As long ago as 2003, when Michael Silverstein's book Trading Up was published, we've been acknowledging a shift in consumer spending. Wealthy consumers will trade down to less expensive items when it makes sense, and the middle class will trade up to more expensive items if the benefits justify the expense.
With the current economic crisis well underway, it's interesting to see that this behavior is still playing out, but in a slightly different way. When the economy was strong, consumers acknowledged trading up to higher priced products. They justified their purchases by citing the additional benefits, or by trading down in other areas that were less important to them. Now, it appears that the consumers' rationale has changed. People are only spending extra money on necessities, but looking closely, one consumer's necessity is another consumer's luxury.
This presents an interesting opportunity for innovation and product development. Many companies are responding to economic conditions by defeaturing products and cutting any costs possible to better appeal to the masses. I would argue that companies that serve the needs of their consumer groups in better - which may not always be cheaper - ways, will be better off in the long run. The other day, the Financial Times reported that BMW may actually post a profit for 2008. BMW does not appeal to the masses and consumers who appreciate the features and attributes of the brand do not have common income levels. What they do have in common, however, is that they consider the features and benefits of their BMW to be a necessity and will either pay a premium price, or would rather buy a used BMW over any other new car. This tells me that BMW has taken the time to find out what their consumers consider necessary, and they deliver it in their products. They aren't trying to find ways to make their cars have universal appeal, and it appears to be paying off.
What do your company's consumers consider to be a necessity in their lives? Do your products and services deliver on the qualities that your consumer would deem a necessity? If your consumers have less disposable income than they had before, the answer to these questions becomes even more important. If you won't give your consumer what they need, surely someone else will.