Thrive or Survive Strategies During an Economic Downturn
Building Brands in inflationary times
The news is awash with rising prices caused by increased energy prices; restrictions on the availability of products from war-torn Ukraine and Russia; and supply chain issues as hangover from COVID.
As consumers’ discretionary spend decreases, some are trading down to cheaper brands or own label offerings to help their money to stretch further. This is not just a ‘working-class’ issue: even wealthier households are looking for ways to become savvier shoppers.
In their corporate report, Tesco states that the macroeconomic downturn and possible reduction in discretionary consumer spending is a significant enough risk to consumer perceptions of value and loyalty that they have built strategies into their business model to future-proof their revenue
Like Tesco’s drive to build consumer loyalty through clubcard prices, brands have a choice of strategies that they can confidently adopt to build loyalty and differentiation. How they execute these strategies will be as important as the strategies themselves.
Brands can make choices on how they will continue to stay relevant in this changing world, and still operate profitably. It doesn’t have to be all doom and gloom, and certainly doesn’t need to be a race to the bottom on format, pack size or price.
At Futureful, we have identified 2 different types of strategies that brands can adopt during an economic downturn: the we have called these strategies ‘Thrive’ or ‘Survive’.
The Thrive Strategies
These are positive growth strategies that offer benefits to consumers and create positive brand associations. They build brand loyalty by giving the consumer a clear reason to choose it by justifying how the brand is different from its competitors.
There are different thrive strategies to choose from (we name just a few here). All of them build positive associations in consumers’ hearts and minds and as such the brands become a conscious, differentiated choice:
Brands can tap into recreating more expensive out of home experiences at home such as the trend for #Nandosfakeaway and #fakeaway (much as Nespresso did for the at-home coffee premiumisation market in the 1990s)
They can help with consumer behaviour change by offering multi-faceted benefits that would be attractive to a consumer such as plastic reduction, time the product lasts, and money saving as shampoo bars vs. shampoo have done
Brands can reinvest in brand differentiation ensuring that consumers have a clear reason to choose them over and above the competitive set, as Febreze famously did with their odour elimination benefit vs Glade and Airwick
The Survive Strategies
These strategies focus on consumer and brand cost savings. They acknowledge the new reality of lower discretionary spend and lower business margins: they proactively take action to help both consumers and business to manage these costs. The narrative focusses more around control, cost cutting and continuous delivery of the same benefits, rather than the introduction of new benefits.
Two examples of survive strategies include:
Eliminating unnecessary packaging and looking for cheaper manufacturing and distribution solutions to avoid passing on price increases
Communicating why cost increases are justified as Pret did with it’s 25% rise in the coffee subscription
To avoid commoditisation, these conscious brand changes need to be communicated with clarity to remind consumers of the quality that they’re getting and dissuading consumers from trading down.
How to execute the strategies
To understand which strategy is right for your brand we recommend that you go back to the basics of marketing:
Understand your consumer and their needs so that you can offer the right products and services in the right place at the right price for changing consumer priorities
Invest in your brand proposition to ensure that you continue to differentiate your brand: data shows that people are less likely to be price sensitive if your brand is distinct
Want to know more?
Futureful runs ‘Hot Topics’ workshops where we deep dive into issues and explore the implications for your brands. These workshops are a cost-effective way to understand what’s happening, why it matters to brands, and what brands can do about it. Each workshop is enriched with case studies. If you want to find out more, book a free discovery call here.