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Consumer Confidence and What it Means for Your Marketing Efforts

Consumer Confidence and What it Means for Your Marketing Efforts

There is no shortage of advice as it pertains to marketing strategies for business. In times of economic boom or bust there is a seemingly endless number of experts ready to tell you what you should do and almost always it ends with you spending your hard earned money with them.

Weird, right? Well, hold on to your wallets and read on.

Business owners are typically experts in their field. They are good at selling homes, treating sick animals, running a successful restaurant … etc. What they aren’t necessarily experts at is marketing their business to others. Whereas marketing should be a big priority, it has a tendency to be one of the last things business owners put their attention on.

Marketing is More Than Just Great Ads

An important component to maximizing your marketing efforts is staying on top of consumer trends. This ultimately helps you to make better marketing decisions for your business. A critical data point for nearly every business to watch is consumer confidence. The economy ebbs and flows based on the consumer confidence index which is monitored each month with a consumer confidence survey. This survey is conducted by a non-profit, non-partisan entity called The Conference Board.

How Do We Measure Consumer Confidence?

The survey analyzes consumer behavior related to consumption, spending, and savings. It establishes a monthly index based on two factors that can be simplified with two questions:

How are you feeling today and how do you think you’re going to feel later?

In a more technical sense, here is how it works.

The Present Situation Index will reflect consumer sentiments in the now. Currently, and not surprisingly, consumers are harboring concerns about inflation. The October PSI saw consumer confidence fall sharply. This tells us that consumer perspectives are that the economy is slowing and that a recession is imminent if not already here.

The secondary gauge is calculated off the Expectations Index which goes beyond the present to measure how consumers are feeling about the immediate future. This index has been lingering for some time in negative territory which suggests that consumers continue to have a bleak outlook on the economy for the foreseeable future.

The Consumer Confidence Index

The aforementioned indices are calculated on a monthly basis. The overall Consumer Confidence Index is calculated by combining 40% of the Present Situation Index with 60% of the Expectation Index.

So, in simple terms, how you feel today and how you’re feeling about the near future gives people who track these important trends a score that helps to understand not only where we are, but also where we’re going from a business perspective. This information is important to most everyone, but is especially critical to business owners, agency planners, and of course, politicians.

The Consumer Confidence Index decreased in October after posting back-to-back monthly gains. The Present Situation Index fell sharply from 150.2 to 138.9. The Expectations Index has been sitting below 80 for some time. Last month it slipped from 79.5 to 78.1.

Note the reference to 1985 in the upper left hand corner. The Consumer Confidence Index uses this year as the baseline for comparison because, in 1985, CCI was reported as 100 which means we were in a balanced state that year. This then became the economic mean, or the cornerstone for comparison.

Why We Care and Why You Should Care too

Having a working understanding of these, and other important economic indices allows you to be proactive with your planning. It allows you to either take a more aggressive posture in your given category or in some cases, pull back in order to save on expenses.

Your best course of action is dependent on your category, your market, your competition and any unique conditions that you may be experiencing as a business. One other important consideration might be given to the duration of the economic downturn. Many savvy business owners look to correlate their marketing efforts with economic conditions. A slower economy can actually be an opportunity for certain businesses in almost all categories. Gauging consumer confidence while keeping a close watch on other influencing factors like regulation, innovation, and political direction helps you to outmaneuver your competition.

Want to learn more about the value of consumer insights while also not having someone reach for your wallet? Send me an email at or give me a call at 602.284.6722.

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