A few years ago, PM wrote about the concept of "trading up" ― a consumer notion in which shoppers were willing, even eager, to pay a premium price for products and services that possess higher levels of quality, taste and aspiration than other goods in the category. So many middle-market consumers wanted to trade up that they turned the adage “the higher the price, the lower the volume” on its ear. 

But now things have changed yet again, as evidenced by this recent article from the Wharton School of the University of Pennsylvania (the world's first collegiate business school, established in 1881).

Yes, in general consumers shy away from spending during the downward phase of an economic cycle. However a new logic is defining not just what U.S. consumers buy, but how they view the shopping experience. The faculty at Wharton and other experts predict that this time around, the “severity and uncertainty” of today’s crisis could have longer-lasting effects on spending attitudes. And while they know consumers will eventually start spending again, it will be a slow process, they say ― one without the vigor of previous rebounds.

As the Great Depression changed consumer behaviors for a generation, evidence points to another large shift in spending traditions. Over the next 18 months, Wharton marketing professor Wesley Hutchinson predicts a learning process as consumers become more frugal, which will carry over once the economy recovers.

"At some level, everybody has now been schooled about financial markets and overextending one's credit ― something American consumers have been notoriously bad at. We had a habit of not paying a lot of attention to the cost of using borrowed money."

Wharton marketing professor Stephen Hoch sees consumers embracing a new logic. "Until recently, there has been a theme of entitlement that people really latched onto," he says. Luxury goods marketers promoted “entitlement” themes heavily in their sales pitches ― the belief that if consumers worked hard they were entitled to splurge on rewards for their efforts. Now these types of tactics seem obsolete. Consumers who had learned to trade up when times were flush are now learning to trade down, Hoch adds.

According to Wharton experts, consumers are realizing they were wasting money on higher-priced goods and services when less expensive alternatives were available with little real trade-off in quality or satisfaction. Now they are possibly feeling regret for what they used to spend; they are finding a new sense of well-being in becoming more discerning shoppers. "There will be more of a premium placed on seeking value," Hoch says. "People will realize that's being smart."

Erin Armendinger, managing director of Wharton's Jay H. Baker Retailing Initiative (which partners Wharton students with innovative retailers), suggests that people "are definitely changed by what has happened. I don't think they will go back to spending like they did, at least not anytime soon." As credit card companies and lenders no longer support consumption binges, consumers are forced to cut back sharply on spending, she says. The halt in credit expansion is a "hard stop" for consumers who have been forced to retrench and reevaluate their attitudes toward spending.

"Everybody got caught in a cycle of conspicuous consumption. Everybody had to have the newest, the latest, the best." Now, she says, that "crazy mindset" is over and shoppers are only willing to pay for what they absolutely need or items that present extraordinary value. "We are back to simpler times, but the pendulum will settle somewhere in the middle.” In the future, shoppers will learn to focus on the value of goods and services, Armendinger predicts.

To read more about changing consumer habits and the “Shopper of Tomorrow,” click here.