Chris Harrison: Consumer Confidence – Without It, Brands Suffer

In the USA, the University of Michigan publishes a monthly consumer confidence index. According to the BBC Business website ‘every blip and dip of the University of Michigan’s monthly consumer survey… is chewed over obsessively by market pundits.’

Here in Africa we don’t get this sort of information on a regular basis. So when it comes, it’s worth a quick read. And marketers who do so, should ponder whether or not to adjust their forecasts.

Consumer confidence is the degree of optimism consumers feel about the overall state of their economy and their personal financial situation. Having read a number of these surveys in the last week, it is clear that the latter strongly influences the former. Particularly in markets where the general public are not well informed about macro-economic trends. Or the realities of business performance.

Africa is a large and diverse Continent. We have to keep saying that for the benefit of those folks who still think we’re a country. And in such a place, there are bound to be very significant differences in consumer attitudes. Right now in Ivory Coast, people are less concerned about economics than they are about being hit on the head by a French missile.

Several countries are looking forward to the blessings and curses of becoming an oil producer. But as yet the likely benefits of the black harvest are not clearly understood by consumers. The Modern Ghana News has just reported that local consumer confidence dipped in January 2011, and attributed it mainly to a 30% rise in fuel prices. Mmm.. that does send a confusing signal to people living on the shore of an oil lake, doesn’t it? Meanwhile the Bank of Ghana Composite Index of Economic activity was up 10.5% in 2010, citing improvements in revenues from tourism, social security contributions, manufacturing, ports and harbours. So the macro economic message isn’t getting through to ordinary people. And the reaction of the Governor of the Central Bank of Ghana was to say: ‘ there’s no cause for alarm.’ I think I first heard those words spoken in the movie ‘Towering Inferno’, and more recently during the Japanese nuclear incident.

In South Africa, consumer confidence also dipped in the fourth quarter of 2010. It measured 14 on the Bureau for Economic Research index., but in fairness the high in 2010 was 15 and that was a huge improvement on 2009 where the index read 1, 4, 1 and 6 at the end of each quarter. Back in June 2008, South African consumer confidence was -6 on the same scale. So perhaps the biggest learning from this is that the confidence curve confidence in South Africa is a roller coaster. No doubt the ability of Government and the central institutions to communicate and contextualise trends has a big impact. Turning to Kenya, global research giant TNS RMS has just released the fifth wave in a programme of consumer confidence measurement. The sample was nationally representative of adults over 18 years. And consumer confidence has reduced dramatically.

Overall confidence in the economy of Kenya is down 18%. This is statistically significant. 93% of respondents disagree with the statement ‘ Jobs are easy to find.’ And only 23% agree with the statement ‘jobs will be easier to find in the next 6 months.’ Six months ago, 52% thought business conditions would improve, now that number has dropped to 35%.

Marketers should note that only 45% of people think their household income will increase in the next six months, down from 62% last September. Brand managers will have to work harder to align their offers and promises with a prevailing attitude of caution, or to overcome it.

Interestingly, this pessimism does not seem to be shared by businessmen in Kenya. Recent CEO level meetings have been briefed on growth in Sub Saharan Africa driven by a favourable external environment; ongoing structural reform; booming demographics; commodity prices and consumer goods sales. South Africa and the BRIC countries are seen as being active participants. There re also calls for a green revolution – a boosting of agricultural productivity – sooner rather than later. A sentiment you will have heard in the column before.

So once again, the man and woman in the street may not be receiving the right macro-economic messages. If this continues, consumer spending will decline. So in amongst the reporting of the Ocampo Six and sundry other political and administrative complexities, Kenyans really do need to receive better analysis of economic process.

That said, I am wary (and weary) of too many statistics. My favourite story on the subject features a statistician participating in an experiment. During the experiment his head was placed inside a lit oven, and his feet inside a freezer. Interviewed afterwards he commented that, on balance, the temperature had been quite comfortable.

Chris Harrison is Chairman of Young & Rubicam Brands, Africa. This article has been republished with his kind permission

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Image by BartNJ