After the global pandemic in 2020 taught most of the world to live and work entirely from home, marketers planning their strategy for 2021 are asking one big question:
“Will this uncertain time change the way people spend money?”
McKinsey, who recently surveyed consumers in over 48 countries about their spending habits in 2020, says: “Yes.”
One of the biggest findings in the McKinsey study was that 75% of consumers changed brands at least once during the pandemic.
McKinsey’s research also identified four other key changes in consumer behavior that could have a significant impact on brands in the near or distant future.
In this blog post, we’re going to walk you through each of the five layers mentioned in the McKinsey study and give you some insight into how marketers and brands can deal with them.
How shopping behavior will change in 2020
1. Brand loyalty is tested.
At the start of the pandemic, when entire cities started closing non-essential stores, consumers were spinning to stores or hopping online to order essential products they would need in the coming months. This led to a significant disruption of supply chains and product shortages worldwide.
And even in the earliest days of the pandemic, consumers were paying close attention to how companies were handling shortages and spikes in product demand.
While some brands saw influxes of new customers they had once lost to larger competitors, other companies lost customers because they simply couldn’t keep up with high demand.
“Over 60% of global consumers have changed their shopping habits, many for convenience and value. In the US, the percentage was 75%,” the McKinsey study found.
When it comes to brand changes outside of the US, a whopping 91% of Indian consumers and 82% of Chinese consumers say they have changed brands at least once since the pandemic started.
According to McKinsey, the top three reasons consumers changed their habits or brands were value, availability, and convenience.
As you can see from the data points above, the risk of losing a customer to another brand is higher than usual in 2020. Even if a product seems essential or valuable to a potential customer, it may not get bought if another brand can deliver a similar branded item faster.
How brands navigate
Currently, some big brands are working to better align teams to ensure that products can be discovered, ordered and delivered quickly even in times of high demand. Meanwhile, some smaller brands are making their products available online and in-store to potential customers who cannot get an item quickly enough from brands they have used in the past.
According to a post by Repsly that included data from anonymous brands, companies that were successful in 2020 used data and company-wide communication strategies to identify areas at risk of high product demand around March and continued to vote with teams such as marketing, service, and supply chain teams to make sure their shelves and warehouses are well stocked.
Similarly, in another recent report from McKinsey, researchers predict that successful, high-demand brands will develop an integrated approach between their supply teams, sales and marketing departments. McKinsey also discourages brands from raising prices during times of high demand and instead focusing on other key business and customer experience strategies.
“Operational concerns may be more important than pricing strategy, including stabilizing the supply chain, keeping products on shelves, addressing urgent customer needs, and maintaining quality,” the McKinsey report explains.
2. Consumers are in no hurry to grab their wallets.
Prior to the pandemic, Gen Z was the top age group where essential products took precedence over other purchases. Meanwhile, other generations have been more inclined to purchase products based on their brand name or non-essential benefits.
Consumers of all generations are rethinking their spending habits following store closings and financial uncertainties related to the pandemic.
Even as cities, businesses, and jobs slowly reopen, buyers plan to remain cautious with their budgets.
In the US alone, 40% of consumers say they continue to pay attention to where they are spending money, while 31% plan to buy cheaper versions of items to save money. And when they make those purchases, 21% of consumers aim for more brand and product research than they would if they did pre-pandemic purchases.
How brands navigate
While pre-pandemic consumers may have made purchases with themes related to fun, entertainment, brand names, or other benefits, many today are more budget conscious than ever.
For the most part, consumers are mostly focused on making major product purchases. And if someone buys a less important product, such as a product that entertains them, they will do a thorough research to ensure they are getting the best value for money.
By this point, many material and non-essential product companies have recognized consumer budget concerns and have begun using online marketing strategies to ensure consumers can discover their products, understand their value, and determine that they are worth buying.
Companies that sell critical products in particular have created campaigns, ads, and messages to remind consumers how important the items are. In the meantime, companies selling less important items are getting creative to identify new value propositions for their products or brands.
For example, in the ad below, Procter & Gamble acknowledges the COVID-19 crisis, explains how products are donated to families in need and philanthropy, emphasizes the importance of their household and health items, and reminds viewers of the importance of their brand in helping consumers across generations away to disinfect their homes:
The P&G ad is effective because it highlights that the brand is offering affordable and available products that people trust for cleanliness, shows how the company is actively aiming to help those affected by the pandemic, and the audience reminds of the importance of its products to global households.
In another example, Ice Breakers, a mint company that sells products that are considered less important, created an ad to highlight how eating mints before putting on a mask can prevent you from smelling your breath.
While the P&G campaign recognizes why their branded products are essential to people around the world, the Ice Breakers ad puts new emphasis on a non-essential mint product that people may not want to buy right now.
3. Buyers need e-commerce.
McKinsey notes that “most Categories have seen their online customer base grow more than 10 percent during the pandemic. “
Additionally, in most product categories, at least 30% of consumers in the US and UK expect to make even more purchases online after the pandemic.
How brands navigate
While many larger brands are improving their e-commerce strategies, some prominent technology giants offer solutions that enable smaller or medium-sized brands such as boutiques, retailers or restaurants to generate income online.
For example, Facebook recently launched a tool called Facebook Shops, which allows any company with a Facebook or Instagram business page to create a mini online store that links to all of the social media branded platforms. Meanwhile, meal delivery apps like DoorDash temporarily reduced commissions on local restaurant orders, allowing these business owners to virtually sell groceries and generate royalty-free income on each order.
4. Health plays a role in purchasing decisions.
With the pandemic affecting thousands of Americans, people began to think more than ever about their health and safety – even when buying products.
In the past, health conscious consumers may have peeked at the back labels of various products, and interest in health and safety has grown even greater. Now they might ask, “What is the packaging process for these products?”, “Are the cashiers in the grocery store given PPE?” Or “How do companies actively prevent the spread of germs?”
While the health and safety of consumers and brand employees may not be the biggest buying motivator, people are thinking about it a lot more in 2020.
When businesses big or small take steps to show that they really care about people, ultimately consumers can identify with them, trust them, and value them more.
How brands navigate
While it sounds easy to buy a commercial with a commercial that simply says, “Our brand cares about you,” this approach may not convince your audience that the message is authentic.
Many of the brands that are thriving during this period show how important they are, rather than just saying it.
For example, when global mask shortages emerged in the early days of the pandemic, fashion companies such as Louis Vuitton and Burberry rerouted clothing production to make face coverings.
Aside from creating PPE, other companies have donated to causes related to the pandemic or taken additional measures to keep their customers and employees safe.
Target, viewed as an essential company, has posted content online about how the company plans to help customers, employees and communities at this point in time.
Instead of focusing the YouTube page on content that highlights products, sales, and offers, Target has a playlist designed to help customers and communities during COVID-19.
In addition to shopping health and safety tips, videos on the playlist explain how Target works to create safe in-store experiences and smooth online shopping options for customers.
In addition to creating videos on how the chain aims to help customers navigate COVID-19, the brand has also set up a $ 10 million Pandemic Relief Fund, which is $ 1 million in support of Target – Provides employees. This shows that Target is taking steps to help its community, customers, and employees who work in important roles in the business.
5. Buyers have become homebodies.
According to the survey, 70% of consumers still do not want to resume activities or work outside their homes despite pushing to reopen the economy. When they’re not leaving home to work, travel, or dine out, McKinsey notes that many don’t leave home to shop either.
If you look into the near future, “More than 3 out of 4 [consumers] Those who adjusted their behavior due to the pandemic said easing state restrictions will not change their cautious behavior. Consumers are following medical expert advice for reassurance, “notes McKinsey.
How brands navigate
Brands cannot simply assume that when stores reopen, people will return to stores. While some consumers may not feel comfortable or safe leaving their homes immediately after a pandemic, others may not want to shop in physical stores because they know they can buy almost any product they want online.
At this point in time, successful brands are trying to continue to meet customers where they are even if they don’t leave home.
While some brands are building online stores and digital services, others who don’t sell a physical product are launching online events or virtual experiences to gain awareness, continue to generate sales, and delight their customers.
An example of a brand that turned a personal experience into a virtual offer was an animal shelter called Sweet Farm. When the California-based, donated farm closed to the public during the pandemic, its owners created a virtual offering that allowed businesses or individuals to pay $ 65 to $ 750 for a farm animal to be in their virtual one Meeting point or meeting to appear as a guest star.
The campaign was cleverly titled “Goat-2-Meeting”, a piece on GoToMeeting – a popular video meeting software.
According to Sweet Farm, the campaign, which began in March, was so successful that there was a waiting list for animal gatherings until April. Sweet Farm has also partnered with more sanctuaries to increase meeting availability and share donations with other organizations that care for animals.
How marketers can navigate 2021 – and beyond
This year marketers and businesses were tested by the global pandemic and economic landscape. As you ponder what’s next for your brand, keep these trends in consumer behavior in mind:
Consumers crave value and availability.
More than ever, consumers choose to buy from a company based on product value and availability, rather than brand loyalty. Business owners who have relied on loyalty and credibility in their sales should also monitor their supply chain and prices to ensure that their products are worth the price and accessible to customers. In the meantime, lesser-known brands can use competitive analysis or other tactics to find where they can help consumers struggling to find affordable or high-demand products.
Digital transformation is the key.
Brands can no longer assume that a billboard or pedestrian traffic will generate significant revenue. At this point in time, many companies that used to be mostly physical are building online stores, using various online channels for marketing and thinking outside the box to create virtual offers that delight and retain customers.
“Human” brands will benefit from this.
In 2020, customers cared more about how companies treated employees, how they kept customers safe, and how companies took action in times of uncertainty to help others. Ultimately, brands with executives who really care about people will get better reviews, word of mouth, and positive awareness than brands that exercise caution.
Would you like to learn more about how companies will do in 2020? Below is content from HubSpot’s Adapt 2020 series: