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August 30th, 2022

The Cost of Living Crisis: What can brands do? 

FMCG ShopperMarketing
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As the UK battles the highest 12-month rate of inflation since tracking began in 1997, the worry from shoppers about the pending recession is strong. CPI Inflation is expected to rise more than forecast in the May 2022 Report, from 9.4% in June to just over 13% in 2022 Q4!

In collaboration with Relative Insight, a text analytics company, we’ve published our 2022 report on Navigating a Financial Crisis: The Impact on Shoppers and How Brands Can Add Value. This report looks at what shoppers are saying online using technology that enables us to visualise text data and determine what brands can do when shoppers stop spending!

How shoppers are reacting to the Cost of Living Crisis?

Consumers are understandably being more cautious with their spending. They are reviewing their finances and making some necessary cutbacks – all to be expected in times of financial struggle. However, what is interesting is the views around how people are choosing to save…

Meal planning and batch cooking are becoming very popular – driven we suspect by the social community on apps such as TikTok, where people have been inspired by home cooking videos. There has also been a reduction in eating meat, an effect of years of communication about the cost of meat vs. vegetables and a latent want to help fight climate change we imagine!

“Plan your meals and take a shopping list to the supermarket. It’ll focus what you buy and ensure you don’t pick up random end of aisle deals. Even better do online food shopping, it’ll save you a ton of time and you’re more likely to stick within budget/buy what you set out to.” UK Personal Finance 28 Apr 22

As reported by Google Ads Research in June 2022, “there has been a global disruption in consumer behaviour, as people deal with many crises at once, including inflation and a potential recession.” Shoppers are searching more for ways to cut costs, with a rise in searches for “buy 1 get 1”, “promo code for existing user”, and “good time to buy”.

What does this mean for retailers and what can they do?

The current climate represents a HUGE opportunity for the discounters and the brands that are present in this channel. Aldi and Lidl have the perfect opportunity to capture a greater share of the more affluent basket during the coming period as we see that even those that are relatively comfortable are making cutbacks.

Leverage brand trust

Through Relative Insight’s analysis, we could see that people were 82x more likely to mention Lidl in Jan & Feb 22 (versus the previous six months) and 66.7x more likely to mention Aldi.

The more premium grocers such as Waitrose, Ocado, and Sainsbury’s can take advantage of the convenience of online shopping, exploiting one of the big weaknesses of the discounters.  This, combined with sharp pricing and other added elements such as testers and discounts for loyalty, could minimise switching and be a powerful tool to hold onto their customers.

Consumers seek comfort and reassurance of (affordable) familiarity. For example, Lidl has such a strong value association already established.

Big on quality, lidl on price ad

Most importantly, how can brands help shoppers navigate through this period? 

We are at the top of a recession rollercoaster and shoppers need more support than ever. This financial pressure and the cost of living crisis will have a significant impact on shopper behaviour over the coming months.

Whilst food and grocery are essentials, large behavioural shifts are to be expected as shoppers become acutely value-conscious and adjust their loyalty between retailers and product ranges.

Now is certainly not the time to take a hatchet to costs and spend, in fact, some of the world’s leading brands are upping their marketing budget to earn the right to increase the price of their product. Coca-Cola recently announced that their prices are going up 12% and so is their marketing spend!

The key thing to remember is that if the price of a product is going up, brand marketers need to display the extra value consumers get. There are several marketing approaches that brands can use to drive value perceptions – all of which we’ve identified in our report.

Innovate with packaging formats

Packs which deliver genuine benefits such as bulk saving packs, keep it fresher longer packs etc will enhance value. For example, P&G has produced XL packs of their Fairy Dishwasher Tablets encouraging the consumer to purchase through the promise of needing to buy less often as they will last longer.

Brand quality reinforcement

Companies need to elevate the benefits of commodity products. For example, Domestos bleach promises product power of effectiveness. People will be looking at ways to save money but know that buying a cheaper product may not last as long or be as effective.

These are just a few of the ways companies can leverage their brand power during times of financial hardship – there’s lots more recommendations within our Cost of Living report.

If you would like any more information or are curious about our other recommended brand strategies for success in a recession, please download the full report here.

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