The coming months are going to be difficult for many brands’ consumers – understanding how to communicate sensitively and usefully with them will be key.
The rising cost of living has taken hold, with inflation at its highest rate in 40 years. Undoubtedly, brands will feel the repercussions of the soaring cost of living, as consumer confidence takes a downturn. Among reduced consumer spending, the economic downturn might also lead to lower stock availability, or supply chain challenges as industries come to terms with a more lethargic economy.
Consumers are looking – desperately – to the brands they shop from to help at a precarious time for many people’s personal finances. Among advice on how to cut energy use or eke out midweek meals, there is a need for real solutions that help both businesses and consumers in difficult circumstances. To navigate the threats of changing consumer spending priorities, it’s critical for marketers to understand how this translates into consumer attitudes and the difficult decisions many consumers will be forced to make.
Consumer confidence has seen the biggest sustained fall since the global financial crisis in 2008, with 55% of consumers looking to reduce their spending on luxury items. Value for money and quality is becoming the main purchasing drivers for many, and healthcare retailers are seeing a 19% increase in the proportion of own brand sales online between April 2021 and May 2022. Consumers are clearly switching to cheaper own-brand alternatives.
Meeting your consumer
It’s critical that brands are able to adapt to this environment. Agile marketing strategies that allow a brand or retailer to begin to promote their own brand range quickly will not only retain consumers, but also attract new ones who have been priced out elsewhere.
Although it is impossible to predict exactly how the cost-of-living crisis will impact brands and consumers alike, it is important to have a flexible marketing strategy that considers future trends. According to the Office for National Statistics, there is no sign that the pace of inflation will decline in the immediate future. As a result, the squeeze on living costs will not be short-lived either, with real household disposable income (RHDI), predicted to remain higher than pre-pandemic levels until 2024/25.
Back to basics
With this economic squeeze set to remain, marketers need to go back to basics to ensure they maintain contextually relevant, and empathetic communication with their customer base.
This can be done with the below five key steps, using Kotler’s five P’s:
Product: Just as the healthcare retailers focused on their value and everyday product ranges, marketers need to adapt their ranges to reflect financial pressures and make sure online descriptions match this new intent. Reduce frustration and wasted spend by cutting lines suffering from stock outages from marketing plans.
Place: Online is certainly the place to be as customers shop around for the best deal. It isn’t just about securing the lowest price, with the energy price hike, consumers are considering what they can get delivered for free, rather than the travel expenses incurred by going to a store.
Consumers’ research behaviour is more expansive in times of financial strain, as they search for the right product, at the right price. Search, marketplace and social media features very heavily in the research phase, so making sure your marketing strategy covers these areas is key.
Price: It goes without saying that offering the lowest price online, coupled with free delivery, is going to attract a lot of customers in this climate. But this is no good if pushing prices to rock bottom takes margin with it. Scrutinise your data to understand how to maintain margin through effective pricing and merchandising, while keeping marketing spend effective.
Promotions: BOGOFs and other offers are as valued as ever but they must be relevant. Consumers are scrutinising the real-world value of promotions (“What value is two sold cheaply when I’ll only use one, expensively?”) as well as their sustainability, with concerns over waste. Brands are safer to budget for genuine, higher value promotions to avoid frustrating a customer looking for true value.
People: Being human is crucial in times of financial hardship, targeting customers with unrealistic lifestyle expectations may create negative sentiment towards your brand. Considering the tone of an email or using data respectfully is key when nerves are wearing thin. Ultimately, consumers need empathy more than ever.
In an economic downturn, consumers may look to reduce spend. But the fact is they are still spending, and just being more discretionary about where. They are researching their spend more than ever, but also welcome brands who are willing to do some of that ‘heavy lifting’ for them. Making sure your digital marketing is following ‘right time, right place, right price’ principles and speaking to customers in a way that respects the current moment, will help both your customers and your brand beat the squeeze.