Consumer

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As Inflation Hits a Record High, How Can Brands Connect With a Beleaguered Consumer?

New whitepaper from Ogilvy Consulting reveals role of brands in consumers' time of need

By Jo Arden

The Cost-of-Living crisis is going to have a profound impact on the brands people choose to spend with. No categories will be immune: people are being much more considered in whether they buy branded on everyday essentials and bigger ticket items are perhaps being pushed further down the priority list. The Resolution Foundation recently commented:

The scale and immediacy of the current income squeeze, combined with the distribution of pain it brings and the historical context of a decade of stagnation, help to explain why it will be so deeply felt. Few will be immune.

But this is not to say that spending has stopped. Economic volatility will prompt trial, switching, trade-offs and a whole range of other consumer behaviours which present an opportunity for brands. Now is a great time to think deeply about how your brand can help people weather the storm – through being truly transparent on prices, rewarding loyalty, simplifying the buying process, presenting fairer payment options for instance.

Our report talks about (brand) Promise, Empathy and Action being the right combination for value based innovation. Sainsbury’s ‘Feed Your family for a Fiver’ (2008) is a great example from the last recession of a brand that brought that combination together brilliantly. It was a value driven initiative which was tuned into what the nation needed right at that moment and it stayed true to the brand promise.

The Sainsbury’s example is interesting from a tone perspective too – it was hard-nosed value handled with humour. Brands don’t need to change tone because they are communicating about value or price; it doesn’t make them any more helpful to consumers and it doesn’t support the brand in the longer term. We can offer entertainment, hope, humour – all the things brand are great at, they can still do whilst being respectful of the economic backdrop.

We need to remember too that, whilst affordability and value will dominate decision making for many, considerations around the environment and social impact are still here. Consumers don’t want to cut straight to compromise and brands which can help consumers make choices they feel good about, will set themselves up for success.

The Whitepaper

The UK is experiencing its worst inflation in forty years. In a perfect storm of price hikes, rising interest rates, and stagnating wages, many Britons are facing existential fears about the future. Everyone is talking about the cost-of-living crisis, from economists and politicians to pundits and brands, but when it comes to consumer brands the talk is wearing thin for UK consumers. Big brands are often perceived to benefit from inflation, or even drive it. Meanwhile consumers see corporate net margins rise to record highs, creating frustration among the public, leading to an “Us vs. Them” mentality.

During times of crisis brands generally rely on empathetic messaging, but this tactic is losing its appeal, especially as some are getting it very wrong. OVO Energy’s ad suggesting that consumers cuddle their pets more closely to stay warm comes to mind. What’s not being understood by brands is that many UK consumers are in a period of unprecedented uncertainty – especially those with young families – and this requires new kinds of customer insight and response. Increasingly brands that have come out of the pandemic seem to know their customers less well than they did before, despite a wealth of observed marketing, browsing and purchase data.

“Today’s consumer plight needs to be seen through new lenses, with the application of natural language analysis, and cognitive segmentation, marketers can understand the human drivers behind the data. Most important is to understand the palpable sense of dread consumers are feeling about the future, feeling antagonised by the “we’re all in it together” messaging and triggered by half-hearted price promotions.” Paul English, MD Ogilvy Consulting.

At lower income levels, behavioural insights are critical to understanding what consumers really need, as we find in these audiences:

A greater belief in fate and high sensitivity to the idea of things being “out of control”

Less openness to new experiences

Prevailing prevention-focused mindset with the fear of loss

Analysis of Big Data doesn’t provide consumer empathy points if there is no understanding of the drivers of human behaviour. The key to creating these initiatives lays in the intersection of:

Empathy – genuinely understand the needs and behaviour of consumers

Action – inspiring the consumer to do something they perceive as doable and beneficial to them

Promise – a brand must create an evergreen experience rooted in genuine value to the consumer to create trust.

The brands that come through this tough period with their integrity and customer bases intact will be those who have been seen to make a material difference to consumers. By moving beyond traditional promotions and messaging strategies, and embracing Value-based Innovation, brands will deliver meaningful and authentic impact for their consumers.

Read the full report here.

Jo Arden is chief strategy officer at Ogilvy UK.

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