Research

Rocky Mountain poll: For consumer confidence, all economics is local

Behavior Research Center, a marketing and public opinion research firm based in Phoenix, has been measuring consumer confidence in Arizona via its Rocky Mountain Poll for 30 years. Recently, says Research Director Earl de Berge, the firm added several questions to the poll designed to uncover consumer confidence today compared to 15 years ago. The results show that half the number of families plan to make major purchases today as did back then. Further, it appears that a consumer's perceptions about his own job and the health of the company he works for contribute more to those decisions than news about national and international economic trends. To paraphrase former U.S. House Speaker Tip O'Neill's famous quote, all economics is local. Here's Earl de Berge talking about these results, and what political leaders need to know about the impact on buyers of their revenue and budgeting debates.

2010-02-24

Behavior Research Center, a marketing and public opinion research firm based in Phoenix, has been measuring consumer confidence in Arizona via its Rocky Mountain Poll for 30 years. Recently, says Research Director Earl de Berge, the firm added several questions to the poll designed to uncover consumer confidence today compared to 15 years ago. The results show that half the number of families plan to make major purchases today as did back then.

Further, it appears that a consumer's perceptions about his own job and the health of the company he works for contribute more to those decisions than news about national and international economic trends. To paraphrase former U.S. House Speaker Tip O'Neill's famous quote, all economics is local. Here's Earl de Berge talking about these results, and what political leaders need to know about the impact on buyers of their revenue and budgeting debates.

Transcript:

Behavior Research Center is a marketing and public opinion research firm based in Phoenix, Arizona. It's been measuring consumer confidence in the state via its Rocky Mountain Poll for 30 years. Recently, says research director Earl de Berge, the firm added several questions to the poll, designed to uncover consumer confidence today compared to 15 years ago. The results show that half as many families plan to make major purchases today as did back then.

Further, it appears that a consumers conceptions perceptions about his own job and the health of his own company, contribute more to those decisions than news about national and international economic trends. Here's Earl de Berge talking about those results and what political leaders need to know about the impact on buyers of their revenue and budgeting debates.

Knowledge: We're here today to talk about consumer confidence and I know that you've been tracking these data for quite some time by way of the Rocky Mountain Poll and I was wondering if you could tell me a little bit about what the rocky mountain poll is, how long you've been doing it, etc.

Earl de Berge: Well we've been doing the Rocky Mountain Poll for about 30 years. We started exploring consumer confidence when First National Bank in AZ still existed because they were our premier client on that, so that takes us back to the 70's. But it has been a very interesting ride trying to learn how to do this. And ultimately we've made a transformation in the study.

We realigned all of our questions in the local market to match those in the conference board because we had very similar questions to begin with and that was a very important step because it allowed us then to measure in Arizona in a much more detailed way than the conference board could, but relative to the American market as a whole, and it was a very interesting move.

Knowledge: Ok, so tell me what some of the components of the study are. What kinds of questions do you ask.

de Berge: We ask questions about the consumer's view of the current marketplace, particularly the business environment, jobs, and those types of things. We ask them to look ahead 6 months with respect to what they think is going to happen in the job market, what they think is going to happen with personal family income and what they think is going to happen in the general business market.

These have proven to be, when you analyze them as a group (we don't analyze them individually, we analyze them as a group), fairly good indicators of whether or not the consumer is in a positive or negative mood relative to the economy as they see it. But as well, increasingly we believe it is connected to consumer buying intentions. And that was one of the things we pursued in the last study. We asked a series a questions that we had asked back in the 80's.

We re-asked them in terms of consumer buying and major durable goods. The question that we were interested in academically, if you will, was whether or not any of the consumer confidence questions, indicators, themselves connected as a predictive element in consumer buying. And the answer appears to be yes.

Knowledge: So tell me what did you find out?

de Berge: Well, fundamentally, we found that compared to earlier studies, oh, say 15 years ago, which was the last time we tinkered with these questions, that consumer buying intentions today are about half of what they were then. Furthermore the definite consumer buying intention, we ask people whether they are definitely going to buy something in a category — a new car, kitchen appliance, household furniture, and so on — or whether it is only a probability that they would buy.

So, people fall into three categories: I am definitely going to be making that purchase, I might make that purchase, or nope, that's just not going to happen in our household. What we discovered is that only we're only at about 15 percent of households participating, compared to say 30-35 percent in the past, but only 5 percent are definite. We then further look to what categories are most active and then whether or not it's the, looking at the current marketplace or looking at the future marketplace that is most likely to correlate the buying their plans.

Knowledge: Could you go back over that?

de Berge: Let me just build a little tree for you. There are questions that look at how consumers see the current economic environment in which they are embedded, and then there's a set of questions that asks them to look forward six months and guess what is going to be happening in their own personal income and the job market and so on. We then asked a new battery of questions on whether or not they [would] definitely, probably, or probably not be buying consumer goods in each of the five categories.

And our interest was, first, what does buying look like today compared to say 15-20 years ago. The answer is, pretty bad. It is half of what is was, and the real strong buying level is really small. So, probably looking ahead for the next few months, at least, maybe the next 6 months, it doesn't look like there's going to be a great surge in buying unless attitudes change.

So then the question becomes, well which attitudes have to change the most in order to trigger more confidence and willingness to make purchases, and it turns out in our data that there are two of the elements that we test that look like they are going to be predictable.

One is what they think about their personal family income and whether that will improve and secondly whether as they talk around the water cooler, they anticipate that the job market is going to improve. Those two are much more strongly related than any other elements that we look at on the test.

Knowledge: It really boils to people's employment prospects, whether they feel their own job is secure; whether they feel that they can get another job to improve their situation; because that would relate directly to their income right?

de Berge: Yeah. And one of the interesting parts about that, for a very long time [we] wondered the extent to which the national media and local media harping on the indicators … really drove opinion on whether or not I'm going to buy a car, or whether I'm going to buy a new appliance for the house and so on.

And it turns out there must be some degree of correlation [to] it…but if you really want to define what drives it, it's whether they see job creation or job layoffs in their company — or now in their public sector job — because they can really see that it's very close. So we always wanted to know whether it's what they feel locally or what they see in the media that is most likely to drive these views. Well, certainly it's a mix of both, but clearly today, it's their family income and what's going on in their place of employment.

Knowledge: How interesting. Tipp O'Neil said, "All politics is local." So, "All economics is local”?

de Berge: I think that's true and I think that's true not just here but all across the various areas we work. We're active in Central America, Mexico and so on… and it really is true.

Politics and economics are local, but there are many underlying reasons for that and I think understanding that is the charge that people like you and I have trying to understand economics…is to the degree to which consumers, particularly in difficult times, or in very good times, base what they see on their immediate environment more so than what's happening in France, what's happening in Japan, or what's happening with Toyota or what's happening in Washington, D.C.

Knowledge: Even though what matters, you know, at the end of the day, on Friday when you get your pay check, is what's happening in your company in your job… the fact of the matter is that there are these macro forces that are going to affect what happens but people are not paying attention to that as much.

de Berge: Well is that the fact of the matter that macro economics is going to drive everything? I think we know more today than we have in a long time, or at least we feel more confident, that if consumer buying doesn't actually take off it's going to be a very, very long time before we see a real improvement in the economy.

The downward force of dollars coming out of the federal budget or coming up from business and so on can only go so far…[if] consumers don't play this is going to be a very, very long serious period of depression. So, I think what happens attitudinally at the local market is far more important than we thought in the past. It may not be true in good times; it may not be true in average times, but in bad times it seems to be a very, very powerful force.

And it raises the question in some degree that if we don't get rid of some this partisan bickering that just keeps looking for blame, keeps looking for blame, keeps trying to say things are bad the other guy is not doing right, or whatever, whether that will elongate this belief on the part of consumers that what they are seeing locally is going to stay.

They shouldn't be pulling harder on it… or they should just be taking their time, protecting their butt and so on. It's very difficult to understand how this stuff works together but I think it's clear, we see it in consumer confidence and attitudes towards the public system, is that two are going downhill in parallel. Well, that should say something to people who have interest beyond simply staying in office.

Knowledge: What other questions would you like to be able to ask? Are there… has this opened some new areas that you would like to pursue?

de Berge: Yeah. I think that we need to drill down a lot deeper in the categories in which people will be making purchases and as well in the geography that we look at. I would like, for example, to better understand the interrelationship of these opinions and consumer buying and consumer confidence in the west as a whole and possibly as well in the border region.

These are economic areas that have great influence on one another and probably will have even greater influence in years to come. We don't know enough about that. I don't think anyone knows enough about that, and so for us that would be the next frontier, to take these measures that have been going on for years and expand the base [to which] we deploy the questionnaires and so we can learn more about those people.

As well, I think there are also some sub markets — women, Hispanics, younger markets — that we don't really have enough sample on to make definitive comments about, so I'd like to  … increase sample size so we can take a better look at those issues and give people more definitive knowledge about what we have learned.

Knowledge: Well, thank you very much for spending time with us.

de Berge: My pleasure, thank you!

Economics