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EU Referendum Marketing

How austerity-fatigued consumers will spend in post-price rise Britain

By Claudia Strauss, managing director

March 3, 2017 | 5 min read

Coffee, Marmite, fish fingers and Walkers crisps – nothing appears to be safe from the Brexit-themed price rise. With an unfortunate mix of uncertainty and inflation expected to make the pound in our pocket feel much lighter in 2017, many people fear a sharp downturn in consumer spending could hurt brands.

shopping

It raises the question: what do consumers actually do when there are price rises?

Convention says that when inflation increases, you pull back on your spend. You cut back on the non-essentials, meaning the high street, travel and entertainment industries take the biggest hit.

But there are many things that are unconventional about the current climate and many reasons to doubt that consumers will adopt a conventional response.

And for brands, understanding the ways that consumers will actually respond to price rises will be key to having an effective marketing strategy.

Keep calm and carry on spending

When we conducted a series of self-funded polls following the EU referendum, we asked consumers: would you limit your spending if there were price rises and currency fluctuation?

Their answer? Not really.

Having had nearly a decade of belt tightening, 2017 has consumers by and large expecting to continue their spending as is. Given that spending behaviours tend to be reasonably well-ingrained and don’t really change overnight (barring a sudden change in personal circumstances), this shouldn’t be too surprising.

Add to that the fact that the erosion of the weekly grocery shop has meant not many consumers could actually tell you the price of a carton of milk (and consequently don’t really notice price rises for more mundane products), plus the general fatigue around austerity messaging, and it’s clear that a sudden change in consumer spending habits is pretty unlikely.

More significant was that consumers said that they might take slightly longer when they’re deciding what they want to buy. They said they’d procrastinate more, do more price checks and think through which product really offers them the best value.

For brands, this is where the impact of post-Brexit Britain will be felt. And it fits within a set of wider trends that have been transforming the customer-brand relationship over the past decade.

The rise of the all-powerful consumer

Consumers are now more powerful than they have ever been before. And price rises will only make them more powerful.

A mix of social media and technology has made consumers savvier, better informed and better able to see through marketing messages and understand what is really going on. When they can find user reviews, competitor pricing and better deals from their smartphones, they’re much less likely to take 'two for one' deals, price reductions and CSR initiatives at face value.

The rise of a millennial-led but increasingly universal trend towards buying experiences, instead of more stuff, has added to this. For all the doom and gloom and fear that the world has gone mad, many people are keen to just get on and enjoy their lives. They don’t want to clutter their houses with more things that they don’t need – they want experiences that they can remember (ideally for the rest of their lives).

Price rises will accentuate this move towards a more powerful, savvy consumer. Consumers will think more about whether products are actually that valuable, how much of a positive experience they are likely to be and whether they can get a better quality product or price elsewhere.

You won’t avoid this by lowering prices. For budget brands hoping to undercut the big players, customers will be sceptical about their pricing strategy, wondering what corners have been cut or what quality has been sacrificed to keep the prices low. The same scepticism now applies across all price points and cannot be avoided by anyone.

If brands want to keep consumers buying their products and services in post-price rise Britain, their value propositions will need to be watertight. The experience of buying and using it needs to be at the forefront. And the messaging needs to be open, honest and in tune with what customers want: proof of quality, proof of trustworthiness and the right price.

Claudia Strauss is UK managing director at Future Thinking

EU Referendum Marketing

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