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The emergence of new consumer market segments

Consumers stopped buying many things since the start of the global coronavirus crisis. Malls and retailers closed down. Only certain food deliveries, banks, grocery stores, and pharmacies are open. Businessmen, entrepreneurs, and marketers are struggling to stay afloat, and they will continue to struggle even after the quarantine.

This is because of the unprecedented global crisis that we are facing. People are forced to follow a set of norms, such as social distancing and work from home, for fear of getting infected, making people struggle with day-to-day life

In fact, 70% of residents in Metro Manila are “not managing very well” the situation that we are in, according to the research report of Good Thinking, which surveyed more than 200 cross-section of residents during the period between March 24 to April 3 under the enhanced community quarantine (ECQ).

When asked what aspects make up “not managing very well,” the respondents named financial, mobility/transport, access to basic needs, adjusting to work, lack of social interaction, and safety concerns as the top pain points.

The picture gets bleaker as we move through the ECQ. According to the same report, there’s an apparent decline in the quality of life is during week 4 of the ECQ, with 79% saying they were “not managing very well” compared to just 62% during week 3. Moreover, there’s 9% of the respondents who said they were “struggling very much” during week 4 of the ECQ compared to 0% during week 3.

The unavailability of a universal vaccine for the next 18 months and the looming global recession will just make life more difficult in the coming months, even years. That’s why businessmen, entrepreneurs, and marketers must understand the emergent and overarching need of consumers during these times, that is, the need to cope.

Psychologists define coping as a set of efforts to manage demands that could exceed one’s resources — financial, physical, mental, emotional, and spiritual resources. Research on coping have identified five types of coping styles or behaviors, namely problem-focused coping, emotion-focused coping, seeking-understanding coping, seeking-help coping, and avoiding-the-problem coping.

With these coping behaviors emerge five new consumer market segments that display peculiar buying patterns, namely:

• Problem solvers: this segment actively plans, tries new things, and finds solutions to existing woes. Examples of products and services that this segment buys are everyday consumables that can be purchased conveniently in the community; they try new apps like digital banking, videoconferencing tool, or online marketplace.

• Emotional expressionists: they let their emotions out as evidenced by the copiousness of angry and complaining posts in social media; they engage in virtual meetups, and look for appeasing activities. Examples of products and services that this segment buys are virtual coaching, self-help webinars, virtual dance parties, and self-care products like essential oils and fitness products.

• Understanding seekers: they try to understand the situation that we are in and seek to learn about it; examples of products and services they buy are online courses, webinars, virtual coaching, documentaries on pandemics, and fitness and health care products.

• Help and support seekers: this segment seeks help and support from others to enable them to cope; examples of products and services they buy are virtual coaching and spiritual advisory, financial advisory and insurance, and errands services and apps.

• Problem avoiders: this segment looks for activities to forget the current problems and they act as if nothing is happening; examples of products and services they buy are hobby products such as those in gardening and fitness, liquor, comfort food, popular coffee brands, and entertainment content.

Individuals may vacillate from one segment to another because of the volatile nature of these emotional behaviors of coping. But this segmentation serves as guide for entrepreneurs and marketers to adapt their marketing communication in order to address each segment’s coping needs.

But also note that many of the products and services required now are digital or virtual in nature, may it be a virtual service, an app, or ecommerce platform. Entrepreneurs and marketers should also transform their offerings that take into account the social distancing required by consumers.

 

Reynaldo C. Lugtu, Jr. is CEO of Hungry Workhorse Consulting, a digital and culture transformation consulting firm. He is the Chairman of the ICT Committee of the Financial Executives Institute of the Philippines (Finex). He is the Country Representative of the Institute of Change and Transformation Professionals Asia (ICTPA) and Fellow at the US-based Institute for Digital Transformation. He teaches strategic management in the MBA Program of De La Salle University. The author may be e-mailed at rey.lugtu@hungryworkhorse.com

Economies/areas with the most number of COVID-19 tests conducted

Economies/areas with the most number of COVID-19 tests conducted

How PSEi member stocks performed — April 23, 2020

Here’s a quick glance at how PSEi stocks fared on Thursday, April 23, 2020.

Shares snap losing streak as global marts rebound

By Denise A. Valdez, Reporter

LOCAL SHARES snapped their three-day losing streak yesterday on the back of improved investor sentiment evidenced by a rebound in global markets.

The bellwether Philippine Stock Exchange index (PSEi) climbed 25.80 points or 0.46% to close at 5,599.55 on Thursday. The broader all shares index likewise added 20.64 points or 0.6% to 3,408.81.

“The local market rallied with strong leads as crude oil rebounded, providing some support to the market,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a mobile message.

After falling to negative territory at the start of the week, the price of crude oil in the United States recovered by as much as 20%. This resulted in gains in Wall Street, with the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite indices improving 1.99%, 2.29% and 2.81%, respectively, on Wednesday.

Asian markets also performed better on Thursday. Japan’s Nikkei 225 and Topix indices rose 1.52% and 1.36%, respectively, and South Korea’s Kospi index increased 0.98%.

Despite a higher close for the local bourse, PNB Securities, Inc. President Manuel Antonio G. Lisbona said investors are still tiptoeing around the situation.

“The market reached a high of 5,672 before weakening at the close to settle at 5,599 which implies an underlying cautiousness among investors,” he said in a text message.

With the coronavirus disease 2019 (COVID-19) pandemic still going on, investors remain on close watch for any development that may drag the market down.

“Immediate support can be found at the previous low of 5,460 and immediate resistance can be found at 5,800,” Mr. Lisbona said.

Sectoral indices at the PSE were mostly gainers on Thursday. Mining and oil grew 55.12 points or 1.21% to 4,609.44; property rose 25.93 points or 0.92% to 2,839.59; holding firms added 31.01 points or 0.56% to 5,541.92; financials climbed 5.53 points or 0.46% to 1,195.13; and services picked up by 2.98 points or 0.23% to 1,298.31.

The sole losing index was industrials, which shed 10.56 points or 0.14% to 7,267.07.

Value turnover stood at P4.37 billion with 697.10 million issues switching hands, lower than Wednesday’s P5.07 million worth of 600.52 million issues.

“Trading volumes were the lowest in several weeks as most investors stayed on the sidelines. It is currently down 3.4% for the week. We may see it continue to move higher unless trading volumes continue to decline,” AAA Southeast Equities, Inc. Research Head Christopher John Mangun said in an e-mail.

There were 114 advancers, 66 decliners and 49 names that ended unchanged yesterday.

Net foreign selling grew to P440.43 million from P236.22 million a day ago.

Peso gains vs dollar as US mulls fresh stimulus

THE PESO strengthened against the greenback on Thursday on the back of positive market sentiment following a fresh stimulus package in the US amid the coronavirus disease 2019 (COVID-19) pandemic as well as gains in global stocks.

The local unit ended trading at P50.67 per dollar yesterday, rising 13 centavos from its P50.80 close on Wednesday, according to data from the Bankers Association of the Philippines.

The peso opened the session at P50.70 versus the dollar. Its weakest was at P50.74, while its strongest was at its close of P50.67 against the greenback.

Dollars traded went up to $290 million on Thursday from the $212.78 million on Wednesday.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the currency was tracing the strength in stock markets.

“The peso closed stronger after the latest gains in the US and local stock markets,” Mr. Ricafort said in a text message.

Reuters reported on Wednesday that MSCI’s broadest index of Asia Pacific shares outside of Japan rebounded from two-week lows to inch up by 0.5% to 460.43 points.

The gains came after a strong overnight lead from Wall Street with the Dow up 2%, S&P 500 adding 2.3% and Nasdaq rising 2.8%.

Analysts said better-than-expected US corporate earnings supported equities despite continued volatility in overall sentiment due to the virus.

At home, the Philippine Stock Exchange index gained 0.46% or 25.80 points to close at 5,599.95 on Thursday.

Meanwhile, a trader said the peso was buoyed by risk-off sentiment due to expectations of the US Congress’ approval of another fiscal support package for businesses in the United States.

“The peso appreciated from market optimism after the US Congress approved a fresh stimulus package of about $500-billion intended for small businesses and medical facilities,” the trader said in an e-mail.

The US House of Representatives is expected to clear a bill providing $500 billion more in aid to help small businesses ride out the COVID-19 crisis, according to Reuters.

For today, Mr. Ricafort gave a forecast range of P50.50 to P50.80 while the trader expects the peso to move around the P50.60 to P50.80 levels. — L.W.T. Noble with Reuters

House considering COVID-19 relief via CITIRA

A KEY legislator said that the House of Representatives plans to include coronavirus disease 2019 (COVID-19) relief via incentives contained in the Corporate Income Tax and Incentives Rationalization Act (CITIRA).

“We intend to insert at the bicameral conference committee level COVID (relief) as eligible (for incentives),” Albay Representative and House Ways and Means Committee chairman Jose Maria Clemente S. Salceda told reporters via Viber Thursday.

Asked how companies can avail of CITIRA incentives after having been set back by COVID-19 and the associated quarantine, Mr. Salceda told BusinessWorld via text message: “We will easily assess the damages.”

Finance Secretary Carlos G. Dominguez III has said that the department is reviewing the proposed bill to provide “tailored” relief programs for firms hit by COVID-19.

The CITIRA bill, which aims to gradually lower the corporate income tax to 20% from the current 30% and rationalize the tax incentive system, is still pending before Congress, which is scheduled to resume on May 4.

Companies that qualify for incentives under CITIRA may avail of up to 50% additional deductions on direct labor expenses, up to 100% additional deductions on training and development expenses, and up to an additional 50% on top of the 100% deduction now allowed on the purchase and use of inputs from domestic suppliers, which will benefit domestic industries and producers.

Senator Juan Edgardo M. Angara, vice chairman of the Senate ways and means committee, said that the Philippines lost potential foreign investors due to the “uncertainty” over CITIRA.

“We have to put some certainty into the future because you’re talking about people who are deciding on one billion dollars worth of investment. Companies have to know what their bottom line will be for the next 10 years if they come to the Philippines,” he said in a virtual briefing hosted by the Foreign Correspondents Association of the Philippines Thursday.

The administration has passed three tax laws so far: the Tax Reform for Acceleration and Inclusion law (TRAIN) and the two consecutive increases in sin taxes — Republic Act (RA) No. 11346, which raised excise taxes on tobacco products, and RA No. 11467, which raised excise taxes on electronic cigarettes and alcohol products.

Other pending measures under the tax reform program include the Passive Income and Financial Intermediary Taxation Act; the proposal to provide a uniform framework for real property valuation and assessment; and the bill increasing the government’s share from mining revenue. — Genshen L. Espedido, Charmaine A. Tadalan

OFWs in essential jobs seen mitigating remittance drop

THE government’s estimate of the decline in remittances from overseas workers is 2-3%, far more optimistic than the World Bank’s own view of a 13% average drop in funds sent home to low and middle income countries (LMICs) in East Asia and the Pacific.

Citing Bangko Sentral ng Pilipinas (BSP) estimates, Finance Undersecretary and Chief Economist Gil S. Betran told BusinessWorld that OFWs remittances could contract by 2-3% this year.

“BSP has an estimate — 2 to 3% decline. The reason is that most of OFWs are in socially necessary industries including health and education,” Mr. Beltran said in a mobile phone message Thursday.

“The forecast is negative 2 to negative 3% year-on-year, lower contraction than World Bank forecast for global remittances,” he said.

Cash remittances to the Philippines were at a record $30.133 billion in 2019, up 4.1%. As recently as early April, the BSP projected OFW remittances to grow by 3% this year.

Nicholas Antonio T. Mapa, senior economist at ING Bank Philippines, expects OFW remittances to post a year-on-year contraction of 2.5% in 2020 as Filipinos working abroad “may not have enough income” to send cash to their families here with lockdowns imposed in several countries, forcing businesses to suspend operations.

“Remittances from abroad will likely experience a 2.5% contraction due to COVID-19 which could affect both growth prospects and the external position of the Philippines. Impaired remittance flows in 2020 forced us to drop our growth estimates while we believe that peso will come under pressure once remittance support fades when lockdown measures are relaxed,” Mr. Mapa said in a note Thursday.

He projects the Philippine economy to contract by 2.2% this year in the worst-case scenario following the expected decline in remittance flows, which support domestic consumption, and the Luzon-wide lockdown which was extended until April 30.

In a report, “COVID-19 Crisis Through a Migration Lens,” the World Bank projected remittances to LMICs worldwide to decline 19.7% to $445 billion this year. The lost remittances could spell “loss of a crucial financing lifeline for many vulnerable households.”

Growth is expected to bounce back to 5.6% to $470 billion next year.

For LMICs in the East Asia and Pacific, including the Philippines, the World Bank projects remittance flows to drop 13% to $128 billion this year before bouncing back in 2021, growing 7.5% to $138 billion.

“This is not so much due to a decline in the stock of international migrants, but largely due to a fall in wages and the employment of migrant workers in host nations due to COVID-19,” the World Bank said.

The bank said if the country of origin is in crisis, migrants tend to increase the money they send back home; if the host country is in crisis, remittances can decline.

It said lockdowns and travel bans have a direct effect on employment and wages of foreign workers due to business closures and disrupted travel.

“The outlook for remittances for 2020 remains as uncertain as the impact of COVID-19 on global growth and may depend to a large extent on the measures taken to restrain the spread of the disease. In the past, remittances have been countercyclical during times of disaster in the recipient economy. This time, however, the pandemic has affected all countries, and the economic fallout is likely to vary due to country-specific characteristics,” it said. — Beatrice M. Laforga

Electricity market prices expected to increase post-ECQ

THE market operator of the Wholesale Electricity Spot Market (WESM) is expecting spot prices of electricity to increase in May, as demand is also projected to gradually rise soon after the enhanced community quarantine (ECQ) is lifted on April 30.

In a market report released Thursday, the Independent Electricity Market Operator of the Philippines (IEMOP) said spot prices are projected to average of P6.68 per kilowatt-hour (kWh) in May, while generation capacity is deemed adequate.

The operator noted that the “significant” drop in power demand during the ECQ brought down the effective spot settlement price (ESSP) to P2.47 per kilowatt-hour (kWh) in March from P3.45/kWh in February.

The ESSP is the rate paid by customers for their WESM transactions each billing month.

The National Grid Corp. of the Philippines (NGCP) earlier noted a decrease in demand for electricity of around 20%-30% during the quarantine period.

With industries and commercial businesses shut down during the ECQ, the system energy requirement of Luzon and Visayas grids decreased by around 19.8% compared to pre-quarantine levels to an average of 2,350 megawatts (MW).

In the first half of April, market prices ranged from P0.0/kWh to P2.973/kWh with an over 4,300 MW supply margin. Spot market volumes also fell to an estimated 10.98% of the total energy requirement.

“A new trend in the demand profile was even observed wherein spot prices were mostly higher during the night as opposed to the afternoon,” IEMOP said.

The continued drop in spot market prices since March is expected to persist until the end of April. The market operator expected spot prices to settle at an average of P1.83/kWh this month.

Should the ECQ period be extended to May 10, IEMOP said that generation supply will still be adequate, bringing down prices slightly around P4.30/kWh for the month. — Adam J. Ang

DA assures checkpoint snags for food cargoes resolved

AGRICULTURE Secretary William D. Dar said he has resolved the issue of food cargoes that were held up at local government-run checkpoints, after conferring with the Department of Interior and Local Government (DILG).

In a virtual news conference Thursday, Mr. Dar said he now expects food shipments, which have been halted at some checkpoints run by local government units (LGUs), to proceed unhampered.

“Food supply will always be fundamental during a crisis like the coronavirus disease 2019 (COVID-19) pandemic,” Mr. Dar said.

The Department of Agriculture (DA) has issued 99,948 food passes to vehicles carrying basic food commodities, which allow them to pass checkpoints thrown up to enforce national and local quarantines.

His updates of the Department’s food supply estimates include 84 days’ worth of consumption for rice, 147 days for corn, 28 days for vegetables, 12 days for fish, 111 days for poultry, 21 days for garlic and onion, and eight days for pork.

However, Mr. Dar warned that food passes issued to vehicles carrying produce may only be used for the transport of such cargoes.

“Distribution of relief goods is not included in the mandated use of the DA food pass,” Mr. Dar said. — Revin Mikhael D. Ochave

Infrastructure faces further delays due to ECQ, redirected funds

THE government’s infrastructure program faces further delays due to the quarantines imposed by the coronavirus disease 2019 (COVID-19) outbreak, as well as the repurposing of funds to contain the pandemic, according to Oxford Economics.

In a research note Thursday, it said the government’s original 7% economic growth target will require an increase in the project implementation rate of at least 50% from the current 30% “before infrastructure spending provides the necessary boost,” with weak private investment expected to further dampen overall investment.

“Boosting growth via increased infrastructure spending is a priority for the Philippine and Indonesian governments, but progress has been slow in both. For the Philippines, a key issue is the limited capacity of major government departments to fully implement their allocated infrastructure budgets,” it said.

Oxford Economics noted that progress in infrastructure projects “has been slow” despite the P8-trillion spending plan for the flagship infrastructure program.

It said this “is likely to be hurt further by the coronavirus outbreak this year” despite government’s efforts to continue with the projects since the government budget is expected to prioritize programs geared at containing the pandemInfrastructureic, boost health care and cushion the economic fallout.

According to its Global Economic Model, Oxford Economics estimated that infrastructure spending accounted for 1.2 percentage points of gross domestic product (GDP) growth over 2017-2019, using an investment multiplier of 0.85%.

“Nonetheless, we expect public capex to pick up as normalcy is gradually restored. Although falling short of the governments’ targets, we expect infrastructure spending to remain a key fuel for growth in both countries over the medium term,” it said.

It said spending by the major infrastructure-implementing agencies, the Departments of Public Works and Highways (DPWH) and Transportation (DoTr), increased at average rates of 34.9% and 6.1%, respectively, over the 2016-2018 period.

However, it said higher budgets have “kept average implementation rates for both departments relatively stagnant at 34.2% and 12.5%, respectively,” or an estimated weighted average implementation rate of 30% for the two agencies.

“Although both departments are spending more, their absorptive capacity hasn’t kept up with the rapidly rising budgeted amounts, resulting in stagnant implementation rates,” it said.

The Luzon-wide lockdown, which was extended until April 30, limited movement to essential workers and shipments only, suspended public transportation and halted non-essential business operations.

Work on many public infrastructure projects was also stopped in Luzon due to the lockdown, while 13 rail projects were allowed to carry on with limited work. — Beatrice M. Laforga

Transport GOCC dividends rise 74% to P19.3 billion

THE Department of Transportation (DoTr) said state firms which it oversees remitted P19.3 billion worth of dividends to the national government this year, up 73.87%, after government-owned and -controlled corporations (GOCCs) were tapped to provide advance funding to help contain the coronavirus disease 2019 (COVID-19) outbreak.

Transportation Assistant Secretary Goddes Hope O. Libiran told BusinessWorld in a phone message that the higher dividends represent the DoTr’s “response to the call of President Rodrigo R. Duterte to support the government spending measures” in response to the pandemic.

In a statement, the department said that it turned over a total of P52.7 billion in dividends from transport GOCCs between 2017 and 2020: P10.1 billion in 2017, P12.2 billion in 2018, P11.1 billion in 2019, and P19.3 billion in 2020.

The DoTr said the P19.3 billion total dividends that it handed over in advance to the Bureau of the Treasury were supplied by eight GOCCs.

The department said P6 billion was provided by the Civil Aviation Authority of the Philippines, P6 billion by the Manila International Airport Authority, P5 billion by the Philippine Ports Authority, P1 billion by the Light Rail Transit Authority, P500 million by the Cebu Ports Authority, P500 million by the Mactan-Cebu International Airports Authority, P140 million by the North Luzon Railways Corp., and P130 million by Clark International Airport Corp.

“Under the law, all Government Owned and Controlled Corporations (GOCCs) are mandated to remit in full their respective minimum dividends to the Treasury on or before 15 May of each year,” the DoTr said.

Transportation Secretary Arthur P. Tugade said: “It’s important for us to realize the urgency of turning over in advance our respective dividends. The President has directed his administration to generate funds to help the country cope with the pandemic. And this is our way of showing how eager we are to help by doing our obligations.” — Arjay L. Balinbin

Exporters advised to tap domestic market via e-commerce

THE Department of Trade and Industry’s Export Marketing Bureau (DTI-EMB) is urging exporters to reach out to domestic markets via e-commerce as their traditional markets could face disruptions due to the coronavirus disease 2019 (COVID-19) pandemic.

DTI-EMB Director Senen M. Perlada said only 40% of Philippine exporters have websites, which he said must be searchable and scalable.

“The digital space is very wide open. If there’s anything that this ECQ (enhanced community quarantine) has taught us, it is possible for us to get more active and explore the opportunities in the digital space,” he said in a web conference Wednesday.

He said companies should look to serving the domestic market.

“Gamitin natin mga possibilities dito sa local (We should explore the possibility of selling local) because that’s one big option for our exporters and manufacturers habang medyo hindi pa nagse-settle ang dust internationally (while international markets remain uncertain),” he said.

“Realistically speaking, there’s enough I think… under the constraints that we have now, to really look at the Philippines as a priority,” he added.

Mr. Perlada said e-commerce can be explored for both the domestic and export markets, adding that small businesses may partner with larger companies to help reach international buyers.

“We are going all the way to recommending the government to be actively involved in getting our products already in our geographic markets so that they are available there for e-commerce.”

Mr. Perlada said companies can also focus on exporting to recovering nearby countries including China and South Korea.

Exports for the US market are seeing the biggest declines, he said. — Jenina P. Ibañez

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