The Cost of Living Crisis
How should brands be approaching the cost of living crisis on social?
The cost of living crisis is no longer an abstract concept - it’s already hitting all of us in one way or another. And the same is true for brands. This is something real, and it’s going to change how we need to approach our activity as marketers.
As always, how we respond relies on how our audience is behaving. Let’s take a look…
The crisis is disproportionately affecting those with less resilience to price changes
We know that those on lower incomes will be most affected. When essentials are taking up the majority of your budget, it’s hard to know what to cut back on - especially when it’s those essentials, like food and fuel, that are rising in price.
This also includes younger generations. According to Deloitte’s Global Gen Z and Millennial Survey, Cost of Living is their biggest concern - even more so than Climate Change. This shows the huge and immediate impact the crisis is having; and the additional stress of price increases in context of trying to make more sustainable choices.
It’s a global experience
This isn’t just limited to one country; it’s a truly global crisis. Ipsos Mori surveyed over 20,000 people in 30 countries and found that two-thirds of people say the prices for transportation, food and drink and utilities are higher than six months ago.
A mood of prudence and caution with spending
The result of all this? A mood of cutting back, and caution towards any extra expenditure. Those with disposable income are becoming more careful - according to Kantar’s global survey, only 13% of people say that they don’t need to make any changes as it stands. That means a huge 87% of people will be impacted in some way, whether making general cut backs, changing their behaviour, or changing how they manage their finances (e.g. dipping into savings or reducing the amount they’re putting away).
So, what does all this mean for brands?
As such, there are three key things that we think brands need to be more aware of as the crisis continues to develop.
Expect less loyalty
According to The Grocer, around a third of people are saying they’ll switch from the branded products they prefer for cheaper options, like supermarket own-label items.
During the 2007-2009 recession, customers had a similar reaction. A decline in loyalty results when consumers need to give greater consideration to price - exactly what we’re experiencing now. That means brands will need to work even harder to justify why customers should choose them over lower-priced alternatives, especially in FMCG.
Longer purchase journeys
Those with disposable income left to spend will be even more careful in how they’re spending it. Holidays and eating out may become more of a treat than the norm, so expect to see longer deliberation periods and more research to make sure they’re getting a good deal on exactly what they want. This means brands may be seeing it takes longer for customers to convert, particularly for higher-priced items.
A change in segmentation
As external factors have more of a squeeze on how consumers behave, the normal ways we segment our audiences may become less relevant. Purchases depend on consumers having disposable income, feeling confident about their future, trusting in business and the economy, and embracing lifestyles and values that encourage consumption. The cost of living crisis puts a squeeze on every one of these areas.
As such, the decision to purchase is more complex than ever, with more factors in play - so understanding this and adjusting your audience segmentation is key. Learning from previous downturns is something that brands need to bear in mind, and building in segmentation around attitudes to the downturn might be more useful than classic demographic segments - more here from Harvard Business Review.
What are the key actions to take?
So, what does your brand need to do right now? This isn’t panic stations, but you can make sure that you’re continuing to add value and connect with your audiences in ways that won’t go down the wrong way.
First, take a temperature check
Understand how your audience is feeling. How will the cost of living crisis affect them, specifically? Look at running your own research or focus groups - this could be a combination of a social listening dive and talking to your audience in person. From this, build in any additional considerations you might uncover. Do you need to adjust your measurement or goals to account for new behaviours? Do you need to adjust any targeting? Now is the time to understand how the general trends will affect your customers specifically.
Consider what your business is doing internally versus the external messages that you want to talk about in relation to cost of living. Company profits, redundancies, employee wellbeing all play into this; this is the backdrop that your customers will be interpreting your messaging. Treat it similarly to how you’d consider Pride - if your business isn't doing anything for the community other than sending out a rainbow Instagram feed post, it isn’t going to hold up.
Authenticity means really leaning into what your brand is good at and what sits at the heart of your purpose. For example, Microsoft offered free skills training to those who lost their job during the pandemic, or Barclays’s Digital Eagles Money Mentors and providing free financial advice. Don’t be British Gas, whose Stop the Silence campaign around removing the stigma of energy debt ran against the backdrop of their profits soaring by 44%...
Remember that any campaigns you’re running over the next few months will be viewed against the background of cost of living. Does what you’re saying still feel appropriate? What language are you using? Is there any way it could be perceived negatively?
It’s not about changing the character of your brand, and the associations you’ve already built will continue to be your anchor. It’s more about viewing your activity with one eye on the context, and adjusting where you need to.
The cost of living crisis isn’t going anywhere. As we look towards the next few months and how this changes things for brands, it’s all about remaining authentic, understanding your audiences’ changed priorities, and reacting sensitively.
Now’s the time to take the cost of living crisis out of the abstract and start adding detail to your approach.
How will you adapt?