The past few weeks have been turbulent. Rising corona figures and new measures, the COP26 in Glasgow to try to limit global warming and rising prices in almost all parts of the economy due to gas shortages and inflation: these are all issues that affect consumers' everyday lives and influence their behaviour. How can marketers find the right direction in all this uncertainty?
Growing importance of price due to gas crisis?
Gas prices are skyrocketing in the Netherlands, both for citizens and for companies. Since gas is still one of the most important sources of energy in the Netherlands, this price increase has an impact on virtually all parts of the economy. A fortnight ago, Unilever announced a 4.1% price increase. One of the biggest product categories of Unilever is the personal care business. This branch was included in the Consumer Behaviour Monitor. In the Monitor, we immediately see an effect of the increasing prices. Compared to week 17 and 19 of this year, we see that it has become more important that personal care products are 'worth the price'. This purchase trigger is considered important by 64% of the Dutch population, compared to 56% earlier this year. People also find it more important whether a product is on sale or not. The quality of the product and the feeling the brand gives have become less important.
This increased price sensitivity seems to be a reaction not only to increased prices in the supermarket, but also to the sweltering atmosphere in society. It seems that, for example, the corona figures and the COP26 conferences generate uncertainty about the future. Corona generates uncertainty mainly in the short term, but the environment also in the long term. Products and services that we have come to regard as normal turn out to be less so. Think of the worldwide shortage of chips for cars, telephones, computers, the long waiting times for electronic bicycles, the shortages in all kinds of supply chains that became clear at the beginning of the corona crisis, and shortages of raw materials such as magnesium or gas. For marketers, the question now arises: how to respond to all these developments?
The best way to lower the price elasticity of your product is to invest in your brand. The stronger your brand, the more likely people are to pay the price asked for it.'
First, it is wise to develop differentiation in your product portfolio. This will give you options as a brand when certain raw materials or products become less available, but also when consumers start to value other aspects. With prices rising again and consumers being more careful with their money, it makes sense to also offer cheap products, even though this may not be your main proposition. By introducing new products and marketing them with the help of a 1+1 offer, for example, you respond to increased price sensitivity and give consumers a reason to buy your product again next time. In any case, innovating in your business processes can be a good idea. Switching to wind or solar power? This is a good time. Throwing your brand into a price war to win over consumers can be tempting, but too much focus on the short term is often a bad idea: regular discounting reduces your price elasticity and erodes your brand. A good example of this is Stella Artois, which got 'hooked' on price promotions a few years ago, plunging from premium to C-brand. Our article from last week also states that it is dangerous to do too many price promotions. The best way to lower the price elasticity of your product is to invest in your brand. The stronger your brand, the more likely people are to pay the price asked for it.
Marcel van Brenk, partner at EY VODW: "Price is the most sensitive of all commercial instruments. One wrong decision can undermine a brand position carefully built up over many years, or erode future margins. Insight into the development of perceived value is therefore an absolute must in building strong brands'.
Preparing for a sustainable future in a not-so-sustainable present
The climate conference in Glasgow is currently bringing the climate crisis and sustainability back into the spotlight. Chances are that the climate, and the measures we must take together to stop global warming, will become increasingly important in the coming years. Nevertheless, sustainability is still an important trigger for few consumers. Only 36% of Dutch people think it is important that brands pay attention to sustainability in their communication. In a variety of industries, 'a brand that cares about the environment' is a reason to choose a brand for only 10% to 12%. Only personal care is a minor exception with 18%. In several industries, when a brand is not sustainable, this is a barrier for only 8% to 11%.
"Times may be changing, but the laws of marketing are not.
This puts brands in a special dilemma. As a brand, should you already be anticipating a future in which sustainability will become increasingly important, even though consumers currently attach little value to it? Times may be changing, but the laws of marketing are not. If it suits your brand, it can be smart to already take steps within the brand to become more sustainable. When sustainability becomes more important to the average consumer in the future, you can take advantage of this. But, the laws of marketing also tell us that, as a brand, you have to focus on the needs of the consumer. And right now, the majority of consumers don't need brands to communicate about sustainability. So don't shout it from the rooftops just yet until this starts to change.
Daan Muntinga, strategist and scientist: 'That brands want to do their bit to make our economy and society more sustainable is of course to be applauded. And it is understandable that marketers who are themselves convinced of the sustainable cause like to tell it. But this research shows that sustainable is still far from being relevant for every category. Marketers who find that sustainability does not appeal to their consumers, would do well to realise their sustainable dream behind the scenes. And only communicate about it when it becomes more relevant for their consumers.
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