As consumers demand brands absorb rising costs, how can they keep their customers?

With the cost-of-living crisis making it harder for consumers to afford their favourite brands, many are demanding that companies absorb the rising costs. So how should brands respond?

New research has revealed the impact that the cost-of-living crisis is having on customers, with almost a third of consumers admitting that they can no longer afford to buy from their preferred brands – and many demanding that companies absorb the rising costs, rather than passing them on to the customer. 

Below are figures – taken from a survey of 1,000 consumers and 500 marketers, conducted by Ello Group – make for dire reading across the consumer space, with areas such as brand loyalty, spending scale backs, and increased expectancy of offers/deals all featuring heavily within the report.

31% of consumers can no longer afford to buy from brands they have been loyal to in the past.

Coming straight off the back of a global pandemic and Russia’s invasion of Ukraine, the cost-of-living crisis is less a case of adding fuel to the fire, and more a matter of crashing a gas tanker straight into a volcano.

Rising prices due to supply-chain issues and materials/ingredients shortages had already forced many into tightening their belts, with the recent increase in household costs exacerbating an already drastically deteriorating situation.

40% of consumers have had to scale back on their spending.

Here in New Zealand we have all observed the soaring prices for fuel, food, electricity etc. Therefore, it is no surprise that consumers are spending less and being thriftier with their ever-dwindling disposable income.

Rowing against the tide:

There is no denying that it is an intensely difficult period for brands and businesses, with the current crisis having the potential to rival the pandemic. However, the findings of the report do point towards some areas in which brands can combat the impact of the cost-of-living crisis.

43% of consumers believe that brands should be absorbing rising prices.

In comparing datasets from 2021 and 2022, unsurprisingly, we can see that price remains the most important factor to consumers – a trend which is echoed in the marked increase in the importance of loyalty schemes and discounts/deals.

Whilst this may spell further gloom for brands already struggling to keep their prices down, it does also provide an opportunity for those looking at ways to retain their loyal customers.

Interestingly, there is a disparity between consumer needs and brand prioritisation. As highlighted in the below graphs, whilst consumers view price as the most important factor, brands are setting more priority towards quality and customer service.

Perhaps the most interesting difference is in the area of quality. Although quality does rank second in order of importance for consumers, it has seen a substantial decrease compared to the previous year.

Clearly brands do not wish to let the quality of their products slip; they have undoubtedly spent time and resources on getting these products to their current condition, and must also consider post-crisis life. However, during these turbulent times, a slight realigning of their priorities so as to match those of the customer may help in both retention and attraction.

Maintaining brand loyalty in a crisis:

With consumers desperate to make savings wherever they can, it’s no surprise that brand loyalty is down in almost every major consumer sector. So how can brands keep hold of their customers without cutting into their already decreasing profit margins?

In the current climate it’s not always possible for brands to simply absorb cost increases as the crisis also impacts the costs of goods for businesses, therefore it’s vital for businesses to find other ways in which they can maintain the loyalty of their customers.

This is where providing an exceptional customer experience is integral.

In troubled times it is more important than ever before to build connections with your customers, and make them aware that you are really listening to them and fully understand their situation.

As we spoke about last week, this may well mean increased funding and support for your customer service staff, who will be bearing the brunt of the complaints and frustrations incurred by the price increases.

Even if you are unable to match the price that a competitor is offering, by adopting a personalised approach and really exploring the products and areas that are most important to the customer, you may be able to provide discounts/deals in other areas – thus maintaining loyalty to your brand.

In discussing the role that customer experience can play in placating disgruntled consumers in this climate, here are three key areas that brands should focus on:

  • Engaging early on – In a world where there’s more competition, consumers are reducing spend, brand switching is increasing rapidly and therefore there’s less loyalty than ever before, brands can’t afford to wait too long before engaging.
  • Focus your attention on all customers (not just the big spenders) – Yes, some customers may not be able to spend right now, but ultimately, it’s connection that keeps customers coming back, so even if it’s a ‘not right now thanks,’ as long as you’ve built a relationship with them, they’ll come back eventually.
  • Take a softer tone – Customers want to see empathetic, human communication from brands, which slowly over time builds trust. This softer marketing approach which hones in on human centricity is the only way forward.

Despite it becoming something of a buzzword, there is no denying that we are currently living through an unprecedented time – and in some cases, despite your best attempts, consumers will be dictated purely by price.

However, it is still important to do all you can to support your customers during this time – even if much of it may be in vain. Because there will be a post-crisis world, and even those customers who had to leave will remember the level of customer experience they received, and may well return when they are able.

Building these meaningful customer relationships during adverse periods, is something that we at HOED Research strongly endorse: we believe that adding extra value that is meaningful to that individual customer and which improves their life outside of the transaction with that particular brand, is critical to maintaining a great relationship and connection with the customer.

Here at HOED Research we have been partnering with businesses nationally and internationally for almost 30 years! Our breadth of experience has dramatically evolved over time to help us provide the best solutions and end-to-end services that span across the full customer experience value chain. 

We pride ourselves on building intangible bonds with our clients, which are prospered through values such as loyalty, trust, honesty and transparency. We love what we do! and it’s the HOED guarantee to provide excellent value, a wealth of experience, quick turnaround of results, actionable insights, extensive professional reporting and competitive pricing!

Please feel free to contact us today to discuss how we can help you streamline all of your CX needs.

*This article adapted from a piece originally published on the*