The coronavirus impact on consumer psychology
For businesses considering their next move the cause for concern will be the coronavirus impact on consumer psychology. Predicting consumer behaviour is something that any company or brand can do with the right data. If your business has been in operation during previous economic downturns, following the data and asking the right questions will provide answers on your next steps:
- What changed for your company?
- Post-recession which parts of your product/service did your customers value the most?
- During recession which parts of your product/service was the least useless or the most under-utilised.
For startups with a lack of historic data, it will be slightly difficult to predict consumer trends. We recommend analysing industries, products or services that have similarities with your business. Speaking to your customers is a great place to start. Find out what is important to them and where your business sits on that scale. For B2B companies this is just as important as they could get caught in the snowball effect. Rewards-based consumer research is a smart option. Can you capitalise by getting your product into the hands of more consumers at a discount and in return gain value feedback on your company’s positioning. Asking the right questions will help to find out where your business will fit in now, and in the future.
- What are your customer’s main fears during this time?
- Are they at a high-risk of losing their jobs?
- What are their thoughts on the outcome?
Asking these important questions can prove crucial to your survival and will go a long way in understanding your customers appetite.
A deeper focus on your customers
Consumption trends usually bounce back quickly after a recession ends, though this is dependent on the sector. Although some industries can see a higher demand during and post-recession, as we’ve already seen with direct-to-consumer demand and home delivery services. Luxury goods are likely to see the decline first as most consumers will become conscious of their spending habits.
Questions businesses should ask themselves:
- Can we scale back the cost of your product/service?
- How do we position our brand during these times?
- Can we develop alternate payment methods and give customers more value for their money?
Research from McKinsey & Company which analysed how the recession changed US consumer behaviour showed that people first started by learning to live without expensive products. The research shows that of the consumers who switched to cheaper products, 46 percent said they performed better than expected and 34 percent of those who switched said they no longer preferred higher-priced products. Full report here.
Knowing what customers value will give valuable insight on how to position your brand.
Your brand positioning
Establishing contact with your customers should lead to internal strategy sessions. Based on the feedback from customers your company should develop an action plan which considers the following:
- Price vs benefits
- Brand positioning
- Content type and plan
For some, a decline in profits does not necessarily mean a decline in customers. Brands that are creative with their products and offering will rise. Making a switch to less premium products or offering premium products at a discount will go a long way. Betting on the benefits of your products will pay-off long term when consumers redevelop their appetite for spending. An argument against this would be that customers will no longer be willing to pay a premium for a product or service that they have paid less for. To combat this you can create a time-based or loyalty based incentive.
* Example: A prediction would be that Netflix will see a rise in subscriptions which will be a logical prediction with more people at home and the need for entertainment increasing. Another prediction if homes start to feel a financial squeeze would be that Netflix will see a decline in new subscribers and we see a rise in illegal streaming. Netflix could offer their customers their premium service for the price of a basic package which will result in more views of their content.
This would be an example of amending your price vs. benefits.
Your brand’s response or lack of one will be a long-lasting thought with customers. This is a great time to show what you stand for as a brand and spark positive emotions. Being reactive and understanding how to position your brand is necessary to differentiate yourself from your competitors.
Read our previous post: Business Tips on Coronavirus.