A new report, The New Value Economy, put together by full-service agency Mediahub, reveals how consumer behaviours have changed due to the current economic challenges. Mediahub Chief Strategy Officer ANZ Linda Fagerlund sits down with StopPress to delve into the findings.
Cost of living crisis – the four words on everyone’s lips right now, regardless of whether you are a consumer or a business.
The past year has presented plenty of economic challenges, as people grapple with rising inflation, steeper prices at the grocery store and less money to splash around on what they love.
As for the marketing and communications industry, Linda Fagerlund, Chief Strategy Officer ANZ at full-service agency Mediahub, describes it as a cautious and conservative time.
“We’re weathering the storm a little bit and being as optimistic as we can that the consumer confidence will rise and the economy will kick back into gear again.”
Cost of living impact
Following lots of conversations with clients around the state of the market and consumer sentiment, particularly in retail, Mediahub was driven to find out what impact the cost of living crisis is having in Australia and New Zealand.
In May, it commissioned a research study of 1000 Australians and Kiwis to see how consumer behaviours have changed over the past six to 12 months, the results of which were published last week in a report titled The New Value Economy.
“What’s been important for us to understand is that cost of living is not a new thing. It’s been something that consumers and people at large have been wrestling with since probably post-Covid,” says Fagerlund.
“And what the research really highlighted for me was the value for money is now the core overriding factor when it comes to purchase decisions.”
Value for money is #1
This was true, across a variety of different motivators, including quality, locally or ethically made, trust and sustainability – value for money was the number one priority according to 54% of Kiwis.
What Fagerlund found surprising was that this was not just something felt by low-income households but was a priority for all, no matter their income level.
This indicates the need for a “seismic shift” in how we think about consumers, she adds.
“That traditional approach of targeting people based on income is probably not as relevant as it once was with the economy the way it is, and price being such a sensitive issue for all people, brands need to think about how they be more relevant to all people across that spectrum.”
The research interviewed people aged 18 to 54 and analysed the data by life stage. Despite most saying they felt some forms of financial distress, the report found those who were older – the empty nesters – were less anxious overall, generally in a more stable position as they no longer have to navigate the rental and jobs market, as well as parenting.
Cautious group
But this group were also the most cautious when it came to their spending, says Fagerlund.
“They’re wanting to sit back and apply a wait and see approach to the economy. So they’re not spending, despite their ability to… They’re more likely to invest in things like their home.”
In New Zealand, while motivating factors like locally made products still play a role in brand choice and loyalty, the research suggests that people are now balancing out their needs to find the most value driven offering to suit their budget needs.
“It doesn’t necessarily mean it’s got to be the cheapest, but it’s got to feel warranted for the price point. And that value can be like it’s locally made, it’s a brand I love and its premium, but I think what is happening now, people are really starting to think about all of those factors and price is becoming more of an elevated part of that equation,” says Fagerlund.
Clever customers
Consumers today are savvy – they know and understand how economic impacts effect the whole supply chain, so treat them as the smart, educated customers they are, she adds.
“Really show customers what you’re doing to earn their hard-earned dollars, and how you’re giving back as well. There’s nothing worse right now than retailers or brands being seen as exploitative and hiking prices up for the sake of it.”
Mediahub has been advising clients that this presents a prime opportunity to not just enter a price war with its competitors, but rather to ensure it has a differentiated offering.
Evaluating pricing strategies is the natural place to start, to ensure a good entry point for consumers into your brand, but the key is to really think about the “why” behind your product, explains Fagerlund.
“We tell clients to really use this time to go back to your marketing fundamentals, what kind of need and motivations does your product offer your target audience and really be transparent about any pricing changes you’re having to make as well.”
Two-speed approach
She recommends a two-speed approach for brands and marketers to help weather the current storm – defending their current positioning in the market, but also investing to grow their audiences over the long term.
“Really make sure you are listening to your existing customers, building as much loyalty as you can… ensure that you are top of mind and… at a price point that is going to be a bit more palatable.”
Now is a good time to invest in media and advertising, with research like The Long and Short of It, by the IPA, saying this shows a stronger payback to long-term profit.
“It’s easy to feel like, ‘Oh, no one’s spending and people are very price conscious, so let’s just switch off advertising.’ It’s actually opposite, you actually should be doing more to ensure you are there,” says Fagerlund.
People would choose travel
While most Kiwis prioritised their budgets on groceries, the study asked them if they had more discretionary income, what they would use it for.
“It was enlightening for us… to see that most people would choose to spend it on travel. They’re just so focused on the day-to-day right now that if that budget barrier was lifted, they want to spend it on more leisure, more time with their family and friends, exploration and adventure.
“I think that’s a lovely thing to remember is that consumers are not just consumers but they’re people and they’ve got all of these emotional needs… they want a bit of joy, a bit of fun back in their lives.”
It’s the first time Mediahub has produced a report like this, and the agency intends to conduct the research regularly, especially to see how the cost-of-living crisis continues to play out.
