How Should Marketers Navigate the UK’s Cost of Living Crisis?

In the UK in the last few days, there has been much talk about the ‘cost of living’. This is in no small part due to the Covid-19 pandemic that has led to this year having a 5.4% inflation rate - the highest since 1992. This, of course, is affecting all areas of life from food to energy, house prices and general daily living which has to be budgeted for. 

This disparity is set to widen with announcements today from supermarket Tesco’s chairman, John Allen, that the ‘worst is yet to come’ as he predicted a 5% rise in the price of food soon. For marketers, brands and advertisers around the country, this current period in time marks a challenge for them to get messaging right to ensure that they understand consumers’ moods while also delivering on promises made to clients. 

With grim predictions about how the rising cost of living is set to impact citizens’ lives, LBB spoke to experts at UK advertising agencies to find out what this news means to marketers and how they would be able to ensure a rigid strategy will see them through this period. 

Clare Lawson

CEO, experience, EMEA - Ogilvy 

It is time for brands to move from a price narrative to a value narrative. In times of unavoidable inflation – the long-term value that a brand delivers and how it demonstrates that value through the relationship it has with its customers is paramount.

In isolation, one brand communicating to a customer with a basic ‘price adjustment’ may seem acceptable, but when a customer receives ten such notifications in ten weeks, those brands become lost in the noise of ‘rises, hikes, and underwhelmed customer expectations.

Demonstrating value, not writing an email or a letter, will set your brand apart. Whether that’s an entertainment streaming service giving you two extra films for free, or your go-to supermarket providing premium offers for regular customers, or as happened to me recently, my favourite online wine retailer scrapping all delivery charges irrespective of the size of order – happy days – these things stand the brand apart.

Why? Because they have all differentiated with experience. Research suggests that over 70% of us are willing to pay more for extra benefits or rewards from a brand. The lesson - deliver the experience your customers crave, and your customers will stand by you.

Vicky Bullen

CEO, Coley Porter Bell

Prices will go up, there is an inevitability about that. And no one likes spending more, regardless of what it is for. This means that a brand has to play an even greater role in the narrative, doubling down on what makes it special and relevant in the consumer’s life.

It could be that a brand is proud to use local suppliers, rather than outsourcing abroad, but this will increase the price of products. Make sure we communicate that clearly, we know consumers want to support local businesses (over 90% of shoppers are willing to pay more for British-made goods), so demonstrate that value.

It’s also important to ensure that brands demonstrate empathy with the impact that price rises have on individuals’ circumstances. Perhaps provide helpful advice for those who want to try and reduce their spending. But always be careful as to how this is executed. When Ovo, the energy supplier, blogged helpful tips for reducing energy bills that included recommending customers hug their pets, it caused a PR nightmare. The sentiment may have been correct, but the execution was careless and unempathetic.

Sometimes businesses can’t help but raise their prices, but brands need to ensure they keep providing compelling reasons to stick around, and equally ensure they understand and identify with the impact these situations have on individuals’ lives.

Jamie Peate 

Global head of retail strategy & head of effectiveness (UK) - McCann Worldgroup 

Inflation is in the news, in the national conversation and on the agenda for marketers again. However, it’s worth taking a moment to think about what is causing the current increases when thinking about how to shape strategies around it.

Inflation is being driven by supply side cost of goods increases, predominantly due to energy price rises, affecting transport and manufacturing, rather than by increased demand. These are real costs being absorbed by manufacturers and retailers, directly threatening their profit margins. 

They can not absorb them indefinitely so are passing them on to their customers. 

Marketers, therefore, need to be very aware of how to balance the need to manage their financial challenges against how to handle any necessary price rises they pass on. 

This varies from category to category (e.g. a daily essential versus a nice to have, a distress purchase versus a considered investment? etc.) but here are four things to consider before you act:

• Are you focusing on what is important? Inflation is probably affecting your whole category so small price differences between you and your competitors might seem a big deal for you but might be negligible to customers facing bigger financial challenges, so show empathy for their overall situation.
  
  
• Are you continuing to invest in your brand sufficiently? A brand with a clear and relevant meaningful role and an emotionally resonant platform will be much more likely to maintain its price premium, even when prices start to go up across the category.
  
  
• Are you being honest and transparent about what is happening? Don’t try and sell, bamboozle with numbers and percentages, or obfuscate with indecipherable words. Simplify and then get out of the way so your customers can make up their own minds.
  
  
• Are you respecting your customers’ intelligence? If prices are going up, they will have probably already noticed so anything you do must acknowledge and be congruent with this.

Zaid Al-Zaidy

Group CEO - The Beyond Collective

Brands need to be aware of their audience's concerns and needs. At the moment we are seeing UK inflation at its highest in 30 years and so people are feeling cautious and thinking about saving. 

In times like this brands need to be clear about the value they bring in terms of tangible benefits. As the saying goes, ‘The head is bigger, but the heart is infinitely more powerful,’ and this is critical right now when irrational desire is still key and the world is saturated with me-too offerings.

Harvey Cossell

Chief strategy officer - We Are Social

If inflation continues to rise and products become more expensive as a result, the thing we need to remember as marketers is that everyone in your category is going through exactly the same turmoil. No brand is going to be at a significant disadvantage relative to the next. However, your brand may be at risk from an adjoining category.

For instance, as people’s discretionary income falls there will inevitably be a reduction in big-ticket luxury goods purchased. However, as we know from the ‘lipstick effect’, smaller luxury purchases are likely to rise as people look to continue to treat themselves, albeit to a lesser degree. This will represent an opportunity for those brand categories in this space. Something I am sure they are already all cognisant of.

One way of combating such a challenge is to remind your consumer base of the value you add to their lives beyond mere price. Does your brand have any utility? What are you adding on an emotional level? 

Broadly, marketers are going to need to hold their nerve and resist the temptation to revert to price promotions and tactics that strip out hard fought equity from their brands. It is easy to worry about where sales are going to come from during times of economic strife, but people will always look for brands that communicate and connect with them on an emotional level.

The heart will always follow the head, but in times like this, the rational underpinnings of such messaging is also important. Consumers want to be able to justify to themselves any splashing out, particularly when money is tight. Getting the balance right between emotional positioning and rational reasons to believe is going to be of paramount importance. Something as marketers we need to treat ourselves to.

Jason Cobbold

CEO - BMB

So inflation is galloping ahead. By how much and for how long no one really knows, but there is a gathering sense of uncertainty. What will price hikes mean for filling up my car, for my weekly shopping trip or for planning a summer holiday?

That said, the impact of price rises will be felt very differently. Price sensitivity varies hugely for different groups of consumers and across product categories. We will witness surprising trade-offs as people buy more of one thing as they sacrifice another. 

All eyes will be on the supermarkets where the real and symbolic impacts of inflation are felt almost immediately. The loaf of bread, a pint of milk and a tank of petrol are all customary yardsticks for inflation. Supermarket brands will compete fiercely in a daily battle to win the label of ‘good value’. Price matches, promotional mechanics and value commitments of every kind will take on new meaning.

But inflation has a deeper impact too. It gets into the psyche. It is unsettling. It hits our confidence as consumers. The most effective businesses will respond not just with value, but with empathy and understanding. Levelling with the thrifty mindset of the consumer and understanding the everyday trade-offs and sacrifices he or she makes will mark out the better brands. Brands that portray the cycle of easy hedonism, of quick, unconsidered purchases, may look out of place.

Inflation and the uncertainty that goes with it will also interfere with purchase cycles. Consumers will take longer to buy the more expensive ‘big ticket’ items. Expect a bit more digging around online and offline before people commit their hard-earned cash. Brands would do well to look again at their purchase funnel in the inflationary world.

Lastly, this may also be a moment of caution for loftier brand claims. The epic, futuristic visions of some brands might jar with consumers’ concerns about affordability come April 2022. Brands will have to rise to the occasion as price rises race ahead.

Camila Toro

Planner - VCCP

In times of uncertainty, brands need to listen, act and collaborate with their audience. All with the single aim of adding value. When information is so accessible to many- agile communication from mainstream brands is expected and needed. If they fail to do so, the long-term loss can be greater. 

Listen carefully to your customers to really understand their current situation. It’s not just what brands say, but what they do about it. During the pandemic, easyJet introduced the Protection Promise pledge, enabling people to change their flights easily, which gave both reassurance and flexibility to customers. This made an uncertain time easier to navigate, and as a result, consumer brand trust increased.

Lean into adding value to elevate and support people during a crisis. After the first lockdown, easyJet created ‘EurOpen’, a campaign seeking to feature struggling European local businesses. Utilising easyJet social media channels allowed them to reach a wider travel-driven audience they would perhaps not be able to do without a significant ad spend.

A constantly changing world demands agile, strategic communication for brands who want to keep being relevant. Seeking to reassure customers and build recurrent trust will result in a long-term brand building you won’t regret.