It’s a tough world out there for consumers, who are more likely to be looking for 'safe' brands than chasing novelty. Jerry Stiedaman of VSA Partners has some thoughts on how big brands can drive home their advantage.
Ongoing consumer uncertainty means that for big brands, it’s time to shine. Despite the call to disrupt and reimagine business – a call that spawned a thousand startups – the national and global turmoil of the past few years (and in the financial sector the past few months) has brought about a significant shift in consumer priorities. The result is a renewed focus on the familiar and reliable.
According to PwC’s February 2023 Global Consumer Insights Pulse Survey, 96% of those surveyed said they were planning on adopting cost-saving behaviors in 2023. The study also showed that 69% of consumers altered their non-essential spending in the previous six months. These statistics show that consumers are adopting much more careful spending habits in 2023, and brands will need to make their offerings feel truly valuable amid growing price sensitivities.
The antithesis of long-lasting value? A company with shady credentials or an unproven track record. Startups have been hit particularly hard with this brand connotation – failures have left thousands of consumers in the lurch. As one example, before its recent sale to e-commerce specialist Retention Brands, the subscription makeup service Birchbox left customers without their monthly boxes for some time. The brand posted a mea culpa on Instagram, citing “a host of unprecedented setbacks that are affecting all of you, our cherished members.” It’s no wonder that people seek safety over novelty.
The startup landscape is also getting walloped by financial factors. Rising interest rates around the world mean they are increasingly vulnerable to competition. VC funding is radically slowing after the worst Q4 since 2013. And the startup-friendly tech sector has seen more than 100,000 layoffs this year. This damage was further compounded by the sudden collapse of Silicon Valley Bank (SVB) in early March. Many startups relied on SVB for banking and payroll – in fact, 88% of Forbes’ “Next Billion-Dollar Startups” were SVB customers.
With startups hurting from financial difficulties and reputation damages, more established brands have a clear opportunity here to reposition their offerings and lean into the demand for safety and consistency with a longevity well suited to the task.
So how does the big brand take advantage of these times? Here are three thought starters:
- Refocus and strengthen your core experience. The last decade has seen a barrage of brands differentiating themselves with a veneer of friendly colors and unconventional marketing tactics. While that might get people in the door, it certainly won’t make them stay. By refocusing on stability and strength, you're investing in your company’s future: Bain & Company says that “across a wide range of businesses, customers generate increasing profits each year they stay with a company. In financial services, for example, a 5% increase in customer retention produces more than a 25% increase in profit.” Put simply, existing customers spend more than new customers. Plus, their referral potential gives you a free, built-in acquisition machine.
- Take a stand on sustainability and other important social issues. This has been an arena typically dominated by startups. However, both consumers and business customers are increasingly concerned about sustainability and social responsibility, with many choosing to support brands that prioritize these issues. Stealing back market share from smaller players requires acknowledgement of the things that may have influenced these customers to defect in the first place.
- Invest in infrastructure that helps you more consistently deliver great product experiences. Consumers crave great customer experiences. A study by Adobe found that 73% of customers want to be delighted by companies, but just 18% say that companies have met that standard. What are your customers’ pain points? What technologies are your new competitors using that you aren’t? Seamless online experiences, quick delivery, AI-powered customer service – this is your chance to create a reputation for dependability and responsiveness with your customers. Take time now, while you may have more bandwidth, to audit your operations and find these points of weakness. Then invest in modernization. It will be money well spent and better position you to take advantage of the inevitable market rebound.
And one of the main causes for recent brand defections, especially among your millennial and Gen Z audiences, is this desire to make purchases mean something. According to HubSpot’s 2022 State of US Consumer Trends report, half of Gen Zs and 41% of millennials want companies to take a stand on social issues, particularly racial justice, LGBTQIA+ rights and climate change. This slowdown is the perfect time to set your own positions on the issues that matter most to your customers. Because failure to do so could be more damaging than the stand itself.
Patagonia is a great example of this activation – 98% of its product line now uses recycled materials, 100% of the virgin down that it sources is traceable back to the farm where it was procured and 86% of its products are Fair Trade Certified sewn. Patagonia is very open about its sustainability efforts and has supported its claims with real action – including the CEO’s forfeiture of the company to a sustainability-focused trust.
To remain competitive, brands must be willing to adapt and evolve. This means reevaluating your positioning in light of changing consumer preferences, market trends and societal shifts. By doing so, brands can stay ahead of the curve and continue to resonate with customers and prospects in a rapidly changing world.