Consumer confidence is an important topic for small business owners, economists, and politicians alike. Here’s why you should care abou it, too.
You may have heard some chatter about consumer confidence. Not surprising, since it’s an important topic for small business owners, economists, and politicians. Why should you care about it? Read on to find out.
What is consumer confidence?
Consumer confidence is a statistical measurement that captures the consumer’s outlook on current and future economic conditions. In other words, it determines whether consumers are feeling optimistic or pessimistic about the economy.
These statistics have a massive impact on small business revenue. In fact, 46 percent of SMBs cite consumer confidence as the number one financial indicator of their business. This information is essential for small businesses to make informed decisions about marketing, brand management, and the financial health of their company.
How do I measure consumer confidence?
The Consumer Confidence Index is used to determine a statistical measurement of consumer feelings and attitudes. The index was first created in 1967 and has been used to analyze consumer opinion ever since.
Data is recorded based on household surveys, and 40 percent of the index is based on current conditions while the remaining 60 percent factors in future expectations. Participants are asked questions like:
- How would you rate the present business conditions?
- What would you say about available jobs in your area right now?
The above questions are asked for current situations and future expectations. The Conference Board describes the survey as, “a monthly report detailing consumer attitudes and buying intentions, with data available by age, income, and region.” Get access to the index online.
Why is consumer confidence important to my business?
Consumer confidence has a profound effect on the financial health of businesses, says Tanya Roberts, VP of Corporate Marketing at Bill.com. When consumers have a pessimistic outlook on the economy, they spend less money. When the inverse is true, they spend more.
Understanding these trends helps business owners plan for the future. During times of low confidence, businesses can expect less revenue and growth than periods of economic prosperity. Getting familiar with the Consumer Confidence Index trends allows organizations to make informed business decisions based on consumer attitudes. Well-informed businesses stay in business.
How can businesses improve their consumer confidence?
According to Small Business Trends, “41% of small businesses surveyed predict that US business conditions will be better off in the coming year.” The survey indicated that “66% also believe now is a good time to make business-related growth investments.”
While the current climate is promising, it’s still important for businesses to be proactive. Recession-proof your organization so it can stand strong during hard times. Withstanding the ebbs and flows of the economic landscape starts by being the best in your industry.
Build a strong reputation with your customers. In times of economic stress, consumers tighten up budgets and limit spending. Become a necessity to your customers. A strong brand reputation, quality products, and superior services make an impact no matter the economic outlook. If your customers are confident in your brand, they will continue to buy from you.
Protect your organization by making consumer confidence a priority for your small business.