Could perception be helping to drive down the economy?
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Summary of recommendations:
The Consumer Landscape
As our insight shows, consumer confidence is unlikely to improve significantly in the near future. Having said that, our analysis also shows that consumers will all react in very different ways to the downturn, depending on their socioeconomic profiles – a key point for any organisation to bear in mind.
Many consumers have already changed or are planning to change their behaviour in response to the downturn, yet it is clear that the perceived threat does not always match the reality. Ironically, it is those people who are least likely to be significantly impacted who will be amongst the most likely to change their spending patterns in a knee-jerk response to the current economic climate.
To date, the symptoms of this change in mindset have centred on small, dayto- day and easy to make cut-backs. However, we are going to witness a major tightening of the purse strings around big ticket items such as holidays, cars and white goods. This will be compounded by concerns around the threat to household income.
Value for money is going to be at the top of the agenda for consumers in 2009. People will purchase, but only as long as it satisfies their appetite for a good deal. This incredible desire for value and a bargain is evident in the massive increases in discount vouchers searches on the internet and will continue to play out throughout the year. It is a phenomenon that has largely been driven by consumer demand and word of mouth. Furthermore, it also dovetails into another key trend and opportunity - websites encouraging user generated content and demanding consumer input are gaining popularity across the board, from teenagers to professionals. The bargaining power resides with consumers and they know it.
Against this backdrop, the early part of 2009 will be especially challenging for retailers. Lower demand and higher supplier costs will put pressure on retailers’ margins as they absorb increased costs rather than pass them on to consumers. We are likely to see aggressive discounting, particularly on clothing and footwear and the electrical and DIY sectors are expected to struggle. All this will do for consumers is underline to them the position of power they now hold at a time when, as incredible as it might seem, some car dealers are now running ‘buy one, get one free’ offers.
Turning insight into action – recommended learning points
Consumers’ hopes and fears combined with their incessant drive for value, access to ‘always on’ media and information makes for a potent cocktail for organisations. All of these factors will see consumers become far less loyal and much harder to please. This is the age of what we call the ‘empowered consumer’: they hold all of the cards, know it and want more-for-less without compromising quality of service.
1. Make every conversation count
For any organisation, our recommendation is to make every interaction with a customer count. This means using scientific-like customer insight to anticipate and respond to changes in each customer’s behaviour. This is about enriching the customer experience, knowing what makes purchasers’ tick and responding at every opportunity to capitalise on new trends emerging between the customer and brand. It all begins and ends with data and analytics by tapping into a rich vein of customer data and augmenting it with additional intelligence gleaned across every touchpoint.
2. Focus on a cohesive contact strategy across all channels
In this new consumer landscape, tone of voice will be just as important as the message itself. That means organisations need to focus on really understanding their customers and what drives their behaviour. Now is the time to focus on re-establishing, reinforcing and reinvigorating relationships with current customers by placing greater emphasis on the exploitation and application of existing data assets. The enhanced knowledge derived from this approach and the move to a coordinated customer contact strategy will lead to more profitable and longer relationships between brands and consumers
3. Work with consumer control, not against it
Consumers are taking control online, and will continue to do so in 2009, across all of their relationships with organisations. The most successful businesses will be those that are able to tap into this mood of empowerment by responding to genuine consumer demands through integrated communications channels. Even businesses that do not naturally fit in online can use the potential of the Internet, as seen by the basic example of the restaurant sector using its successful of two-for-one discount voucher formula.
The world is changing quickly, both in terms of consumers’ hopes and fears and also the prosperity of the communities they are part of. Customer insight driven by data and analytics capabilities will become even more important in delivering up to the minute information to organisations to enable them to react at speed to subtle changes in consumers’ circumstances. Adapting rapidly and sensitively to these changes as control switches between the company and consumer will be vital to fostering long-term goodwill and brand loyalty.