(Last of three parts)
Consumers around the world are settling into life amid uncertainty, adapting by assigning greater importance to taking control over their finances and favoring sustainable practices.
The EY Future Consumer Index, which examines shifting consumer attitudes and behaviors over a range of time horizons and across international markets, demonstrates how accustomed people are to living in a constant state of crisis and uncertainty.
In the previous parts of this series, we discussed three key shifts in play that differentiate the current crisis from previous ones, and the key trends in consumer behavior as identified in the Index. In this final part, we discuss the four imperatives that businesses have to take into account.
Business leaders will have to adapt to meet the needs of consumer values that have shifted during the pandemic experience. Consumers are actively seeking more control over their lives instead of simply reacting to events.
To address this, businesses will have to review their operations to optimize for better pricing, approach sustainable products as a cost-effective option instead of a premium choice, explore new and targeted ways to engage consumers on multiple digital channels, and reconsider what their purpose is as well as what KPIs they want to set.
1. Review portfolios and operations to ensure affordability.
To get the products they want at prices they can afford, consumers are more and more likely to trade down. Companies must think about how to manage their product portfolios in this inflationary environment to improve pricing outcomes.
Prior iterations of the Consumer Index have demonstrated how the pandemic has increased the willingness of customers to switch to private label products. Retailers now have the possibility to broaden their selection of private label products. To ensure that they can best optimize for pricing, brands must also look for alternate supply chains, ingredients, or components and experiment with other product characteristics, such as packaging and package sizes.
Due to ongoing price and revenue worries, this necessitates and facilitates improved supply chains and industrial resilience, but it is also likely to be more than a temporary remedy.
2. Tailor sustainability strategies to offer affordable fixes.
Despite their increased resolve to live more sustainably, consumers are becoming more price sensitive. Many businesses will need to switch approaches and explore how to make sustainable goods and services become the affordable norm for consumers, rather than as premium alternatives.
The need to look into business models like renting, reselling, and mending to keep goods in use for longer is at the heart of this mindset. This creates a need to scale up current sustainability solutions so they can be more affordable from a procurement standpoint.
For instance, the increase in energy costs brought on by the increased price of fossil fuels may encourage more investment in alternative energy, enabling scalable and inexpensive green energy and providing a chance for innovation to produce more sustainable products.
3. Adjust investment in engagement to take advantage of new digital opportunities.
The importance of digital channels during the pandemic is likely to continue increasing. However, the physical world will not become subordinate to the digital one overnight. Brands will have new opportunities to interact online and in the still emerging metaverse as a result.
Now that consumers are becoming less brand loyal in their buying decisions, brands that have been generally decreasing marketing budgets during economic downturns run the danger of greater disintermediation. Businesses need to step up their efforts to clarify and define their unique brand offer by looking at fresh, focused approaches to connect with and engage with consumers through a variety of channels. This entails testing new digital technologies as well as gathering and using consumer data in ways that improve both physical and virtual customer experiences.
However, these initiatives must be weighed against customer worries about data privacy and cybersecurity. Not only is it crucial to protect consumer data, but businesses can also gain the trust of their customers by demonstrating how they responsibly use their data to benefit them in real ways.
4. Set KPIs that take shifting customer values into account.
The extent to which consumer values are shifting is highlighted by the current and previous waves of the Index. People are less driven by monetary gains, and sustainable behaviors rather than wealth are more used to determine status. The way that consumers use their time is changing, and they are searching for ways to alternate between saving time on the things they dislike and spending time on the things they enjoy. Instead of focusing on salaries and careers, people are now increasingly concerned by purpose and flexibility.
Companies need to reevaluate their goals, KPIs, and purpose in order to align with these developing values. Non-financial indicators like emissions, diversity, and innovation are progressively taking the place of traditional financial measurements like growth, profitability, share price, and shareholder returns. Companies must consider and evaluate these indicators in the context of the clients and staff they serve, and they must create new KPIs that instill non-financial values into their corporate culture.
ADAPTING TO CONSUMERS IN A WORLD IN CRISIS
When their finances are stressed, people look for ways to save money and companies may feel the same way. This is a typical response, and for many people, it is also their only possible option. However, having experienced a pandemic, many customers now approach crises differently.
In order to keep a sense of control over their lives, consumer values have altered, and they are determined to abide by them. They are more concerned with acting sustainably than they are with purchasing things they do not believe they need. To stay aligned with these evolving consumer needs and behaviors, businesses will need to start taking action as soon as possible if they wish to remain competitive and relevant.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.
Maria Kathrina S. Macaisa-Peña is a business consulting partner and the consumer products and retail sector leader of SGV & Co.