How we need to get ready for the ‘Great Squeeze’
Strategy Leaders
While it is going to be tough, this period of high inflation could provide the opportunity to explore desperately-needed models of consumption.
Over the last two years it feels like we have over-used, or perhaps even worn out, the phrase ‘unprecedented’.
Certainly, in the history of modern advertising we have never been through anything like we have recently. At the beginning of the pandemic, strategy teams were in huge demand, scrambling to help answer their clients’ questions about what the hell to do with their advertising spend. Cue a lot of responses focusing on the importance of advertising in a recession.
But we weren’t in a typical recession, and consumer behaviour shifted so abruptly, that there was no real way of knowing (if we are being honest) what the right thing to do was. There was a lack of information and data to help us, and we relied on educated guesses. At Havas Media Group we pivoted quickly. Our Covid Tracker went into field the week before the UK went into lockdown. Even so, it would be several weeks before we saw real patterns in consumer behaviour emerging.
We have all learnt a huge amount about human nature, the need for connection and how sudden changes in our lives influence how we behave. Indeed, understanding consumer behaviour is ultimately the role of media planning in its broadest sense.
We are now at the precipice of yet another ‘unprecedented’ situation. The Bank of England warns that the UK is headed for the biggest slide in living standards in three decades. Our Covid tracker shows that 40% of people are worried about their long-term financial situation (up 32% vs six months ago) and 36% are worried about their day-to-day situation (up 33% vs 6 months ago).
Inflation has hit 5.5%, its highest level since the early 90s, energy costs are set to increase 54% (about £700 a year) from April, and according to The Food Foundation food scarcity now impacts 4.7 million people, with one million now going a whole day without eating.
Aside from these huge figures, there are millions of smaller figures impacting people’s purses every single day. Jack Monroe, the anti-poverty campaigner, challenged the government on inflation figures, bringing to life the staggering inflation seen in peoples shopping baskets. It was devastating to read. She has created the Vimes Boots index which demonstrates how inflation disproportionately impacts the poor.
Moving beyond ‘survival mode’
I’ve coined the phrase ‘The Great Squeeze’ to describe what we are facing, and it isn’t too much of an over-statement to say this will be a period of survival, not just for brands, but more importantly for people across the UK. We are in a position where everything is contracting, and when everything is contracting, ‘growth’ proves difficult.
Consumers are going to have significantly less disposable income than they have ever had. At the same time, brands will have higher costs than they have possibly ever had, yet they won’t be able to pass these costs on to consumers. This raises interesting questions about what the role of media becomes, a question which is heavily influenced by the brand and sector in question.
New customer acquisition will be increasingly hard, if not impossible, in some sectors, be it treats such as days out or incidental purchases such as snacks and take-out coffee. Meanwhile, for budget brands and retailers, growth will be more likely, albeit out of consumer necessity rather than choice. While considerable marketing theory would suggest acquisition is a more effective strategy than loyalty, how do the constraints of The Great Squeeze change this? Will customer loyalty become more important?
The Great Squeeze will also increase pressure internally. Clients will increasingly spend time exploring price sensitivity and its implications for their product and marketing. While media agencies increasingly battle with rising media inflation and its implications as to how budgets get spent.
In the short term it is going to be a hugely difficult period to navigate; however, in the longer term there is opportunity. Well beyond our industry, and at a global level, our economic models must evolve. Exponential growth is at odds with our ultimate survival; the climate crisis necessitates that we move to a more circular economy.
We will be forced (sooner rather than later I hope) to re-evaluate what economic growth looks like, and to explore new commercial models. Monica Majumdar wrote an interesting piece for this very Strategy Leaders column back in November that explored this, focusing on the growth potential of re-use.
So, what do we do now?
It seems trite to say that data will be crucial, but to understand how the contraction of market forces influence behaviour, marketing science will be key in identifying new opportunities for sustainable, circular growth. We have always used tracking and modelling to understand what works, and moving forwards this will be critical in understanding evolving models of consumption. It’s a fascinating challenge for our strategists and data experts to unlock.
The Great Squeeze should open up new conversations with clients about their business model and how media spend could support this in new ways. It should also open up conversations with them about the evolution of the relationship of our commercial models with them.
Consumer behaviour is only one side of the coin. We must also be highly aware and attuned to the needs and motivations of people across the UK as they struggle with rising costs across the board. The social implications of financial hardship are huge, and mental health will take yet another further tumble. There will be very real requirements to think carefully about how brands connect with them, and what they are asking of them.
While it is going to be an incredibly tough time for much of the UK, The Great Squeeze could provide the opportunity, if we let it, to explore desperately needed alternative and sustainable models of consumption. There will be many difficult conversations, but invention comes out of necessity, as the saying goes.
Eva Grimmett is chief strategy officer at Havas Media Group
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