New research from RAPP and Code (part of Omnicom Precision Marketing Group) launching today reveals that financial anxiety caused by the global pandemic means a third of UK consumers are planning to spend less this year across six key sectors: travel, luxury, retail, automotive, technology and financial services.
Hope amid the anxiety
Undoubtedly a symptom of consumer finances hit hard by the pandemic, the research findings were not all bad news for businesses, though, as they also revealed a way to overcome this challenge.
Over half (57%) of consumers say they would spend more money with brands that treat them as individuals (i.e. sending bespoke conversations). The figure increases to 89% for those aged between 16-24 and 77% for 25-34-year-olds.
Polling 1,000 consumers, RAPP and Code unveiled the nation’s current and future spending habits, but also the expectations and desires from brands as influenced by the COVID-19 pandemic.
Despite headlines hinting at the dawn of the new ‘Roaring 20s’ once restrictions are lifted, the research revealed that Brits are in fact planning to rein in spending in 2021.
Drilling down into the figures per sector, the findings show that travel and luxury will be hit hardest, with 41% and 34% saying they will spend less in these spaces, respectively.
However, the cuts don’t stop there as respondents also report intensions to reduce spending in retail (31%), automotive and technology (both 30%) as well as financial services (27%).
Why is this happening? For many different reasons that the pandemic has highlighted. Travel chaos and lockdowns have shown consumers the value of staycations and self care days. More people are working from home, meaning less time driving a car.
Consumers are said to have rearranged their budgets with more attributed to health and wellfare. Since the pandemic started there has been a rise in the consumption of wellness products such as those found at Vibes CBD’s store at https://vibescbd.co.uk/. There have also been increased purchases of fitness equipment, a 2000% increase over the previous year’s sales, acording to Statistica.
Insurance policies ranging from health to life coverage have seen an apparent uptake during 2020 (approx 13% increase) which is expected to continue. With new expenses such as these, consumers should be tightened their budgets in other areas.
What does this mean for brands?
Intended cuts in consumer spending is a challenge brands must face this year, as in any period of economic uncertainty.
However, the research also uncovered consumer wants and needs for the year ahead, showcasing what brands can do to capture new audiences, retain existing customers and drive continued loyalty.
Consumers now expect communications to be tailored to them as an individual. They want brands to go beyond basic personalisation by considering their values, needs and behaviours.
But there’s a long way to go. Almost half of those surveyed (49%) said that all six sectors did a bad job on individualised marketing in 2020.
Luxury performed the worst, with only 10% believing the sector did a good job at communicating to them as individuals.
Automotive and travel similarly ranked low, with 11% and 12% respectively, while financial services and technology scored 18% and 19%. Retail fared better, with a third (33%) saying the sector delivered individualised communications.
The expectation gap is real, and these findings clearly show that in order to succeed, brands need to evolve their customer relationships and treat customers as individuals.
Caroline Parkes, Chief Experience Officer at RAPP said: “As we emerge from lockdown, the depth of the pandemic’s economic impact will become clearer.
“Our research has highlighted the cautious mindset of the consumer which means that brands have an important job to do to help instil confidence and give customers exactly what they are looking for.
“Generic messages will do a brand no favours in this post lockdown world – the gap between the winners and losers will become wider.
“Consumers have told us they want to be treated as an individual which means that the brands that find smarter ways of combining customer research with social and data sciences will come out on top.
“Adapting to and predicting the values, needs and behaviours of an individual using AI and machine learning will allow brands to approach that consumer with real one-on-one communication, not just a first name at the top of an email.
“Only then will brands – regardless of sector – deliver the value and hyper-targeted experience people are looking for as we all re-enter the world after what has been one of the most bizarre years to date.”