Jaywing's Director of Partnerships, Liam McNally, breaks down his key takeaways from Retail Week's latest report, ‘Crisis and The Consumer’.
As consumers become more cautious, focus on value
According to a recent survey of 1,000 consumers by Retail Week, 30% of households are earning less than they did pre-pandemic, with 79% reducing their spending in response to the cost-of-living crisis. As a result, shoppers are becoming more cautious, cutting back discretionary spending, researching the best deals and looking for value in products and services.
With customer confidence likely to get worse before it gets better, it’s crucial for brands to prove why they are a trusted vehicle for the consumer. This doesn’t necessarily mean being cheaper than the competition. Value can be identified through several characteristics including exclusivity, unique benefits or features, longevity, rewards, speedy delivery and fuss-free return policies, responsive and helpful customer support, and much more.
To stand out in a crowded market and boost sales, retailers must use data-driven insights to understand the most profitable products and services, as well as the interests and needs of customer segments. This will reveal what real value means to shoppers, enabling marketing efforts and messaging be tailored and personalised.
With 71% of consumers identifying value for money as the most important aspect of a great customer experience, this is a non-negotiable step in retailers’ 2023 marketing strategy.
Don’t let increasing pressure slash your product prices – or marketing investments
Retailers should also avoid the temptation to slash prices or marketing investments in response to increasing pressure. Price drops are not a sustainable strategy for growth and can lead to negative long-term effects on the business.
Nielsen, the global leader in audience insights, has revealed that 84% of such promotions are unprofitable. Once prices have dropped, they can only drop further. Being inconsistent and charging the original price when the economy settles will only frustrate and alienate existing customers. Instead, revert to how to further showcase brand value, validating price-points through customer-centric messaging.
Predictive models can help retailers to understand the impact of changes in pricing on key metrics such as conversion rates, basket-size and customer loyalty. These techniques ensure prices are optimised for the most profitable customers.
Retailers are also faced with the challenge of increasing sales while their own budgets are under the microscope. As Jaywing’s Director of Media Science, Hanna Wade, outlines to Marketing Week, cutting marketing investment during a cost-of-living crisis may seem like the logical solution to reducing business costs, but it can lead to well-publicised, long-term consequences for sales, awareness, market share and customer loyalty. Instead, brands should consider more strategic ways to reduce costs such as re-evaluating their target audience or experimenting with new marketing channels that can lead to better ROI.
Capitalise on data-driven insights
Research by WARC reveals that spend in traditional media, such as TV, newsbrands, radio, and magazine brands has declined. Meanwhile, search spend grew 7.7% in Q3 2022, accounting for 40% of total ad spend.
This may be partly triggered by consumers increasingly seeking products and services online. However, this heightened spend can also be explained by the measurability of digital channels, including search, becoming a more favourable method for marketers. As constraints tighten on budgets, the ability to target, test and measure digital activity is even more valuable to marketers, removing uncertainty in decision-making.
Whether using online or offline channels, marketers are increasingly leveraging marketing effectiveness techniques including econometrics and data-driven attribution, to better understand customers and identify the most successful marketing touchpoints. This allows marketers to optimise budgets to the right audience, in the right place, at the right time, and significantly reduce wasted spend.
During financial difficulty, using data to inform greater levels of personalisation can not only deepen customer relationships but also have a positive effect on brand building. Personalisation can provide customers with a simplified and convenient shopping experience, particularly as they prioritise speed and ease. By using customer data to personalise marketing messages, deliver offers through effective channels and personalise recommendations, brand can improve the customer experience and reap the benefits.
Overall, it’s clear that the current economic downturn has created a challenging environment for retailers. But by showcasing value and using data-driven, customer-centric solutions, brands can still fuel growth – for both the short and long term.
To delve beyond my key takeaways, access Retail Week’s full report or contact me here.