Recession and the new value equation
Post-recession behaviour is rarely the same as what precedes the recession. Alan Treadgold, head of retail strategy at advertising agency Leo Burnett gives a few pointers on the new rules and new thinking retailers must apply.
At its annual convention last week, the Institute of Grocery Distribution celebrated its 100th anniversary. IGD has a well-earned reputation for leading the debate on behalf of its members with Government and regulatory bodies. It was instructive to hear Justin King, in his role as President of the IGD, say that “It’s important that we don’t just wait for consumers to tell us what to do - we must lead them and that will be an important part of our future.”
In 1997 I was living overseas and visited London during the week of the Princess of Wales’ death and witnessed the extraordinary outpouring of public grief. I recall much discussion in the media that the psychological make-up of the British had been changed forever, that the British traits of internalising emotion, outward reserve, maintaining a ‘stiff upper lip’ at all times and so on would be gone forever. And yet, returning to the UK six-months later, it was equally clear that those defining parts of the British character had not been changed at all. So there are always blips and then there are trends.
This is a recession which, in my view, will permanently change consumer behaviours in the UK. Behaviours in post-recession eras, which, mercifully, there is early evidence that we may be about to enter, are rarely the same as those in the period that precede recession.
From a marketing and consumer engagement perspective, one of the features that defines this deep recession from those which have gone before, is that many consumers are very evidently unwilling to forgo the other ‘values they value’ as they search out, and require, overt value in pricing and in call-to-action promotions.
So, in grocery, as a case in point, consumers will continue to demand value pricing, but they will also demand reassurance on food safety, traceability, sustainability and the ethical standards with which businesses behave.
In apparel, this recession has re-affirmed what we knew already - namely that the sweet spots are to be strong on price, or strong on design and quality, which justifies a price premium and that being somewhere in-between, is a disastrously uncomfortable place to be.
Further shake-out seems inevitable. And apparel is not the only fashion-led category in retail, of course. Almost any home centric category has a fashion element and the same proposition applies. Here again, more rationalisation seems inevitable.
So, as retailers emerge, in many cases blinking, battered and scarred, into the ‘new normal’, new rules will apply and new thinking will very definitely be required. Here are some pointers:
- Really understand what your customers value and the value they attach to those values. Frame your proposition accordingly.
- Recognise that the old price-quality trade-offs no longer apply. They haven’t done for a long time, but reconciling what the customer wants and then delivering their expectations, has never been more important or challenging. (Delivering beyond those expectations is perhaps best left for another day.)
- The ‘call to action’ will need to be entirely re-framed for many. In the ‘new normal’ overt and profligate consumption will, in the eyes of many, be considered to be simply unacceptable.
- Seize the possibilities. We are entering a complex new era where the old conventions of customer engagement are no longer valid. The first phase of the casualties in retail were those businesses that didn’t have a strong enough balance sheet. The next phase will be those businesses that don’t have strong enough engagement with the customer. Understand how to achieve this and the possibilities are very considerable.