscription services saw the least reduction in spending mainly because they were expenses consumers had already "opted into" and were thought of as part of the core budget, therefore they were less likely to take action to "opt out." The hardest hit category of Guilty Pleasures seems like it will be the slowest to rebound. It is clear that consumers are re-thinking purchases that are seen as frivolous. These purchases which are hard to rationalize will continue to have a difficult time rebounding.

Consumers Have New Perspective On What They Need
Many consumers reported changes in shopping behaviors and being content with their new spending habits. While many say they will not return to their "spend at will" habits, many look forward to some financial breathing room to "splurge" every once in a while.

Here are some consumer comments from the study:

"I used to buy whatever clothes and shoes I wanted. Now I only buy when I need something, like clothes for summer and trying to use as much as I can from previous years"
 
"I'm mostly cutting back on the more frivolous purchases and saving money for the important things. I'm just content with making smarter choices when it comes to things I want versus things I need."

"When the economy picks up and I am making the money I was before, then I will be able to go out to dinner and get clothing and electronics."
 
What would you say your current spending philosophy is?


Sources of the survey:
Chadwick Martin Bailey is a custom market research and consulting firm who works with many of the most successful companies and best known brands in the world to help them acquire, maintain, and grow their customer base.   www.cmbinfo.com

iModerate Research Technologies listens, connects and digs deeper with consumers online to provide the research story organizations need to win in the marketplace.  www.imoderate.com