Ben Wright – Research Director (Asia Pacific Region), TLF Research and Insight
In the first part of this series, which you can find here, we explored how COVID has fuelled the evolution of a new term to describe the state of worldly and personal affairs, BANI, which stands for brittle, anxious, nonlinear, and incomprehensible.
With such massive impacts due to COVID there has been a massive reframing of perceptions and associated consumer behaviours, which marketers have been scrambling to decode in order to understand how best to pivot. To remain authentic, relevant and distinctive in consumers’ lives, marketeers have to fully appreciate what consumer sentiment is.
Research conducted by TLF in 2021 in the fitness sector found that behaviour change is not linear and the shift towards digital solutions depends largely on satisfaction with new experiences. When a new way of undertaking an existing behaviour has been ‘forced’, the customer experience of the new method can often as not result in a previously long-standing exercise behaviour being dropped. Conversely, the right strategy at the right time can pay good dividends: Disney+ achieved in 5 months what it took Netflix 7 years to achieve.
One of the most likely enduring impacts of COVID is ongoing price sensitivity. Consumers are now acutely aware of the importance of having a savings buffer to protect them from unforeseen circumstances. Rising costs of living have induced significant consumption declines, or trading-down, in many categories. As we noted in the first part of this series, the cost of living in Australia is increasing, sharply with inflation up by 5.1% from March 2021 to March 2022. This leads some CMO’s to have a burning consumer insight question around what is truly ‘discretionary’ – that is, what will households let go of first, and potentially permanently, to enable them to balance their budgets and allay their fears?
Income is a clear predictor of consumer optimism. For example, Australian Gen Xers are among the most pessimistic, with many of this cohort at peak mortgage stress points. Our research shows that around two-thirds of the population do not expect things to return to normal anytime soon, and as a result, do not plan to splurge on nonessential items anytime soon. As we noted in the first series instalment, household budget maps are being redrawn, and even among more optimistic consumers there are strong signs of caution which are calibrating spending decisions.
Research conducted by TLF in the Australian hospitality space found that while a majority of Australians are back out and about, with their favourite activities being to be able enjoy a meal out and socialise with friends and family, they are doing so much less frequently than pre-pandemic levels. Consumers are being more judicious across the board; consumers with a carefree shopping state of mind an increasingly rare beast.
Beyond looking solely at consumer sentiment, which we saw in the first part of this series was plummeting towards levels seen at the outbreak of COVID, it is also important to look at household spending intentions (HIS) data, which is based on actual spending data, overlayed with insights from Google Trends search data analysis. In our view, combining these types of data with insights gleaned from direct consumer research provides a critical sense-check and contextualisation of insights, never more important than in such turbulent times. Further, Google Trends analysis can tell us when consumers are starting to ‘shop around’ and be a sign for a brand to ramp up efforts in customer retention or acquisition strategies.
All available evidence from Behavioural Economics tells us why what consumers say they will do and what they actually do is often at odds. In our research at TLF over the past two years, around two-thirds of consumers have consistently told us that they will remain loyal to the brands that they purchased from prior to COVID, however, mounting evidence is showing the opposite. Two-thirds of Australians have engaged in new shopping behaviours of some sort, including almost half who have tried new brands. On top of this, almost nine in ten of those who have tried new brands intend to stick with them. Paradigms of marketing and consumer behaviour have been challenged on many fronts, including assumptions of brand loyalty, and this makes it important to see exactly where and how consumers are putting their money where their mouths are.
Back to household spending intentions, credit and debit card spending showed signs of a slowdown throughout June as higher interest rates begin to impact household budgets. In the table below we look at spend patterns on a month-by-month and year-on-year basis across 12 sectors:
|CBA HIS (June ’22)||Monthly change||Yearly change|
|Health & Fitness||1.1%||11.3%|
|Communications & Digital||0.0%||1.0%|
Of course, the devil is in the detail, and in this case the specific sub-categories that make up these broader groupings. In relation to retail, for example, over the past year there has been strength in spending for department stores, clothing, furniture, household appliances, jewellery/watch stores, pet shops, sports stores, cosmetics, shoes, hardware, luggage stores, duty free (off a very low base) and dry cleaners. Sectors that had been very strong early on in the pandemic but declined over the past 12 months include packaged alcohol, camera & photographic equipment, arts & crafts, paint stores, antique shops and florists. Fine-tuned analysis of the differences in these categories helps shed light on which sectors are impacted the most as household budgets shrink.
Our research across multiple categories over the past two years, both domestically and internationally, has shown that trust is an increasingly important dimension in customer decision-making about which brands, products and services to engage with. This leads to another key question which is which brands are being trusted now, and why?
With a heightened sense of value in mind, mutual value exchange is a critical element for brands. This is particularly pertinent in the current era of channel fragmentation and digital transparency. Our research also shows that consumers are willing to provide information to brands so long as it is treated respectfully (confidentially and securely), and they do so if they perceive it will help brands deliver relevant products or services to them.
Underpinning trust is the key behavioural observation that humans want to hear other humans’ experiences of a brand, product or service. Brand reputation is far more important than brand promise.
Important questions that marketing managers should be asking themselves include:
- How do consumers’ changed needs and priorities shift how authentic, relevant and distinctive they think our brand is?
- Am I investing in the right mix of channels given the changing nature of consumer journeys?
- How do I mitigate inflation increase impacts on consumers’ decision to stay with our brand in the short- and long-term?
In the final part of our series, we summarise what marketing managers need to do in the uncertain times we find ourselves in. You can read that here!
This article is contributed by Ben Wright – Research Director (Asia Pacific Region), TLF Research and Insight
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