Leading with purpose: How brands can navigate the cost of living crisis
On March 23rd, the Chancellor Rishi Sunak presented his spring statement to the House of Commons. Amidst a barrage of troubling news reports about the impact of rising inflation, all eyes were on Sunak to deliver some much-needed reassurance. But despite a raft of measures, including a fuel duty cut and increased employment allowance, the UK’s economic outlook remains grim. Economic and survey data point toward a significant and potentially prolonged downturn in disposable incomes and consumer confidence, and businesses are set to experience a perfect storm of declining sales and increasing costs.
However challenging the circumstances may be, it’s important for businesses to assess the situation carefully. While the obvious choice may be to prioritise the safety of the bottom line by cutting back, keeping costs low, and hoping you can wait out the bad times, this type of reactive approach can be short-sighted. Indeed, it may be a mistake to expect things to eventually return to normal – whatever normal might mean these days.
There are signs that the cost of living crisis, much like the global pandemic that preceded it, is precipitating a deeper shift in how people live, work and spend. By understanding and responding to this broader change, businesses will be able to do more than just weather the storm – they’ll be able to positively and productively realign their priorities for the long term. And this begins with the details of how they frame their brand’s value and communicate this value to their customers.
In this post, we’ll look at how the cost of living crisis should not be viewed in isolation, but as part of a broader shift in public sentiment with profound implications for how brands present themselves and connect with customers. We’ll consider ways that brands can adapt in these difficult circumstances and position themselves well for the future, as well as pointing out some of the potential pitfalls that might await.
Putting the crisis in context
Even focusing solely on the figures, the extent of the crisis engulfing the UK is staggering. In February, inflation reached its highest level in thirty years. Energy bills have soared, and are expected to climb a further 54% this month, representing the biggest energy price shock since the 1970s. The impact on living standards will likely be even more severe: they are expected to fall at the fastest rate since records began in the mid-1950s. The consequences for consumer confidence have been unsurprisingly devastating. The GfK Consumer Confidence Barometer has fallen precipitously over the past month, and back in January a third of UK consumers were already planning to cut their household spending in 2022.
For brands looking to navigate the threats of declining disposable incomes and tightening budgets, it’s not enough to know the statistics. You need to understand how these statistics translate into attitudes and outlooks, into the difficult decisions that customers will be forced to make about where to invest and where to cut back. And this isn’t always as simple as it seems. Despite the economic uncertainties of the pandemic, for instance, brand loyalty generally remained strong. As a report from the University of Portsmouth noted, customers “continued to buy the products they like from brands they trust at the shops they prefer” as part of a “positive coping strategy”. But now, things may have begun to change – a change that is easier to understand if you pause to consider the wider context.
Of course, the wider context isn’t exactly encouraging. The COVID-19 pandemic caused a 9.7% drop in the UK’s GDP, steeper than any since consistent records began in 1948. It also precipitated a mental health crisis that has already been pitched as “the next global pandemic”. If we expand the frame of reference a little further, the current crisis takes its place as just the latest in a series, albeit perhaps the most severe. A recent report in the New York Times noted that “this will be the third stretch of time in about a decade that real wages have shrunk in Britain.”
Taking one last step back, we can see that the 2008 financial crisis continues to cast its long shadow over the present. This is especially true for millenials, who are increasingly being described as a “lost generation”. Born between the early eighties and mid-nineties, millennials reached adulthood around the time of the Great Recession and are now having their prime earning years catastrophically undercut by the pandemic and its aftermath. Even prior to the pandemic, there were widespread concerns that they would be the first generation in modern history to be worse off than their parents. Their prospects in the coming years are hardly more promising: according to predictions by the Office for Budget Responsibility (OBR), real wages will still be lower in 2026 than they were in 2008.
This context, as dispiriting as it might be, is key to understanding the prevailing mood – a mood that is rather different from the early days of the pandemic. Part of this is no doubt due to the toll that the past two years have taken. However, it’s also a question of a broader social shift, in which the fears and anxieties of 2022 reflect and deepen those of the past decade or more. At the end of 2021, the OED surveyed 8000 UK children on words they would use to discuss health and wellbeing. Their top choice? Anxiety. The influential Edelman Trust Barometer, meanwhile, announced that “distrust is now society’s default emotion”.
What does this all mean for businesses? In the first instance, it should act as a vital guide to customer sentiment. An understanding of how your customers will likely be feeling should be a central factor in shaping how you communicate with them. It should influence not only the way you frame your brand’s value proposition, but also the means through which you communicate it. Ultimately, navigating the cost of living crisis is not just about considering what you say to your customers, but how, when, and where you do so.
Relevance, reach, and responding to the times
Now more than ever, brands run the risk of reaching a large audience with a message that does not resonate, or at a time and place where they’re not likely to be receptive. This is a vital consideration when marketing budgets may understandably come under some scrutiny. But looking at the wrong metrics will mean a mistaken sense of what’s working and what isn’t, leading you to put your focus in the wrong places.
Importantly, it’s no longer the case that your goal should be to get your message out to as many people as possible. As a recent Google trend report put it: “relevance is as important as reach.” Concentrating your attention on channels that drive the strongest results is important. But so too is understanding why certain types of content on specific platforms are the most effective. This understanding comes from being attentive to the shifting preferences and priorities of your audience, at a time when impulse purchases will be much rarer.
Data is extremely valuable here, of course. Being able to consistently and accurately attribute sales or conversions to a specific channel or campaign is essential to shaping your marketing strategy, especially when return on investment is a major factor. Customer journeys have already grown more complex, with many preferring to research their purchasing decisions extensively using the wide variety of sources at their fingertips. As financial pressures grow and disposable income shrinks, this type of due diligence will become more common, leading to an increase in the average number of touch points before customers commit.
As a result, what Google has called the messy middle – the complex web of interactions between first contact and conversion – will only grow messier. Being able to accurately map this process can help you to avoid downplaying channels that are key parts of a customer journey but which might not obviously move the needle according to certain metrics.
Nevertheless, having the data is one thing and knowing how to interpret it is quite another. Data requires context if you’re going to draw the right conclusions. For this reason, you need to be able to supplement the data with the less quantifiable factors of fluctuating moods and shifting sentiments among your customer base. In simple terms, it’s about reading the room, and recognising that relevance is relative. In the current circumstances, you’ll need to be more attentive to tone, make sure you are hitting the right notes, and know when to stay quiet.
Failure to understand the tenor of public sentiment can lead to major missteps. In January, both Ovo and E.on managed to radically misread the prevailing mood, responding to concerns about rising energy bills by sending customers free socks and advising them to “do a few star jumps” to stay warm. The reach of these campaigns may have been substantial, but both companies will no doubt have wished it were otherwise. Having an empathetic approach to how your customers will be feeling is core to avoiding these kinds of unforced errors.
But it’s more than just a question of avoiding costly mistakes. This wider context also provides important clues to how businesses can not just safeguard themselves against the worst impacts of the crisis but set themselves on a firm footing for the future. Seeing the crisis as accelerating and exacerbating longer-term trends will help brands to future-proof their marketing strategies, helping them to thrive rather than survive in this challenging environment.
Positioning your brand with purpose
It is received wisdom in the marketing world that, during times of economic hardship, customers narrow their focus to price and value, ditching other factors such as sustainability or ethical commitments. Certainly, value for money will be of increasing importance to customers facing a 6.5% drop in disposable income, and it is likely that, as the University of Portsmouth study cited above notes, some customers will be forced to “prioritise affordability over sustainability”.
However, relying on an eighty-year-old view of human motivation to predict consumer behaviour is risky. In recent years, ethical concerns have taken on increasing importance in shaping consumer behaviour, and it would be short-sighted to expect the cost of living crisis to simply reverse this trajectory.
If we look more closely at the Edelmann Trust Barometer mentioned above, it doesn’t simply position distrust as the dominant social attitude – it also notes that businesses have an important role to play in “breaking the cycle of distrust”. As the report summarises: “Social leadership is now a core function of business. […] Across every single issue, by a huge margin, people want more business engagement, not less.” And this expectation translates into purchasing decisions: 58% of respondents said they would buy from or advocate for brands based on their beliefs and values.
This claim is reinforced by a variety of industry reports on key marketing trends for 2022, all of which highlight the importance of purpose to brand loyalty and customer retention. According to the Google report mentioned above, brands looking to “stand out in 2022 […] should be more intentional about communicating their value and authentic purpose”. They cite a report by the consultancy firm Deloitte, which found that 57% of consumers were more loyal to brands that “commit to addressing social inequities,” corroborating the Edeleman Trust findings.
By acknowledging the dominant social atmosphere and its roots in longer-term issues, we can see how the current crisis may buck the expected trend of seeing customers downplay ethical issues. Indeed, one recent study found that although 39% of customers are looking for more value for money in the brands they purchase, more than a quarter would still be willing to switch brands for ethical reasons. Thus, while price and value remain important, they are, in Deloitte’s terms, “table stakes” rather than key differentiators. And in a context where virtually every brand within a given sector will be struggling with the same difficult decisions over price rises, it will be even harder for price to be a significant point of difference.
This is where something like purpose takes centre stage. While it can be tempting for businesses to simply protect their bottom line by cutting back on investment, finding ways to speak effectively and compellingly to customers amidst the rising tide of anxiety and distrust is vital. And what speaks powerfully to customers right now is a sense that a brand is committed to tackling broader social issues, especially if this displays an understanding of and sensitivity to the troubling times ahead.
It is important to note, in this regard, that the cost of living crisis will highlight and exacerbate many social inequities. The impact of the crisis will fall more heavily on those on low incomes, who are disproportionately female and from minority backgrounds. This means that the social issues customers are already expecting brands to engage with will become more pronounced, and these expectations may well become stronger.
Putting purpose into practice
In practical terms, a purpose-led approach to the crisis means thinking of how you can meaningfully reach out to and support your customers. This needn’t necessarily involve large-scale campaigns or major changes of direction. For instance, a kitchenware brand offering recipe and meal tips for cooking on a budget is a simple and practically useful gesture of support. For sports-focused brands, looking at the importance of exercise for tackling stress and anxiety could have a similar effect.
On a broader scale, email campaigns for existing customers advising them on how best to take care of their products can show an understanding that your customers are looking for long-term value. This would be a particularly useful approach for businesses operating at higher price points who want to show that their products are a sound investment.
Even if you are forced to raise prices, there are ways to mitigate the impact. You can still ensure you’re factoring in ethical considerations by maximising transparency. Explaining clearly and openly how your prices are changing and the decision-making process behind this can help you to maintain a sense of trust with your customer base.
Of course, bringing purpose into the heart of your brand shouldn’t be seen as a quick fix. As we’ve discussed in the context of environmental marketing, there are risks to building social and ethical considerations into your brand identity. Done poorly, it can lead to a sense of opportunism. It’s worth noting that both Google and Deloitte stress that purpose must be allied with authenticity. This may mean taking steps toward transparency over how your business operates and the ways you’re seeking to be fairer and more equitable – tackling the gender pay gap or unconscious bias within your company, for instance.
It will also mean being careful with how you present your purpose-led communications. If it is evident that you’re simply trying to drive sales, the approach will likely prove counter-productive. During times of intense anxiety such as the present crisis, many customers will be wary of businesses that are too obviously trying to maintain their profit margins. So while offering support or useful content to your customers is one thing, tying it to an overzealous call-to-action is quite another.
Which leads us back to the data question. Purpose-led marketing strategies may not translate simply or effectively into your established metrics for success. It may therefore be tempting to set them aside and double-down on proven approaches and quick wins. And in some cases, this may be the only option. But reflecting on the big picture and investing thought and care into how your brand is positioned can help you to do more than just survive the crisis. It can act as a solid foundation for future growth by establishing trust and loyalty at a time when customers are looking to businesses for leadership.