AN ESOMAR WORLD RESEARCH ROUNDTABLE
On Thursday 17 April ESOMAR held one of its 2008 World Research Roundtables at the prestigious Observatoire in Paris - Purchasing power, Measurement, Perception and Impact on Consumption Climate in Europe. Moderated by Xavier Timbeau, Director of l'Observatoire Français des Conjonctures économiques, the Roundtable brought together experts from government, business, the consumer lobby and academia to debate whether French public opinion that purchasing power is on the decline in France and greater Europe is rooted in perception or reflects reality.
To initiate discussion, ESOMAR Representative and Managing Director of GfK France, Helen Zeitoun revealed the results of an ESOMAR survey (1) that found that 71% of French consumers feel that the value of their buying power has decreased. This figure dropped to 61% among the younger generation; to 60% for those living in the Paris area and 57% for consumers in the high income bracket. The highest figure was recorded for unemployed or non-active participants, with 79% believing that purchasing power was on the decline. A number of factors were cited by participants as playing a role including the introduction of the Euro, increasing costs of raw materials and the pricing structure of supermarkets within France.
The results of the survey (1) are not the first indication that the French people believe their Euro buys less, the subject was a key issue in the 2007 presidential campaign and has remained a hotly debated topic in the media ever since. It therefore became the mission of this Roundtable to take the question to the experts and find out whether declining purchasing power is indeed a reality or rather a misguided perception based on outside influences not properly understood by the general public.
The Panel
Given the complex nature of the topic, the Roundtable brought together a diverse and highly prestigious group of experts, who over three hours, probed into all aspects of the economic conditions that impact on purchasing power. Along with the moderator Xavier Timbeau, participants included: Nicolas Ferrari, Advisor to Finance Minister, Christine Lagarde; Martine Mérigeau, Director of the Association Euro-info-Consommateurs; Gerard Mermet, Sociologist, Directeur of Francoscopie; Marie-Jeanne Husset, Chief Editor of 60 Million Consumers; Patrick Van Bloeme, Associate Director of Harris Interactive France; Andrew Clark, Research Director of Centre National de la Recherche Scientifique (National Center for Scientific Research) and Guillaume Gaulier, Economist, Associate Researcher at Centre D’Etudes Prospectives et D’Informations Internationales.
The Debate
The subject of purchasing power touches on most aspects of human activity attracting broad and conflicting discussion. In order to narrow the scope of the Roundtable dialogue, the topic was divided into three parts. Several panel members were allocated to debate each section dependent on their background and expertise. The debate began by tackling the issue from an economic perspective to ascertain whether there is actual evidence of a downturn in purchasing power that supports the public perception, while the final two discussions took a more sociological approach examining the connection between perception and reality and between economic conditions and happiness.
The decrease of purchasing power: reality or perception?
Nicolas Ferrari, Advisor to Finance Minister, Christine Lagarde and author of Mesure du pouvoir d’achat des ménages, initiated the debate by proposing that it is not purchasing power itself that has decreased, but rather that it is the indicators by which it is measured that are outdated, presenting a false perception to the French people of their economic situation. He suggests a new formula be implemented that measures purchasing power per consumption unit, which should take into account that while the population is growing, households are counting fewer members. He also identifies the need to better define the divide between what is considered to be necessity items as opposed to non-essential purchases and cites the importance of including the cost of housing in the calculation.
Martine Mérigeau, Director of the Association Euro-info-Consommateurs supports Nicolas’s concerns that perception of decreased purchasing power is based on false indicators. She notes that the introduction of the Euro is one of the factors being used as a scape-goat for the French people’s economic woes. She explains that consumption prices in France are high and compares them to Germany where the cost for some goods are 65% less than in France. For the consumer it may appear that since the introduction of the Euro life has become more expensive, however if this were to be true, it would reflect the same increase in other European countries, which is not what the figures show.
Gerard Mermet, Sociologist, Directeur of Francoscopie provided a strong finish to this part of the debate by confirming that purchasing power has only been recorded as decreasing twice in 1983 and 1984. He proposes that it is in fact the amount of goods and services being purchased that have increased, giving the impression of life being more expensive. He uses the reduced 35 hour working week as an example, explaining that this new structure allows more time for the French people to spend, therefore raising their overall living costs, which in turn gives an impression of increased living costs. He also supported that some costs should not be included as necessity items such telecommunications and satellite.
Purchasing Power: media’s role & responsibility - is it a fashion phenomenon?
The second part of the debate began to tackle the relationship between perception and reality. It continued to discuss the role of the Euro in public perception with Marie-Jeanne Husset, Chief Editor of 60 Million Consumers, going one step further by suggesting that “Europrofiteurs” have influenced the cost of living. She supports Martine Mérigeau in stating that it is not the introduction of the Euro that has caused price distortions but rather those vendors who used the moment to increase their prices higher than necessary. She also criticizes the choice of indices used to measure purchasing power, claiming that citizens themselves should play a pivotal role in deciding these. Her belief is that individuals are now much better informed on economic issues and can therefore bring informed opinion to the process. She questions why it is a group of experts who debate and decide on something which is part of every citizen’s daily life. Lastly, she supports the suggestion of Nicolas Ferrari to integrate the cost of housing in the calculation of purchasing power.
Patrick Van Bloeme, Associate Director of Harris Interactive France continues this line of argument by stating that the badly built indices currently applied do not properly reflect the consumer’s daily life, “where the priority is to have a place to live in and to feed oneself. It is thus in small daily consumption that French people feel frustrated; indeed, the daily frequency to which they face this frustration moves them away from reality. For example when one has a high income, one expects to have increased purchasing power in consequence, however we never get the purchasing power which we would like to have, and this generates a frustration”. He concludes by recommending that we distinguish between global perceptions and individual situations in discussing purchasing power. “We need to measure precise situations differently and isolate the various problems related to the purchasing power because “there is always a reality of perception to consider”.
Purchasing Power and Happiness – is there a link?
The debate took a spiritual turn when Andrew Clark, Research Director of CNRS and Guillaume Gaulier, Economist, Associate Researcher at CEPII discussed whether there is a direct correlation between an individual’s well-being and their increasing capacity to purchase. According to Andrew Clark there is no statistical or qualitative evidence which supports the notion that the level of an individual’s purchasing power is directly tied to their perception of being happy. On the contrary, he proposes that increasing purchasing power can decrease happiness as it involves a degree of jealousy and comparison. He suggests that the individual may compare themselves with their peers or even with their previous earnings, which can lead to a sense of dissatisfaction rather an increased sense of satisfaction. According to Andrew this demonstrates that while it may be true that having no consumption power could leave the individual unhappy, a very high spending capability does not ensure a certain level of happiness. He also proposed that the increasing availability of product choice is slowing down the consumer’s ability to choose, reflecting an increasing desire for restricted product and service offerings.
Guillaume Gaulier supports Andrew’s claims by making parallels between the GDP of several countries and their standard of living. By comparing nations, he assumes we should be able to find a correlation between increased purchasing power and happiness in wealthier nations; however his findings could not draw this conclusion.
Conclusion
Although the experts did not agree on the influencing factors or on the solution to rectifying distorted public perception on the issue, most agreed that declining purchasing power was more a perception that a reality. The experts went a step further to predict a significant shift in consumer purchasing behaviour from a mass consumption society towards a more diversified approach. They conclude that globally, for the individual, pleasure is rooted in the ability to purchase and that these purchases are not rational but based on desire. For marketers this trend can lead to a better measure of pricing, better segmentation of consumers including quality/price ratio.
(1) ETUDE - LE POUVOIR D’ACHAT EN FRANCE TEL QUE PERCU PAR LES CONSOMMATEURS
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