Covid-19 cases continue to fluctuate in different parts of the world, with some cities reinstating restrictions amid a new wave of infections, while others are hoping to emerge from prolonged lockdowns after finally getting the spread under control. Due to the unstable situation, we can expect to see adverse economic conditions for months to come.
For retailers, this means most consumers will remain cautious with their spending and when they do get out their wallets, value will be top of mind.
When I say value, I don’t mean cheap. Far from it. Rather, the current mood suggests shoppers are keen to spend their money wisely and invest in products that will at least deliver – or over-deliver – on their promises.
With research showing brand loyalties have been upended in many categories during the pandemic, there’s never been a better time to make value a key differentiator and competitive advantage.
While pricing and promotions will be at the heart of this approach, you’ll need to think differently about how you use these levers.
Start with segmentation
According to John Quelch and Katherine E. Jocz writing in the Harvard Business Review, new consumer segments tend to emerge in economic downturns. From the most vulnerable and hard hit to those less confident about their ability to maintain living standards or people who simply carry on living for today, the first step is determining which segments your brand and products appeal to.
Be clear on which consumer type you’re working with and then you can build out a strategy from there. If, for example, you sell shoes made for a Gen Z target audience who feel it’s always important to embrace the latest trends, you would do well to position your offer for a ‘living for today’ audience. This sense of ‘value’ is clearly going to be different from the perceived value of someone more worried about maintaining basic living standards.
How does thinking local change value perceptions?
Retailers are appealing to consumers in a range of different mindsets, depending where they live, so it pays to think about how that is impacting the idea of value. In Melbourne, Australia, for instance, we’d give our left arm to be able to head down the pub or on a getaway somewhere warm, but that’s not necessarily the case in other parts of the world. Right now, you’re going to need varying strategies to target people with these differing mindsets.
And with various restrictions still in place including border closures in many areas, the customer base has never been more tuned in to local offers. For stores in areas that were once reliant on cashed-up visitors, you may need to seriously review your communications, pricing and bundling strategies to find ways to drive business from locals rather than tourists. For global chains, the challenge is to tweak what you can to bring a more locally nuanced offer to each of your stores’ catchments.
Changed behaviours, changed sense of value?
The pandemic has resulted in widespread behavioural change. According to research by Colmar Brunton, 65 per cent of Australians are cooking more often and using more fresh produce. And McCrindle research suggests Aussies are most keen to spend time with family and friends and enjoy a slower pace of life. All this is going to have a tremendous impact on what people will perceive as value (and valuable) and how you market to them moving forward.
For example, gourmet home cooks may be open to spending more on premium ingredients they were unable to source during lockdown, while the inability to holiday overseas will see funds redistributed to making time with family and friends even more of an experience.
By effectively identifying where your offer sits within this new paradigm, you’ll be best placed to appeal to savvy consumers who are on the hunt for value, whether you’re a luxury brand or an FMCG retailer.
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Note: Original article appears in the Professional section behind the paywall at insideretail.com.au.