It has been over a week since the Reserve Bank of Australia (RBA) raised rates for the sixth time in as many months. It means Australians have had a week to adjust their budgets, re-think their spending, assess their priorities. Brands should have been doing the same.
In today’s inflation-powered world, RBA Tuesdays are a moment every marketer should be using to calculate what the changes in the economy will mean for your brand’s tactics.
As purchasing power continues to fall to a 12-year low, marketers and their agency partners must continue to understand how the whole nation is feeling and intending to behave. Falling purchasing power is quickly changing behaviour and attitudes towards the products and services people buy every day.
Which brands will win? In my view, it’s the ones that read the room and then adapt their tactics accordingly.
We ran some research last month, interviewing 2,052 Australians. We asked everyday Australians what their concerns are in response to the changing economic landscape, and we know that newly emerged consumer groups will prioritise spending by sorting products and services into things they need, treats they would like or can put on hold, and luxuries they will cancel.
For the wealthy and cashed up, this may not mean much, life goes on. But for those on tighter budgets who will be making tough calls on significant purchases, brands will need to reframe their offerings.
Our research tells us that a portion of Australians are already reconsidering spend on products like insurance. Australians are highly preferring to pay with a method that ensures the largest discount possible, with some also actively researching alternate policies or providers to get a cheaper product.
Reading the Room study aside, our DISCUS tracker research also suggests that Australians who are feeling the pinch from rising rates and cost of living are also cutting back purchases of luxury time items from fashion to jewellery and accessories. Purchasing behaviour for technology products are also decreasing, as for electronics and whitegoods. Meanwhile, other consumer groups are continuing to spend on health and beauty, everyday fashion, and pet needs.
With Aussies having only a moderate level of confidence in the Australian economy that is continually changing, marketers must listen evermore closely to what consumers are feeling, what they’re saying, and how they’re behaving.
For the foreseeable future, this means brand loyalty is less important to some customers. For some brands, that’s a challenge – but also an opportunity. Rather than going silent and pulling back spend, the brands that will come out on top will be those that apply greater focus on the customer’s needs and invest in messaging and customer experience.
Think Kellogg in the 1930s
When the Depression hit, no one knew what would happen to consumer demand. Many brands reined in their expenses, cutting back on advertising. Instead of doing the predictable thing, Kellogg doubled its ad budget, and bullishly moved into radio advertising to push Rice Krispies – its new cereal at the time. As a result, by 1933, while the economy took a dive, Kellogg’s profits rocketed to almost 30 percent. Snap, Crackle, Pop continues to be a generational slogan, while Kellogg remains synonymous with breakfast cereal to this day. Do we even remember Kellogg’s competitor’s name? (It’s Post. But the point is, repositioning during tough times has proven to work).
As this recession plays out, brands must understand how the whole nation is feeling and intending to behave, and act accordingly. We know falling purchasing power is quickly changing behaviour – let’s reframe, reposition, or re-promote to align with real needs.
We have seen the supermarkets come out of the blocks quickly on this, with Woolworths leading the way with highly promoted price freezes and locks to saturate the market. Another ‘good different’ retailer is bundling products from across the store to entice a more affluent buyer to trade down. Other sectors must quickly follow or be left worrying about the recession and become forgotten.
The turmoil that consumers are facing now means brands have even bigger roles to play like never before: to educate, to nurture, and entertain. Like some smart brands have done during the pandemic. Nobody predicted how that was going to work out, but for the most part, we pivoted 180 degrees, and survived. More than that, many brands thrived. We can do it again.
So instead of cutting back on your spend, now’s the time to read the room. Listen to your customers and prospective customers, and refocus your marketing. For many brands, it will require investment and a shift in tactics – evolving to ensure product, pricing, and promotional activity align with people’s reality.
David Halter is Chief Strategy & Growth Officer at dentsu ANZ