Six Brand Strategies During Economic Uncertainty

During the last three years, global economies have been encountering major challenges; namely, the COVID pandemic, disruption in global supply chains, repercussions from the war in Ukraine, and most recently, inflation and the forecast of a looming recession.

While all of these exogenous factors remain largely uncontrolled with little room to maneuver, data confirms that consumer purchasing habits are noticeably shifting. Ultimately, the shift will influence category and brand performances. Hence, it becomes critical to understand shifts in consumer behavior that happen particularly in times of uncertainty. This calls for frequent check-ins with your consumers to guide your decisions to not only ensure that your brands continue to do well during tough times, but more importantly, emerge as winners when the dust has settled.

Three questions come into play:

1. What are the key learnings emanating from previous challenging situations from both a consumer and brand standpoint?

In the past, the typical actions of businesses in times of crisis were cutting investment (particularly in the areas of marketing, media, insights, and innovation) and reducing the quality of the product and/or the price. This is usually combined with layoffs and a focus on short-term brand performance without necessarily having a mid- or long-term direction for guidance. Unfortunately, such “intuitive” decisions to solely focus on cost-cutting have proven to haunt businesses later with their brands further struggling once the dust has settled instead of coming out of the crisis stronger.

Employee discontent, operational inefficiency, customer dissatisfaction, and loss of trust are four major alarming signs that are correlated with this disturbing observation. From the consumer standpoint, a wait-and-see attitude, optimization, and rationalization are the foremost approaches taken by the masses during times of uncertainty regardless of the industries and categories in question.

For example, if we look at the FMCG industry during previous times of hardship, reports from several research companies across different geographies concluded that customers tend to switch to value-for-money brands or bulk products. They actively search for price discounts, reducing purchase frequency, and in extreme cases even deserting certain categories.

2. What are the main shifts in North American consumer spending habits?

Based on recent research conducted by Perksy among a North American representative sample, we learned that 82% of consumers are concerned about their purchasing power. The same research highlighted interesting consumer trends in the light of rising grocery prices.

• 61% are buying cheaper brands
• 53% are actively seeking promotions
• 46% are buying less volume
• 34% are reducing their shopping visits to physical stores
• 20% are reducing their shopping visits to online stores
• 8% are seeking food bank assistance

As the summer holiday season ramps up, consumers consider different trade-offs to confront soaring gas prices namely:

• 50% are taking less road trips
• 21% are carpooling more
• 14% are opting for less gas-intensive cars
• 14% are switching to public transportation
• 8% are opting for electric cars
• 5% are selling their cars

3. What are the winning brand strategies to successfully weather the storm during a period of economic uncertainty?

There are different strategies to successfully guide brands through periods of high inflation and uncertain times. The starting point is certainly data-based decision-making. Also, continuously track trends to gain a comprehensive understanding of all the changes in your market, within categories, between brands, and most importantly, shifts in consumer habits.

1. Optimize your portfolio

The most successful companies turn the threat into an opportunity. They review their brand portfolio, remove less profitable SKUs and reframe value, highlighting benefits and product features that have become appealing to consumers. Such a move will align price with brand perception. For example, a market-leading Carbonated Soft Drinks player de-listing regional brands and underperforming sub-brands whilst focusing on driving its national flagship brands.

2. Communicate with empathy

Continuous, consistent, and transparent communication with your consumers is vital to outlast these vulnerable times. Some might argue that cutting brand communication spending is the solution or a part of the solution. However, evidence from past experiences has proven that these brands profoundly suffered versus brands that maintained a solid level of communication with their customers.

The keyword here is ’empathy’ and building consistent brand memories rather than focusing on prices or functional benefits. If as a last resort you must increase the price, the brand needs to convey this price increase in an open and transparent way and explain the reasons behind it. Ideally, offset it with a performance improvement message to reframe value.

3. Leverage innovation and investigate product line-up changes

Conduct a deep dive into changed consumer needs and put yourself in their shoes during these tough times. This can unquestionably unlock opportunities for new product development, that can positively impact your brand equity. Ultimately, this will fuel total brand sales. Depending on your consumer profile, successful brands stress the quality of their product which can justify a premium price. Others might create a new product line-up by having a distinct offer per price segment: premium, mainstream, and value for money to keep consumers who are downtrading within your brand franchise.

4. Be present in the right place

In these unpredictable times, savvy marketers will monitor also the behavior shift of their retail customers. This can help finetune their brand’s direction. Distribution is a key pillar to adjust, particularly since data suggests that some consumers in certain categories tend to switch to low-cost stores. Therefore, channel strategies, in-store activations, and merchandising efforts should be adapted to a changed marketplace.

5. Escape the promotional spiral

Some decision-makers might argue that commercial realities make it impossible to avoid continuous promotions, especially when many consumers face cost-of-living hardships. However, previous experiences have revealed quite the opposite and that nonstop promotions are ineffective in the mid and long run.

Brands need to avoid getting into a promotional spiral. While promotions are necessary to maintain volumes in the short-term, excessive promotions not only negatively impact your margin, but educate your consumers to solely buy on promotion. This attracts non-loyal, price-driven buyers and erodes brand value perception amongst loyal consumers.

6. Craft a bold brand purpose

The key role of a brand is to form a bond with its consumers which the product alone cannot achieve. In addition to a brand identity and clear positioning, a brand needs to have a clear purpose that is relevant to the target consumer and distinctive versus competition. A purpose is simply the positive impact the brand wants to have in the world. Marketers need to lead their brand with a bold brand purpose that could become a key differentiator to drive loyalty, particularly in times of hardship when consumers have to make tough choices.

Consumer research is more than important ever

In conclusion, consumers are incontestably adjusting their spending habits due to the current unprecedented rise of the cost of living. This is not a time to cut into consumer research, quite the contrary. Businesses will need to monitor their consumers and move quickly in adjusting their brand strategies to the changing environment.

Optimizing brand portfolio, communicating with empathy, leveraging innovation and investigating product line expansions, capitalizing on the right channels, ensuring balanced promotional activities, and crafting a bold purpose are six winning brand strategies to successfully navigate through unpredictable economic times.