Tough times and low confidence call for bold action
Lindsay Pattison, Chief Client Officer, WPP
When economic indicators are tough and consumer confidence is low, remember that brands with strong value propositions are 100% more recommended and 91% more loved than the rest, says WPP’s Lindsay Pattison
We are in uncharted waters – consumers and businesses alike. Inflation has spiked, interest rates are on the up, the impacts of war are unknowable, and the OECD’s Consumer Confidence Index is at an all-time low. Consumers are facing the squeeze of a generation as prices rise and disposable incomes contract. And it’s not just product brands that are impacted, it’s services as well.
At times like these the differences between routine shopping, small-treats shopping, lifestyle shopping and shopping for indulgences sing out. But this is the first tough environment in which consumers and brands alike must also navigate rising monthly subscription payments, e-commerce price transparency, the impact of influencers on pricing, and the shift from ‘stuff’ to ‘experiences’. We have moved on from the last downturn.
As fear and complexity prompt consumer caution, the temptation is for businesses to pull in their horns. But the paradox for brands is that harder economic conditions prompting low confidence can present unrivalled opportunities to build deeper and more meaningful connections with consumers. Now is also a time to keep a close eye on, sharpen and communicate the brand’s value proposition. Companies who use this time wisely, communicate well and earn trust will be best prepared for the next growth period.
Three actions brands are taking now
At WPP, we are already seeing brands act. They are strengthening their value proposition and sharpening their brand’s ‘why’ to make sure it is clear and visible at the moments that matter. Understanding why people buy specific products, especially in the current context, is vital – it may have changed with circumstances. No wonder Boots who, in collaboration with WPP’s The Pharm, has launched a three-part value campaign to help customers with the cost-of-living crisis.
Brands are also adding value beyond their products. They are asking themselves what experience, service or value they can offer in addition to their product. Loyalty schemes are the tried and tested formula, but there are other ways to add value. For example, T-Mobile’s ‘Coverage Beyond’ initiative expands coverage and keeps customers connected beyond their usual expectations. And Mars Petcare is taking a platform, not project, approach to innovation by experimenting with a proposition called ‘MyPerfectFit’, which allows consumers to personalise petfood.
We are also seeing brands build their long-term brand equity. Intel, for example, has launched a brand campaign entitled ‘How Wonderful Is That?’ to reinforce its continued relevancy with consumers.
As always, it all starts with understanding the complexities of consumer behaviour.
People are harder to pin down
Consumer behaviour – human behaviour generally – is complex. That complexity will likely magnify when consumer confidence is low.
It will not just be about spending less. Consumers prioritise their spending when times are tough, and confidence is low. Non-discretionary purchases tend to stop first, and brands with weak equity and unclear value propositions lose out to competitors in the face of higher consumer expectations of value.
Of course, consumers may trade down to cheaper alternatives. They may buy more in bulk, and plan better. They may postpone purchases. They may downsize, shift channels, opt out, or even choose different products that meet similar needs. In short, when confidence is low, consumers aren’t looking to cheapen every aspect of their lives. They prioritise by looking to save money in one place so that they can spend it elsewhere.
Meanwhile, the challenges for businesses are very real. A recent survey of CEO and C-suite members conducted by The Conference Board revealed that business leaders are still thinking long term and are continuing to invest for future growth. But over half the boardrooms surveyed are passing down price increases to consumers, and almost the same number are cutting costs.
These actions are clearly critical to weathering the impending storm and being resilient. But executing these actions alone – without simultaneously reacting and adapting to changing consumer behaviours – could pose huge risks.
What we know and what to do
WPP’s ‘BAV Global Brandscape 2022’ study shows that brands with strong value propositions (that is highly relevant brands) globally outperform the rest. They are:
- 100% more recommended than the rest of brands,
- 2x times more used regularly,
- 1.7x times more preferred, and
- 91% more loved.
We have learned the value of a strong value proposition from the 2008 economic crisis. WPP BAV brand analytics data reveals that those brands that stood out then because of low prices gained momentum in the short term. But theirs proved to be a short-sighted approach. That’s because those same brands, by making themselves the bargain option, undermined perceptions of their intrinsic value and ultimately the budget brands’ fortunes plummeted.
If the data points to the value of investing in strength and relevance, what can be done in preparation for better times? We suggest:
1. Be specific – this comes with data
Not all consumers are the same, especially right now. In the US, the consumer landscape is confused. Yes, there is a lack of consumer confidence, but there are also high levels of saving, and a whole slew of different responses to macro-economic conditions. Age groups, income levels, what is being bought – these all have a bearing on consumer behaviour. Actions taken by brands for long-term growth should both be based on data and be intentional.
2. Be proactive – keep generating demand
The need to keep generating demand and preference for brands is important. Companies in the retail sector are being particularly proactive. Some are positioning themselves as being on the side of the consumer. Ogilvy’s ‘Be a Smart Cookie’ campaign for Sainsbury is a case in point – it helps customers maintain financial control, shop smarter, and access personalised discounts.
3. Be flexible – global shocks are here to stay
Across just a handful of years, global shocks have repeatedly impacted our businesses and our personal lives. What consumers craved during the pandemic will be very different from what they need when inflation or interest rates soar. Now is a time for agility and empathy.
4. Tap into existing but under-served markets
At WPP, we are hugely mindful of global consumer equality. Are ethnic minorities served well by your brands? What about women and their health needs? Is the LGBTQ+ community being marketed to appropriately? Is your marketing inclusive, democratic, and inter-sectional? Do you really know what Gen Z is thinking? Make sure your marketing is relevant to today’s communities, that you are not limited by old-fashioned constructs, and that you have earned the trust of the communities with whom you seek to engage.
5. Get innovative – perhaps immersive
The tech options are vast. We are already generating immersive experiences through metaverse technologies, or shifting perceptions using artificial intelligence. And we are developing new purpose-led and climate-aware approaches that help to align brands with brand values in the minds of consumers. Brands need to shift from ‘marketing to consumers’ to ‘mattering to people’. Now is the time to think beyond the box and try something new.
6. Always, always be creative
At WPP, we know creativity has the power to transform a brand and deliver returns. But the returns come with being bold, confident and by taking a lead. You can change the consumer mood, at least momentarily, by being creative. And creativity can keep your products on the engaged shoppers’ shopping-list – always a work in progress – through to the end of the shopping cycle.
7. And unleash your value proposition
Knowing how to offer value to consumers in times like these starts with a deep understanding of consumers’ predicaments. WPP BAV has launched a new 'value’ metric to help brands and retailers unleash their brands’ value proposition in ways that fit with the challenging decisions consumers now face. The ‘WPP BAV Brand Worth Map’ enables brands to see and track how brands and their competitors are perceived in terms of the value they offer. After all, the situation today is quite different to crises past. While ‘value’ used to be almost exclusively about price (we might say V = P), in 2022 the value equation is much more complex (perhaps V = P × Time × Quality × Convenience × Purpose and Values).
Having an open mind – and being optimistic – is what’s needed now. Brand loyalty is resilient, even in tough times, and underlying consumer trends do not fluctuate with every tick up or down of the markets. Take comfort that important marketing trends endure, as do strong brands, but staying strong is vital. So, take additional action alongside any protective measures to avoid losing out long term.
21 October 2022