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Photos: Five game-changing consumer trends

Behind each trend lie opportunities for Canadian entrepreneurs, and those that take advantage of at least some of the trends will be able to keep their products relevant or seize new business growth opportunities. As such, this study from BDC identifies strategies to help Canadian small and medium-sized enterprises (SMEs) transform these opportunities into a real and long-lasting competitive advantage.

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BDC STUDY: MAPPING YOUR FUTURE GROWTH

Three major phenomena are profoundly altering Canada’s commercial landscape, according to a recent study commissioned by the Business Development Bank of Canada (BDC): advances in technology, changing demographics, and the 2007-08 global recession – providing fertile ground for the emergence of new consumer behaviours.

Deloitte and the Research and Economic Analysis team at BDC did the research presented in this report. It was complemented bya BDC survey of 1,023 Canadians on consumer behaviour trends, conducted by Ipsos in August 2013. Some results may be overestimated by the social desirability bias. Therefore, these results should be interpreted as trends and not as absolute statistics.

For the full report, click on the related PDF below.

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The following consumer behaviours offer challenges and opportunities to small and medium-sized enterprizes (SMEs):

1. E-COMMERCE. The first step for many consumers begins on the web, whether it's searching for products, reading reviews or purchasing online.

2. HEALTH MANIA: The demand for health products is increasing, and 31% of consumers are willing to pay a premium for them.

3. 'MADE IN CANADA': Socio-enviro concerns influence purchasing decisions, and many consumers make an effort to buy local.

4. CUSTOMIZATION: Consumers are looking for custom-made solutions that fit their needs, becoming more engaged in product creation

5. LINGERING EFFECTS OF THE RECESSION: Consumers expect quality at a low cost, and are interested in pricing models based on use rather than ownership.

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The Internet has become much more than just an online purchasing tool; it's now embedded in most product purchases. Easy and affordable access to the Internet is reshaping consumer behaviours and habits, as well as traditional marketing tools and strategies. Most Canadian consumers are now connected 24/7 via multiple Web-enabled devices.

TRENDS TO WATCH:
• Most purchasing decisions are now made online

• Online reviews are among the most trusted sources of opinion for consumers

• Consumers who look for product information online do not necessarily buy online

• Price comparison tools are turning some categories of retail stores into showrooms

• Smartphones have become the perfect shopping companion

RICK WILKING/REUTERS

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The type of product information that consumers find online shapes their behaviour and influences purchasing decisions. A few general rules apply to most businesses:

1. Negative reviews online have become deal breakers for 7 out of 10 consumers.

2. Social media allows consumers to stay connected with companies and voice their opinions.

3. Purchasing locations are now being selected through technological tools or applications such as smartphone proximity searches, which help consumers locate and contact businesses.

4. Price competition is no longer local; users can easily compare prices with those of other retailers, leading some consumers to consider brick-and-mortar stores as showrooms only.

Rafal Gerszak/The Globe and Mail

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STRATEGIES FOR SMES:
• Build and develop an online presence: SMEs can establish and develop an online presence with relatively little effort.

• Companies should highlight the value-added aspects of their products and services to differentiate their value proposition.

• Use client experience and product customization to counteract “showroom behaviour."

• Understand your market and focus on the right channels: A good starting point is to leverage online channels (e.g., targeted ads, relevant social media efforts) to build awareness and complement traditional marketing tools.

The Canadian Press Images/Salvat/SAMSUNG ELECTRONICS CANADA INC.

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For many consumers, health awareness is no longer limited to maintaining a healthy diet and physical activity, but extends to their interactions with all businesses. Consumers are looking for products and services that are part of a holistic healthy lifestyle and comply with high safety standards. They expect companies to proactively meet their needs. As a result, the range of products affected by the new “health mania” now runs the full gamut.

TRENDS TO WATCH:
• Canadians are more concerned with what they eat

• Weight management is still gaining ground

• Use of health monitoring tools is exploding

• Health and wellness services and tourism are in growing demand

• Niche sports activities go mainstream

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The average Canadian spent an estimated $935 on health and wellness-related products in 2012, up from $818 in 2007. The opportunities are not limited to health food retailers and companies that produce vitamins or nutritional supplements.

STRATEGIES FOR SMES:
• Minimize consumer effort

• Increase motivation for tasks considered difficult

• Tailor products, services and marketing

• Seize growth opportunities in the spa and resort sector

• Leverage all potential uses for products

• Focus on innovation or minimalism in the sportswear industry

Jupiterimages/www.jupiterimages.com

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Consumer concern for the environment has been increasing steadily over the past decade. Currently, over half of global consumers take “green” factors into account when making purchasing decisions. Companies know that they have to show how their products and services fit into an integrated, green and sustainable approach.

TRENDS TO WATCH:
• Eco-friendly actions are now part of consumers’ daily routine

• Environmental considerations drive purchasing decisions

• Consumers want to buy locally and Canadian

• Public scrutiny of ethical and unethical practices is increasing

• False and misleading environmental marketing claims fuel consumer scepticism

• Consumers want result-driven CSR policies, not mission statements

Peter Power/The Globe and Mail

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Canadian consumers are increasingly aware of the power their spending exerts on the economy. They are urging companies to drive social and environmental change. At the same time, they want to support local business growth and are willing to pay a premium for local products that reflect their concerns.

STRATEGIES FOR SMES:
• Highlight the local characteristics of products

• Incorporate the CSR strategy in the value chain and marketing efforts

• Clearly demonstrate the ethical aspects of your supply chain

• Reassess the relevance of labels and certifications

Chris Bolin/The Globe and Mail

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Consumers are progressively moving away from the traditional consumption of standardized, mass-produced products that defined the 20th-century industrial revolution. They are increasingly looking for custom-made solutions that fit their specific needs and becoming more engaged in product creation.
In 2013, nearly three-quarters of consumers claimed to want personalized products and services, with personalization deemed to be the most influential factor in determining value for money.95 Personalization can raise a product’s value proposition and promote higher brand loyalty, which in turn increases profit margins.

TRENDS TO WATCH:
• Product lines are expanding to respond to diversified consumer preferences

• Mass customization as a new business model

PICHI CHUANG/REUTERS

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The desire for personalization and increased consumer engagement can have significant repercussions on the way SME s operate and differentiate their product. To a certain extent, they can also level the playing field between SME s and multinational companies that rely heavily on outsourcing and economies of scale to gain a price-based competitive advantage

STRATEGIES FOR SMES:
• Involve consumers in product creation
• Target real consumer needs

• Optimize SKU levels by focusing on top products

• Reorganize the business model around mass customization

• Broaden product line-up with simple personalization options

JASON LEE/REUTERS

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Since the recession, consumers have become more aggressive bargain seekers. According to the recent BDC -Ipsos survey, seven out of 10 Canadian consumers have reduced their spending in some fashion since the recession. The 35-to-54 generation appears to have changed its habits the most since the recession, a reality in line with the fact that wages in this age group have remained relatively stable since 2008.

TRENDS TO WATCH:
• A profound and lasting effect on consumption habits

• Consumer confidence remains weak

• Low interest rates have spurred high debt levels

• Bargain hunting will remain a popular hobby, both in outlets and online

• Group couponing has emerged as the thrifty way to make impulse purchases

SARAH DEA/The Globe and Mail

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A “sharing economy” enables consumers to share or trade goods with other consumers, or to rent what they own to others to lessen a monetary burden. Its advantages are numerous and tangible, explaining why it is becoming increasingly popular. The sharing economy is disrupting traditional notions of consumption and ownership. The idea is simple, but its consequences for businesses could be huge.

STRATEGIES FOR SMES:
• Use group couponing as a marketing tool

• Create opportunity through a sharing economy model

John Konstantaras/AP Images for Groupon

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Deciding which trends to follow largely depends on whether they dovetail with a company’s current activities. Obviously, the goal is to enhance value, not destroy it. Below are the key takeaways from this research.

1. ENGAGE CUSTOMERS IN A CLOSER DIALOGUE. By building a dialogue, SME s can effectively communicate their value proposition, create a better understanding of consumer needs and encourage customers to share their opinions.

• Encourage and monitor online consumer reviews.

• Use online platforms to engage customers and make it easy to share ideas.

• Allow customers to modify or customize products.

• Investigate the potential of analytics.

thinkstock/Thinkstock

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2. UNDERSTAND THE FACTORS RESHAPING THE WAY CONSUMERS PERCEIVE VALUE. The evolving needs of societies—due to cultural, demographic and economic shifts—often bring the most profound changes in consumer behaviour. For SME s, it’s important to figure out how to embrace these changes. The new post-recessionary frugality, an aging population that is more health conscious and the proliferation of accessible technology are some of the new forces reshaping consumption decisions. The following three trends are likely to have an important impact going forward.

• Economic concerns continue to linger in consumers’ minds

• Social and environmental policy statements alone are not enough.

• Health concerns are on the rise across the board.

Tom Ackerman/Getty Images

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3. EMPHASIZE THE VALUE OF THEIR PRODUCTS. The full value of a product may not always be apparent to consumers. To generate meaningful returns, they must be accompanied by effective communication with customers.

• The fact that the product is made in Canada or locally, or that other value chain-related activities—such as design or R&D—are done locally. All of these can lead to premium product positioning.

• Ethical and environmental features of the production process need to be measured in tangible ways and clearly displayed on products.

• Consumers are becoming more conscious

of these aspects and are willing to spend more for ethically produced and eco-friendly products.

• Health-related benefits of products, such as low toxicity, or research-backed results that link the product’s ingredients to health benefits, should be clearly communicated, as they can be key differentiators.

Catherine Yeulet/Getty Images/iStockphoto

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