This is the third out of five texts where we explore how the COVID-19 crisis will impact people’s relationship with companies and brands around the world. Read the previous articles here.
Crisis is always a catalyst for change. Following the last recession in 2008–2009, people started to view consumption in a more serious and sensible way. We spent more on what felt truly meaningful while excessive consumerism was stigmatized. We chose reliable quality over risky options; we wanted simple pleasures over extravagance; and we overall strived for more wholesome lives, turning away from what felt wasteful. The toy company Lego, whose profits soared 63% with rapid geographic expansion in 2009, is a good example of a brand that matched the sentiment of the times.
At Lynxeye, we believe that we will see these changes emerge in 2020–2021 as well, affecting what people feel is important and meaningful. Therefore, the need for brands to live by a strong purpose will only grow in the years to come, amplified by this crisis. But companies will also have to deal with consumers that are more scrutinizing in their search for ways to add value to their own lives and society as a whole.
At the same time, there are other, potentially conflicting, factors that will be incredibly important to consider. This recession will likely be the worst since the 1930s according to the IMF. Unemployment is already off the charts in many countries and, naturally, concerns about the economy are immense. This will inevitably cool down households’ willingness to spend money on just about anything, which will make value for money perhaps even more important now than in the last recession.
So how can brands be purposeful while delivering outstanding value for money? How can they deliver high relevance and quality perception at prices people consider to be fair?
Provide meaning by pinpointing emerging demands
Recession consumers are serious-minded, look for meaning and weigh their options. We tend to avoid superficial status consumption to build our social position. Societal aspects in your consumption, like supporting your local community, will likely become even more important to people, limited only by financial strain.
This means shifts in demand for any consumption connected to better ways of life. We’ve seen it in past recessions and we’re seeing it in early indicators of what we’ll be spending on in 2020. People value safety, health, self-development and family, and intend to spend more on things like food, personal development, daily necessities and homes. Brands need to mind these shifts and be ready to explore them in 2020–2021.
Boost personal relevance through deepened personalization
A resource that is available in this recession, that wasn’t available ten years ago, is the possibility to leverage data to create personalized customer experiences. Companies have so far largely built personalization around superficial aspects like context (location, time, purchasing history, etc.) or behavior (drivers, needs, etc.). It’s now time to deepen that personalization to account for people’s sentiments and values to maximize relevance.
Brands that can keep up have the opportunity of aligning with consumers’ changing values and interests during and after the crisis. By for example, implementing more human aspects of online or remote interaction when customers are feeling isolated, or by offering new products that customers hadn’t realized they now find meaningful. And as many brands don’t prioritize a truly personal approach, a little effort can make you come out a winner in your category.
Bridge the credibility gap to the savvy consumer
Going into this crisis, facts and truth were taking heat in a world of fake news. News media consumption is currently booming as people need validated information, and we could well see a growing sentiment to cherish facts for the duration of the crisis. The question is, if it’s a trend that will last long-term.
Consumers have grown confident in and comfortable with their ability to find information and compare options. Companies need to adapt to this new reality, learning to live with claims and promises being scrutinized. Brands that walk the talk, are transparent and authentic will be rewarded. The customer needs to understand what’s in it for them.
Deliver on value and grow through the crisis
Credible, low-price brands will see a lot of opportunities in the years to come. At the same time, a pre-crisis trend that is likely to accelerate, is the fading out of mid-priced, mainstream brands, as people start minding their spending. Buying a higher quality product or service can be justified as you become more mindful, but only if it leaves a lasting impression. With 72% of brands being perceived as perfectly replaceable, you need to be attractively positioned on price or at a justified premium price.
The last recession clearly showed that brands that offered justifiable, credible premiums, were able to sustain their business through the crisis. They could offer much of what luxury brands could, but at an attainable price for the recession consumer. Today, a justifiable price point is also a big part of being transparent and building trust.
Relevance, purpose, credibility and outstanding value will be core assets to thrive in the markets of 2020–2021. The deeper and longer the recession, the bigger the shifts in what we value. As consumer values become more serious, inner-driven, critical and mindful brands that live by a meaningful purpose are likely to be the winners, as long as they deliver great value for money.
The way ahead is to progress with purpose through the crisis.
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