New Research Reveals How UK Consumers Are Coping with the Cost-Of-Living Crisis

As the cost-of-living crisis continues to dominate headlines, new research from dentsu UK&I carried out by B2B International urges brands to ‘Read the Room’ by revealing how consumers are responding to the UK’s current economic conditions. 

• Confidence in the UK economy is very low - over seven in 10 (72%) of UK consumers believe the UK will enter a recession in 2023  
• Just over half (52%) of all UK consumers are anxious and struggling with their finances  
• Only one in four (23%) say they are saving enough each month for their future 
• One in five consumers have only spent on essentials in the last month 
• But 15% of consumers say they will not need to cut back on anything if energy prices and interest rates remain at their current levels for another year 

Surveying 2000 people about the financial products they hold, their spending and attitudes towards finance, ‘Read the Room’ identifies seven core groups in the UK to help brands understand how uncertainty is impacting consumers in different ways and what this means for them.   

1. Keeping heads above water (20%) are struggling to make ends meet and are extremely anxious about their finances. They are facing tough choices and cutting back on grocery spending due to escalating costs for heating and rent. 

• What this means for brands: they will be receptive to anything that makes their financial hardship easier. This could be low-cost value products, DIY alternatives or limiting price increases. They need reassurance. 

2. Anxious debtors (22%) are very worried about their finances despite being in a relatively strong position in terms of household income. They often use buy now, pay later methods of spending and don’t prioritise savings or investment. Their housing situation may not be stable, and they don’t feel well-off, despite how it may look outwardly. 

• Brands should offer ways to reduce or spread out the cost whilst still maintaining the quality and lifestyle for this segment. Anxious debtors will want to either downshift the brands they use or buy from brands that give back to society in some way. This segment may also welcome financial wellness and education, to help them find a better balance. 

3. Budget to retire (11%) feel they are struggling and either are, or will be reliant on state pension. They are starting to cut-back on spending. However, most have savings and many no longer have a mortgage. 

• They will appreciate brands helping them stick to their budgets over the long-term e.g.  promoting bundles / loyalty discounts or offering affordable alternatives. Brands should emphasise their reliability and familiarity. 

4. Ambitious for future (17%) are working full-time, and their good level of income allows them to save. They feel relatively stable, and some are confident that the UK economy will improve over the next 12 months. 

• To help this segment maintain their lifestyle, as they don’t want to cut-back but are just starting to consider their non-essential purchases, brands should try to keep them with loyalty offers, and promote quality of life benefits. 

5. Comfortable & unaffected (8%) are retired or close to retirement. They are able to save a considerable amount each month across multiple financial products. They own their home and have plenty of savings, so feel cushioned from economic uncertainty. 

• This segment doesn’t need to cut back yet but some will want to be less conspicuous in their consumption. Brands can help by facilitating discreet purchasing, and advertising as products they deserve. 

6. Comfortable retirement (14%) have enough income to cover their bills and still spend a considerable portion on non-essential purchases. They aren’t worried about their finances or the impact the economy will have on them. 

• Will do well if they come top for quality. They need to be trustworthy too, these consumers are discerning and will look for products and service in which they can have confidence. 

7. Secure optimists (8%) feel secure and protected from the current economic uncertainty. They are often older and have paid off their mortgage which gives them a stable foundation to weather change. Their budget primarily goes towards non-essential purchases, rather than putting it into savings. 

• This group will be receptive to brands which help them to maintain their current lifestyle. They are loyal to their preferred brand and this should be rewarded to maintain that loyalty. 

‘Read the Room’ is designed to help marketers and brands gain fast consumer insights and adapt marketing plans in response to changing conditions. It sets out key steps brands can take to support customers across these segments, from strategies grounded in targeted, temporary support and financial wellbeing, to rewards and discreet purchasing for consumers’ less impacted by the cost-of-living crisis.  

For many advertisers, brand building against the backdrop of current economic conditions will require investment and a shift in strategy. To help with this, dentsu's Read the Room offers a fresh playbook to guide them through these unique and changing times. It combines the new research findings with recently released industry data from Carat’s Brand EQ study, underlining the correlation between a brand’s emotional intelligence and success, and dentsu’s Finance DNA research which explores key themes shaping the next decade for the finance and payments sector. 

More from Read the Room is available to download here.

Read the full report here.