Catering to the Consumer Mindset: Empowerment, Alternatives, and a Search for Balance
Amidst a mood of cautious optimism, The Next Idea releases its annual report on global hospitality trends. For 2011, the prevailing message reflects a melding of increased consumer intelligence, expanded empowerment and alternatives, and a demand for a balance between cost and quality.
Simply put, in a post-recession restaurant marketplace, consumers are increasingly calling the shots.
To predict buyer behavior, one must genuinely understand consumers . Forecasting future directions relies on a careful balance of correctly interpreting history and foundation, along with analyzing the current consumer frame of mind.
Our report is based on findings from leading market-research firms, augmented by our own consultants’ grassroots and global experience this past year working with our national and international clients.
To accurately predict hospitality trends, we first briefly report on menu introductions of one or two top restaurants that have been prematurely pronounced as “trends.” But our focus in this section is on presenting an appraisal of the restaurant, food, and hospitality consumer: identifying the overall consumer landscape, examining the consumer mindset, and finally, forecasting notable ideas and future trends for 2011 and beyond.
The objective is that by comprehending the consumer mentality, we can more effectively meet evolving expectations. This will drive the cycle of innovation, support continued relevance, and facilitate ongoing success.
The Current Consumer Mindset
As a foundation for predicting upcoming restaurant trends, the broad consumer landscape and pervasive buyer mentality should be considered. These “new consumers” are distinguished by identifying and interpreting the transitioning values that define them and thus dictate their purchasing behavior.
- Sense of Community. Rising from the ashes of the recession, consumers have taken with them a sense of community and camaraderie. Distressed from the lack of work and the publicized corporate excesses, consumers have realigned their values with family and a concern for their fellow man. The consequence is an “in this together” mentality, where the American public realizes that efforts have more impact when community members act in unison.
- Social Awareness. With a sense of community comes a reinvigorated sense of social responsibility on both the local and national level. Observing friends and family members losing their jobs and homes created a greater sense of awareness and values, diminishing previous materialistic tendencies that seemed to be an underlying cause of the past 2 year recession.
Still, all is not altruistic in motive. Consumers are not suddenly immune to seeking recognition and increased status. Rather, the U.S. consumer now understands that being seen as useful, smart, conscious, and generous has emerged as a new expression of social status.
- Innovation as an Imperative. In years past, operating on the edge of innovation was a luxury. Now, it’s a necessity. Case in point: Video-rental giant Blockbuster headed into Chapter 11 last year, while standing by complacently as new kid Netflix began a Blue Ocean trend in online rentals.
Assuming they could coast along on brand recognition alone, Blockbuster stuck to its outdated strategy of being the neighborhood video supplier. Meanwhile, Americans transitioned en masse to online models.
The problem was compounded by the arrival of Redbox, yet another more convenient and economical video-rental solution. Blockbuster found, way too late, that it had fallen behind the curve. Having forfeited the option of simply keeping pace with change, the chain must now undo damage with a major brand overhaul—if there is any hope of reclaiming relevance.
The takeaway here in terms of consumer mindset? While generations past have rejected (and even feared) change, the modern consumer sees it as essential. As time goes on, consumers will have increasingly less tolerance for companies that do not embrace innovation with open arms and eagerly allow purchaser desires to influence trends.
- Continued Truth, Transparency & Even More Information. Last year, The Next Idea reported that the post-recession consumer would require truth and transparency from the food-service industry. However, what is now evident is that the attitude some termed a temporary backlash to being bullied by banks and misled by corporations has evolved into something far less fleeting.
Big Business philosophy has not resonated well with the normally resilient consumer. The result has been a permanent shift in what consumers are willing to accept in terms of honesty. Gone is the “don’t ask, don’t tell” mentality. In its place is a pervasive demand for truth, transparency, ethics, and an acceptance of responsibility for the “invisible” ingredients in our food (not to mention the silent components in our skin creams, cell phone radiations, and the plethora of other products we rely on daily).
Naturally, this elevated level of declaration is fuelling the demand for even more information… and the restaurant, food and hospitality industries will be required to fulfil those demands.
- Economy as the New Excess. Undoubtedly, luxury and premium will always be adored. But with the “new normal” being less champagne and more, well, filtered tap water, consumers have been forced to make changes.
Although premium was previously intrinsically out of their reach, customers could still buy now and pay—with interest—eventually. However, with the impact of the credit crunch, this option has been eliminated. For many, this is the first time luxury has been literally out of their reach.
But rain or shine, consumers are going to find some way to feel fulfilled in buying… and some means of defining themselves, and advertising their status, by how they spend their money. If consumers can’t flaunt their status by buying premium, they’ll simply change how they frame their choice of purchases. In today’s environment, “Look at my luxury car; see how wealthy and cultured I am” has become, “Look at my economy car; see how smart and environmentally conscious I am.”
- Increased Understanding. While economizing has clearly become cool, buying is certainly not about simply choosing the least-expensive option. For one, consumers want to be smart with their money; that is, becoming educated and finding a balance between expense and performance. Many have learned (often the hard way) that the most inexpensive option won’t always last; as a result, they’ll be paying to replace the product next year.
But there’s also the ego component. Crucial to consumers is the perceived rationale behind their buying decisions: They must project the appearance that they bought based on an informed understanding of a product’s value proposition—and not because they couldn’t afford better.
To do so, today’s consumers are learning how to analyze potential purchases. They decode, deconstruct, and evaluate the product in terms of features, quality, price, aesthetic appeal, enjoyment, durability, ethical considerations, and a combination of other criteria. Then, and only then, do they decide if it’s indeed a value match.
As a result, this detective mentality is driving product upgrades. But whereas before, “upgrade” meant disproportionately elevating the price, today it means a fair balance between price and quality. More to the point, it is the consumer who is now defining this fair balance.
- Instant Gratification. The public’s obsession with instant gratification is certainly nothing new. But with a recessionary reduction in lifestyle—and a future that appears uncertain—consumers are increasingly seeking ways to enhance their living standard……… today. Yes, the last couple of years have created more conservative consumers. However, that doesn’t completely negate the consumer’s desire to purchase and be pampered.
On one hand, this can be seen in a trend towards buying sale items whether one needs them or not. This impulse makes sense if you consider the pride a consumer feels in, once again, being able to afford, say, a designer item, simply because it is deeply discounted.
On the other hand, this is manifested in a mindset of “controlled indulgence.” Here, we see an uptick in purchases of small-ticket items that nonetheless provide instant gratification (i.e. although Leonard Lauder’s “Lipstick Index” has faced conflicting evidence, there remains some truth to the theory in general. The Lipstick Index is an indicator based on the theory that a consumer turns to less expensive indulgences, such as lipstick, when she (or he) feels less than confident about the future. Therefore, lipstick sales tend to increase during times of economic uncertainty or a recession).
With the price of a meal being more affordable than a major purchase or spending a weekend away, an opportunity emerges for food and restaurant operators to fill this need. Essentially, “Spoil yourself—without breaking the bank” has become the new motto. And the restaurant meal becomes, in effect, the affordable vacation.
- Augmented Alternatives. In addition to reframing the rationale behind their purchases, consumers are adapting to the new normal by taking pride in expanded options.
Nowhere is this more prolific than in the cellular phone industry. Today, shoppers can select a phone by brand, type, carrier, capabilities, and a slew of other options. Once they purchase the device, there’s a second tier of alternatives, including approximately 10,000 different applications with functionality as diverse as checking financials to finding the closest tanning salon.
Consumer choices are only going to become increasingly more varied. For example, within the next 10 years, look for detergent-free washing machines, ink-free printers, solar-powered cookers, pocket-size pain-relief tools, acupuncture through oral administration, GPS through hearing aids, training and consultations through smart phones, single-season products and “pop-up” stores, fine-dining-quality instant food… and the list goes on.
Moreover, choice will come across via more diversified brands. As globalization migrates to the next level, brands will begin to emerge from new markets such as India, China, Africa, and the Middle East. As developing countries evolve from manufacturing to consumer economies, many local brands [from overseas] will mature into major international players.
Exactly what these brands will look like remains to be seen; however TNI anticipates some competitive food, clothing, and cosmetic brands to emerge, thus capturing the imagination of the newly inquisitive consumer and widening the competitive landscape.
Of course, at a corporate level, this raises concerns for U.S. and European brands. While these world leaders will likely maintain their cache for years to come, new consumer economies are realizing that those famous European and American brands are actually being manufactured within their own borders. Thus, those markets will respond accordingly.
- Virtual Identity & Voicing Consumer Opinion. Social media is on the tip of everyone’s tongue. As such, its impact figures into any trend forecast.
In the most basic sense, buyers are addicted to social media. Facebook, Twitter, and a range of specialist dating and ethnic sites occupy a good portion of consumers’ waking hours. What was initially referred to as a fad has changed the way buyers and businesses identify themselves: No business card? No problem! No Facebook page? No identity!
Consumers view sites like Facebook and Twitter as platforms for communicating en masse and as public forums for declaring their identity. Yet business has been less than welcoming to social media, even touting it as a waste of time. Essentially, during the last few years, Facebook et al. have been seen as consumer—not business—entities. But as we know, this is transitioning; and change is coming quickly.
For instance, a study out of the University of Maryland’s Smith School of Business reported that in 2009, the percentage of small businesses using social media increased 100%, from 12% to 24%, and would likely reach 50% by 2011. So, besides escaping the lower 50% of late adaptors, still-skeptical companies must consider the consumer mindset: If your buyer believes that any business of importance has a Facebook presence, your personal opinion is really irrelevant. In other words, you’d better sign up for an account and start making friends.
Aside from defining and declaring who they are, consumers are embracing another benefit of social media, the opportunity to communicate directly with their favorite brands… in a forum of their choosing. They’re able to carry on conversations, tell businesses what they like, and advise where they might make improvements. Moreover, thanks to sites like Yelp.com, consumers are now privy to the first-hand experiences of others. All this is having a palpable impact, keeping companies on their toes for fear of a public flogging.
Pushing aside the outdated adage “buyer beware,” engagement and empowerment have become the new consumer mantra. Raised within the context of social media, as today’s younger generations enter the business arena, look for even further use of social media by businesses.
- Wellness. The statistics are staggering: It was reported in 2010 that more than half of all U.S. consumers (54%) say they have recently changed their views on health and wellness. Even more tellingly, 32% of all consumers has ingested some type of performance drink in the past 30 days. In addition, the average household spends just under $150 per month on food and beverage purchases that promote a wellness benefit.
While wellness as a trend hit the headlines in the mid-90s, conceptually, it is taking on a different face than ever before. Dietary intake and the components, origin, and quality of food are becoming far more primary in the wellness movement. Specifically, consumers understand not only the need for wellness, but the direct impact what you put in your body has upon it. They are reacting through increased interest in and scrutiny of food’s ingredients and nutritional qualities.
For the food and restaurant industry, this change is creating an incredible shift in demand. Those businesses that embrace buyer education and adapt to the new consumer mindset will see growth; those that believe they can continue to slide by with secrecy are sure to face an uphill battle.
2011 TNI’s Food Forecast: Green with a Chance of Veganism!
Based on The Next Idea’s understanding of the consumer, we have identified the following trends that represent change in the coming years.
- Green. It is no longer possible for food service operators and restaurateurs to ignore the Green movement or take its issues seriously. Most of the large restaurant chains continue to purchase pre-made and frozen ‘ingredients’, thus adding considerable carbon footprint to the ecosystem, not to mention lowering the quality of their food. This is slowly changing. As the next decade progresses, TNI predicts (and recommends) that restaurant chains will adopt local purchasing agreements, reduce reliance on frozen foods, and become proactive in the areas of green construction and general maintenance, all of which will represent positive strides in environmental protection.
Still, given the magnitude of the problem, this issue will not fully resolve itself until there is legislative intervention. TNI predicts that within 10 years there will be a separate body tasked with oversight of green compliance. Customers will not just look for a health department certificate, they will also decide their choice of restaurant based just as much on green compliance.
- Anti-obesity. Obesity is the restaurant industry’s nitroglycerin, and represents one of the industry’s primary challenges in the U.S. Obesity awareness has been elevated to such a degree that we are now seeing noticeable change, albeit in its infancy. This positive change has of course been compounded by First Lady Michelle Obama’s personal interest in and campaigning for this issue, which has clearly defined obesity as a national issue of concern.
As restaurants and food service groups feel the pressure, we anticipate accelerated change as menus include better [healthy] options for kids and more enjoyable healthy options for adults. The fact is that menus will shift over the next few years to higher and [hopefully] fresher vegetable and fruit dominance along with more locally produced and purchased meat and dairy products.
- Veganism. Driven by the concept of wellness, one of last year’s surprises has been the rise of veganism. Currently, only 1 percent of the U.S. population is vegan, however this type of ‘cuisine’ is appealing to more and more people as a meal option.
Vegan food is simply animal-free food – and zero tolerance for animal bi-products in food. This means that only food that comes from the ground, vegetables, fruits, grains and plants are acceptable to eat.
Traditionally, veganism has been more a lifestyle than a diet. It s philosophy includes clothing, cosmetics and so on. Recently, it has been promoted as a diet form in its own right. Indeed, 2010 saw many high-profile people identifying themselves with a vegan diet: Bill Clinton, Steve Wyn, John Mackey (Wholefoods CEO), and even Mike Tyson.
- Mobile Food. Mobile food is not new. This phenomenon has gathered speed through the recession to become a credible and successful business model. This business will continue to grow, and in some cases replace stand-alone restaurants. We are already seeing mobile truck food courts, and we should not be surprised to see in-house food service be supplemented by the mobile truck!
As the mobile food industry grows and becomes more sophisticated, we foresee a range of sub-distribution services that will spill over into the domestic market, such as deliveries by mini trucks, meals to order delivered from oven to door, and so on.
- Ethnic Food. The U.S. has broad representation of ethnic foods, in particular Asian and Mexican.
As the new decade progresses, The Next Idea predicts greater influence from Indian, Peruvian and Mediterranean food. Although these cuisines have been slow to gain traction in the U.S. , they nonetheless provide wonderful and exotic flavor profiles along with healthier cooking methods. Mediterranean food in particular has many healthy attributes, often promoted as heart healthy and abundant with anti-oxidants.
- Fusion. Once available only at high-end restaurants, ‘fusion food’ is increasingly cropping up in discussions about South Asian cuisine. With the popularity of Asian food in the U.S, it is unsurprising that chefs have experimented by combining Asian and Latino staples to create new dishes.
Fusion has a long history. For example, as legend has it, in a moment of culinary flair in a restaurant in Glasgow, Scotland, an Indian chef combined Asian spices with tinned tomato soup leading to the creation of the now ubiquitous Chicken Tikka Masala. The area in the U.S. that will inspire the most creativity will be the fusion of Asian and Latino foods. Sushi Samba (Japanese – Brazilian Concept) has seen solid growth over the past few years, and many more examples of Latino – Asian Fusion will soon emerge. Where the landscape will change is in the type of restaurants serving fusion cuisine. Whereas before this cuisine was almost 100% reserved for table service restaurants, in today’s market we expect to see a large number of fast casual fusion concepts launching from 2011 onwards.
- Farmers as the New Celebrity Chefs. The new farm to table trend has placed farmers under the spotlight; restaurants now feature their celebrity suppliers by stating the source of their products and offering special menus from individual farms.
We will see farmers commenting on blogs, hosting visits, and developing recipes. We will see restaurants paying less attention to chefs and focusing on the farmers and artisans.
The great news for consumers’ health (and demand) is that more attention to the supply chain also means more attention to food safety and product traceability, not to mention local sourcing.
- Marketing through Social Media. Social media is now becoming an increasingly important part of marketing budgets. As traditional and more costly marketing initiatives are being cut, social media budgets are expanding as fast as a teenager’s friend lists.
Restaurants will seek to gain a competitive edge with the ever-expanding availability of new technologies and applications. However the most dominant technology will be the rise and rise of social media. The numbers are simple to understand: in 2004, Facebook had 1 million users. By 2010, it had 500 million. Clearly, this is no fad; it’s the future. Restaurant groups that fail to address the social media opportunities and challenges will experience a wounding competitive disadvantage.
Social media, then, is here to stay, and will only grow larger and stronger.
- Enhanced Restaurant Environments. Restaurant interiors are being developed with a global market in mind, and are increasingly being based on enhancing trends in the restaurant market place – which has of course changed dramatically since 2007.
It is important to be aware that the primary focus of all major restaurant (fast food / casual) chains is no longer food, but instead interior.
The competitive hierarchy [by sector] used to be that fast food restaurants would have the most basic and clinical interior designs, that fast casual restaurants would have enhanced interior designs over fast food, and that only restaurants featuring casual dining and up (fine dining, etc.) would have any form of significant interior design. However as groups such as Starbucks, Panera Bread and Corner Bakery have become recognized, the fast food market has begun to upgrade.
Even McDonalds has substantially upgraded its interior to compete against the fast casual chains. Indeed, if you visit a St. James [London] McDonalds, you’ll find a highly welcoming and hip environment!
Nowadays, fast casual concepts compete directly with waitress service dining in terms of quality of environment and food; although these are fast casual concepts with an average price point of between $8 – $10 per customer.
- Free Means Business.
The ongoing trend of “nasty free” will continue. For example: the estimated three million Americans with celiac disease (which causes adverse reactions to foods containing gluten) want gluten-free food, lactose-intolerant consumers want food that is lactose-free, others desire food that is casein-free, and so on.
The inexplicable [almost epidemic] rise in childhood disorders is now fuelling this trend, as parents are looking to their child’s diet as a potential cure for disorders such as autism and ADHD. This has resulted in many parents instigating a gluten-free and casein-free diet for their affected child.
While clinical evidence proving such diets will help these disorders is limited at best, it is worthy of note that there is absolutely no independent clinical evidence suggesting that such diets will not help affected children. So long as more and more parents publicly announce and testify to positive results, demand will grow, and restaurants will respond.
Vegan restaurants are already in existence. As for gluten-free and casein-free dining establishments – it’s only a matter of time!
- Time to Care/honesty, transparency and even more information
The economic environment has changed the consumer’s value structure, generating a need for transparency, ethics and guarantees on the “invisible” contents of the food we eat. Last year, The Next Idea reported that the post-recession consumer is demanding honesty and transparency. The demand for honest and ethical food is filtering through a range of food service areas, from farm to table concepts to more detailed labelling and generally less secrecy.
Finally, an evaluation of the concept of ‘New Normal’ must be addressed. Just over a year ago, Bill Gross, Managing Director of the global fund manager PIMCO, was among the first to coin the term ‘the New Normal’. It’s a term that gets straight to the heart of the issue. When economies get back to a more normal state, it will be a different normal than foreseen before the GFC [WHAT IS ‘GFC’?]. It’s likely that this new normal will feature a slower rate of growth in developed economies, and will see developing countries driving global growth.
Indeed, the only ‘New Normal’ is that there is no ‘normal’ Businesses need to re-strategize and base their direction on both unchartered and somewhat unfriendly waters. This means comprehensive evaluation of core business functions from supply chain to outsourcing and non-essential (yet often vitally important) departments. In the world of restaurants and food service, this means evaluating the cost of purchasing from large distributors, both financially and environmentally; home-made versus brought in; green policies and operating procedures; and rebalancing cost and quality. While restaurant owners may consider these things falling into the ‘if it isn’t broke, don’t fix it’ category, we would simply say to them – it may not be broke today, but if you wait until tomorrow to fix it – it will be far too late!
About The Next Idea
The Next Idea (TNI) is an international restaurant and hospitality consulting group. Based in Los Angeles, with offices in the UK, India, (and shortly UAE), we work across the world, specializing in concept creation and development – everything from strategy, brand and product development, to design, execution and communication.
We are specialists who focus our expertise in food, food service operations, restaurants, cafes, leisure and entertainment.
We differentiate ourselves from our competitors by always beginning with the end user – the customer experience, the employee training experience, and the brand experience are given the utmost priority when we approach a project.
Our unique experience provides rare expertise for our clients, given our ability to recreate the advanced food and restaurant concepts presently found around the globe. We offer the knowledge, experience, and ability to take account of regional considerations such as local demographics, culture and tastes. —which are invaluable when developing uniquely differentiated concepts adopted for integrated markets.
In addition to our extensive management experience, our team of partners and consultants has collectively developed over 40 new culinary concepts, and opened or refurbished over 750 restaurants and cafes worldwide. This experience brings deep knowledge of combining creative processing with the reality of day-to-day operations and execution.
The TNI team has consulted with some of the world’s most eminent chefs and upscale restaurant groups, in addition to working with clients in entertainment, casual dining, fast casual dining, resorts, theme parks and travel. In each project, we have been involved in all areas of the business and have delivered programs and plans that have developed and enhanced concept positioning, product and menu, operating standards, infrastructure, and overall quality.
Presently, The Next Idea has concept development projects in the U.S., Dubai and Abu Dhabi (UAE), Nigeria, China, the UK, Saudi Arabia, and India.
For information contact: (+1) 818 992 6765 info@thenextidea