Increased consumer spending? Check.
Increased disposable income? Check.
Increased household net worth? Check.
Decreased current consumer confidence? Wait, this can’t be right.
If all the standard economic measures of well-being, like gross domestic product, personal consumption expenditures and income indicate a recovering economy, why is present situation consumer confidence falling and unemployment so high?
It poses the eminent question: do our current aggregate measures of economic well-being really describe the state of the American consumer?
Based on a glut of recent socioeconomic events in the U.S., I’m starting to think the answer is no – and now, Ben Bernanke agrees with me.
Last August, Bernanke pronounced that aggregate statistics generally used as key metrics, can sometimes mask important information. Though our traditional
metrics have started to point in the direction of recovery, “it is clear that many individuals and households continue to struggle with difficult economic and financial conditions.” He calls for new social science data to be integrated into the measurement
of economic well-being. In a sense, this “happiness index” will integrate quality-of-life indicators and personal reporting of happiness (be it control over one’s life, inclusion in a community, confidence about the future or ability to adapt to changing circumstances),
with standard gross national economic data.
At Insights, we agree there is more to well-being than what GDP can tell us. In the Remaining Relevant report released
last year, trends that involve stable finances, value and identity were all integral to a satisfying, happy existence. Balancing financial responsibilities with an enjoyable social life is necessary to restore consumer confidence and in turn, spur increased
This movement towards quantifying happiness has gained significant ground in academia as well as at innovative firms around the nation. Harvard Business Review editor Justin
Foxwrote, “GDP is embattled. Economists and national leaders are increasingly talking about measuring a country’s status with other metrics and even with a squishy-seeming concept like happiness.” Similarly, inventive research firms, such as BrainJuicer,
have started to integrate emotional measurement into their standard methodology. “Emotions should be understood [because] it is our emotional responses to stimulus that results in action, attitudinal or behavioral change.” Even the Conference
Board thinks a measure of Gross National Happiness should be added to the balance sheet.
Banks and credit unions can adjust their foresight into their consumers by understanding the power of an emotional connection (preferably a happy one). Building a brand around positive emotion, rather than spending potential will forge longer and stronger
relationships. Some of the most powerful global brands are the ones that supersede the product they sell, and connect with their consumers on a higher, emotional basis (tell me the last time you bought an iPod or
an Android and didn’t feel great after).
For now, it will be interesting to see how the Fed further develops a measure of happiness as a unit of well-being and how financial institutions can leverage their findings to better target and service consumers. So remember, don’t forget to smile for the