Consumers are battling inflation fears and brands need to fight with them
Ella Jenkins and Sarah Evans, Senior Consultant in Behavioural Science and Consultant in Business Transformation at Ogilvy UK respectively, examine how recent financial fears have impacted consumers and how brands, by employing value-based innovation, can help both their customers and themselves.
By now, we all know how inflation affects our wallets, but have you ever thought about how it impacts our minds?
The uncertainty of inflation can make us feel like things are out of control. And, when we feel like we're not in control, it can really take a toll on our psychological wellbeing. Behavioural science research shows just how strongly people don’t like feeling uncertain (see: ambiguity aversion).
The recent cost-of-living crisis has turned control into chaos.
Unfortunately, the recent cost-of-living crisis has turned control into chaos. Whilst those worst affected are struggling to pay for necessities like food and shelter, many others are feeling anxious about their financial future. And, with less resources available for rewards, important pastimes and social connections, lots of us are finding it more difficult to meet our basic social and emotional human needs.
Above: The cost of living crisis has hit many households hard.
When this crisis first hit, consumers took to social media to vent their fears and frustrations.
“There’s so much happening with this cost-of-living crisis. Feeling overwhelmed and powerless! What are we to do?” (Consumer, Twitter, Feb 2022)
But now we're starting to see consumers fight back. As prices keep going up, many are turning this fear into action by finding creative ways to save money. They're sharing tips and tricks online about how to stay warm, cook efficiently and lower energy bills. For example:
“I’m a single parent and an air fryer has cut down my energy bills so much! I batch cook chilli and pad it out with lentils, then part cook a jacket in the microwave and 10 mins in the air fryer. It costs less than 20p!” (Consumer, Mumsnet, Sept 2022)
What can brands do to help?
Well, first of all, brands need to show that they're on the consumers’ side. Consumers want brands that understand what they’re going through and that can help them feel more in control. Brands that offer rewarding experiences that don't break the bank will win hearts and minds.
It's not enough to just offer discounts and promotions. Brands need to show that they really understand consumers' needs and struggles.
However, it's not enough to just offer discounts and promotions. Brands need to show that they really understand consumers' needs and struggles. That's where Value-based Innovation (VBI) comes in. VBI is about creating meaningful and positive impact for consumers through creative business and marketing initiatives. It's not just about advertising, it's about taking real action.
Above: The Promise Empathy Actions framework, captured from Ogilvy Consulting’s Value Based Innovation report.
How to do VBI?
While there are no cookie cutter approaches to achieving this, the P.E.A framework is a simple way to consider not just what might be done, but how to act in a way that has real impact on consumers. It begins by aligning to the brand Promise, then deepening consumer understanding to build Empathy into any response, before generating Actions that go beyond communications. For more on VBI, see here.
Evidence shows that when brands do embrace this type of action, consumers reward them for it.
The evidence shows that when brands do embrace this type of action, consumers reward them for it. We saw in the early stages of the inflation crisis that some brands, such as Octopus Energy, stood out from the crowd, providing some customers with energy-efficient electric blankets, helping to reduce heating bills by 19%.
Since then, we have seen Iceland lead the way with The Iceland Food Club, an interest-free micro-loan scheme where members can access £25-£100 on a pre-loaded card which can be spent in any Iceland store. These loans are available in six annual windows that align with school holidays, when families are most in need. Iceland is also educating consumers about the cheapest way to cook foods (e.g. air fryers) and recently launched a series of free workshops with energy firm Utilita, designed to help consumers save over £600 a year.
Above: Sainsbury’s Smart Shop App helps customers avoid 'til-shock'.
Sainsbury’s present another great example. They understand that, with rising prices, some consumers fear embarrassment at the till, realising they have spent above their budget. Sainsbury’s recently launched their Smart Shop App, which shows consumers their spend as they shop, helping them avoid till-shock and bringing back their sense of control.
Brands that invest in VBI now will be better prepared for the future.
Brands that invest in VBI now will be better prepared for the future. When the crisis is over, consumers will remember the brands that helped them out during tough times. As for those that didn't? Well, let's just say they’ll be remembered, but for different reasons.