The crisis has had a pronounced impact on consumer behaviour, with people becoming conservative in spending
Brands will need to deploy strategies that can make their products more affordable to consumers, David Roth, CEO, The Store WPP, EMEA & Asia, said
The Covid-19 crisis has had a pronounced impact on consumer behaviour, with people becoming conservative in spending and expecting value from the brands they are loyal to. David Roth tells Venkata Susmita Biswas how brands can navigate the new consumer landscape, and why cutting down on ad spends is not the best recourse at a time like this. Edited excerpts:
Are there similarities in the way consumers across the world have responded to the pandemic?
We have seen remarkably similar responses to the lockdown of economies around the world. The only difference has been the timing of those responses. The graph of web traffic over the last few months, which is highly illustrative of how consumers have behaved during the lockdown, shows that in March, traffic almost doubled compared to January, as people did not have their normal support infrastructure, shopping routines, etc. Web transactions increased significantly. By July, web traffic returned to the pre-pandemic level. However, the transaction rate has stayed the same as March-May. And these numbers are consistent across the US, Europe and Asia. We have seen a seismic shift in behaviour; we generally don’t see such big changes so fast.
The total value of India’s Most Valuable Brands has declined by 6% this year. What are some actionable steps brands can take to navigate through the pandemic?
The pandemic has turned out to be a stress test for brands. There are three components that brands should work on to ensure that they retain as much value as they can, and grow value, too. The first is rapid acceleration of their digital strategies. We have had a rapid acceleration of digital adoption in the last six months, more than what we have had in the last five or six years. The second would be to enhance the value proposition of the brand. As we move to the next phase, governments will pump in money to help consumers cope with the financial impact of the pandemic. Later, and inevitably so, that support will be withdrawn to recover some of the money they had to spend; so, taxation will rise and people will not have as much money as they did. And if they do, they certainly won’t feel like spending it.
Hence, consumers around the world will be looking for brands that give them exceptional value. We can assume that we won’t be making as much turnover as we did in 2019 for another three to four years. Therefore, we need to plan to have more efficient business models. What we have learnt is that achieving 70% fast is much better than never quite achieving 100%.
Most marketers have slashed their advertising budgets. Could this short-term measure erode brand recall?
During the 2008 world financial crisis, brands that continued to invest in brand building came out of the crisis significantly faster and stronger than when the crisis began. And they took advantage of that. We are going to see exactly the same tale play out during the Covid-19 pandemic. For instance, strong brands have significantly outperformed the market indices of their share price as per our BrandZ Top 75 Most Valuable Brands study. This shows investing in a brand through advertising is not a cost.
When consumers are expected to trade down and limit spends, how can brands uncover growth?
If a brand can communicate the value within a product in a way that is differentiated and meaningful, then the brand has a much better opportunity to retain customers. Brands will need to deploy strategies that can make their products more affordable to consumers, who could be feeling slightly pressured to spend. They could acknowledge that by reducing pack sizes, for instance. But, in order to remain on consumers’ shopping lists, brands have to consistently reinforce the product differential.
How can the late adopters of digital solutions like e-commerce challenge the first movers?
Over the last few months, we have been reminded how important the first-mover advantage is. First movers have the advantage of doing things at their own pace and understand what works and what doesn’t for the organisation. That learning curve is very difficult to buy. That said, those who have fallen back, need to accelerate three things — investment in technology, data collection and data analytics.