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How retail brands can help consumers during a cost-of-living crisis

September 22, 2022

The start of 2022 held much promise, with countries learning to live with the coronavirus and consumers returning to normal life. However, Russia’s invasion of Ukraine and the knock-on logistical and financial effects of disrupted supply chains, rising inflation and further climate disasters have knocked consumer confidence even further. With supply chain recovery hampered, an increase in market volatility and countries across the world headed into recession, we are entering a period of significant uncertainty.

In this article, we discuss the implication for brands and how they can empathize with consumer concerns, as well as how they can pivot their marketing strategy to minimize disruption and maintain loyalty.

Supply chain disruption and product availability

With surging fuel costs, delayed deliveries and logistical challenges impacting the global movement of goods there is a lot for brands to be concerned about.

Panic buying was an issue amongst many consumers in 2020, but 2022 is not looking much more stable as we see shortages in semiconductor chips that are needed in many popular items from cars to household appliances, aluminium used in construction and beverage containers, and food products that are reduced by labour shortages and climate change. These are just a few of the many shortages that businesses today are struggling with. As well as threatening business operations and sales, a scarcity mindset among consumers will exacerbate the shortages and further distort purchasing behavior.

According to Adobe Analytics, online shoppers received 60 million out-of-stock messages from March 2020 through to February 2022. Brands that continue to be unreliable in the eyes of consumers are likely to see their customer loyalty suffer. Although customers understand why there are supply complications, brands must still meet customer expectations for how these complications are handled. Fast, free and on-time delivery is still expected. To mitigate disappointment, brands must provide more transparent communications and updates to their customers.

This is pushing brands to re-evaluate their logistical processes and the necessary customer services. Data will be the foundation for change. Supply chain management and inventory forecasting accuracy have been significantly improved with artificial intelligence technology. According to McKinsey, early adopters of these systems have improved their inventory levels by 35% and service levels by 65% compared to their competitors.

Price imperative

High inflation and soaring energy bills are further driving the cost-of-living crisis. Fuel shortages at the start of 2022 sparked the shift in consumer attitudes. Petrol and diesel cars became increasingly expensive to run (and hard to refill), increasing the use of public transport and working from home, as well as increasing demand for electric vehicles. Global sales of electric cars continued to rise strongly in Q1 2022, with a 75% increase from the same period in 2021.

However, we now see fuel concerns extending to people’s homes, with skyrocketing energy bills making headlines across Europe. The World Bank’s energy price index increased by 26.3% between January and April 2022, after what was already a 50% increase between January 2020 and December 2021. As consumers look to minimise their energy bills, energy efficiency will become a key product selling point and cutting overall household expenses will be commonplace.

In this economic climate, brands will need to explore cheaper services/packages in response to falling consumer confidence and higher price sensitivity. Conversely, brands should not ignore the ‘lipstick effect’ – the theory that during recessions and economic downturns, consumers still spend on small luxury items, such as premium lipsticks. While they are less likely to spend on big-ticket items, people still want small treats from time to time. Brands must factor this into their expectations for changing consumer behaviors and how they can pivot their messaging for certain products.

Value messaging

“With inflation at a record high, more people are looking for value; price is at the top of the list of consumers’ motivations for switching,” states a recent McKinsey report. Consumers will always respond to price and value. However, there are only so many opportunities for companies to reduce costs before they start cutting corners - strategies such as shrinkflation quickly garner negative attention. Price promotions combined with supportive messaging will be the first stop for many organizations; however, these alone will not grow their consumer share of wallet.

Brands must also re-evaluate how they deliver value to consumers beyond just cost. Marketers must have a real understanding of and empathy for customers’ evolving needs in new economic situations. Data will be crucial to accurately identifying these needs; however, many consumers act emotionally rather than objectively when making purchasing decisions. This means that understanding psychographic factors will be just as important as gathering data in order to correctly predict how your audience will respond to marketing campaigns.

Brands that embrace value-based innovation can deliver meaningful, positive impact on consumers, businesses, and brands. Airbnb offered temporary housing for Ukrainians leaving the country at the start of the invasion, and set up a channel for others to donate directly to Ukrainian Airbnb hosts as a means of supporting individuals. In a similar vein, LVMH repurposed their perfume facilities to manufacture hand sanitiser at the start of the pandemic which was then donated to their partner charities. Some organisations will not have a connection, be it values-based or capabilities-based, to aid in a given situation. In this case, they will have to measure the relevance of their involvement with the audience impact.

Key takeaways

Consumers want brands to act and help them through times of crisis. However, finding your brand’s appropriate role in these situations can be difficult. It must begin with ensuring you have a full understanding of your customer’s needs versus the needs of consumers in general. It must then be bolstered by responsive and contextualised actions that you can take to support an authentic connection with your customer base.


cost of living