With the increasing complexity of markets and the evolving sophistication of consumers, brands are looking for ways to uniquely engage and significantly stand out with both their existing customers and targeted consumers. The essential key to achieving this lies with an ongoing, robust understanding of the shifting, complex trends and evolving preferences of both markets and consumers.
Jack Welch, the former Chairman, and CEO of General Electric for over 20 years, had a driven, proven approach to developing competitive advantages in this manner. His formula for success was rooted in differentiation in terms of products, services and markets. As he said, “If there is one of my values that pushes buttons, it is differentiation. Some people love the idea; they swear by it, run their companies with it, and will tell you it is at the very root of their success.”
In today’s challenging and evolving consumer landscape a key differentiation that sets brands apart and delivers a sustainable competitive advantage is customer understanding. This is particularly critical in interpreting how consumers interact with companies, shop for products, commit to brands, make purchasing decisions, engage fellow consumers and ultimately pledge their loyalty.
McKinsey & Company has been tracking consumer behavior and sentiment surrounding the uncertainty of COVID-19. They are also reviewing the complexities the pandemic is placing on both markets and consumers and how these pressures are forcing points of evolution in how customers behave.
McKinsey points to an array of dimensions that brands should be analyzing and tracking on an ongoing basis to assess the strength and direction of their company. These include:
- Consumer sentiment and economic health
- Spending behaviors and income confidence
- State and health of brand loyalty
- In-person engagement and the shift to digital
It’s not new that consumer sentiment has largely correlated to the state of health of the economy. However, the unknowns around COVID in terms of the impact and duration the disease will have on society is taking its toll. In response, despite some increasing optimism with the economy, about 40 percent of Americans feel their finances may not return to pre-pandemic levels until later this year, 2022 or even beyond.
This same proportion of consumers indicate they are becoming increasingly mindful of how they spend their money with 40 percent saying they are decreasing their spending across many discretionary categories in order to focus their budgets on essential items. This poses a critical mindshift for brands to position their products accordingly, and to identify those customers whilst segmenting those who have a comfortable frame of mind with their finances in order to adjust their positioning, communication and engagements accordingly in order to effectively motivate both types of individuals.
Related to this, brand loyalty has been taking a significant hit in many markets. The increasing pressures on household incomes are pushing many consumers to migrate to different channels for convenience and ease of use, whilst also trying different brands based on perceived value. Along these lines, approximately 75 percent of American consumers say they are trying new shopping behaviors to address aspects like COVID isolation with most indicating they will continue many of these new shopping habits once COVID subsides.
This is another dimension where it is critical to understand the shifts both established and prospective customers are trending towards in order to align engagements and mirror experiences accordingly. Assuming the “same old, same old” approach will continue to be effective, without evidence, is a major potential risk to the business.
Consumers are also increasingly keeping an eye on how companies treat the health and welfare of their employees with many saying it is an element they consider when purchasing from a company. This is another type of evolutionary point that wasn’t necessarily a major point of consideration before COVID, but is now one that many brands should understand, consider and address in their efforts to build customer loyalty.
According to McKinsey, although 36 percent of consumers are involved in “normal” out-of-home activities, many US consumers are still adopting many in-home alternatives, like online streaming for entertainment and cooking in lieu of eating out. There is also an expectation that many of these shifts in behaviors will remain part of most households as COVID decreases. This is another critical dimension to track and measure in order to understand how these changes can affect the products, services and brand overall.
Given the COVID limitations placed on many individuals, it’s no surprise that consumers continue to migrate towards online shopping across many categories. This is pushing many Americans to develop new digital comfort levels and habits around delivery options with meals and groceries.
The bottom line is that COVID is serving as a catalyst for change amongst consumers. Arguably many of these changes were already underway and this is simply an acceleration but understanding the rate and extent of these changes is critical to the success of brands. This is why data is becoming increasingly valuable and complex. Those teams that have solid, consistent insight into the shifting trends are the ones that will be able to adapt, engage and motivate consumers in order to develop a sustainable competitive advantage. Many enterprises now describe this process as “foresight” rather than “insight” - the key differentiator being that insight considers why customers are doing something now/historically whilst foresight considers what they will do in the future. Predicting and bridging this customer understanding gap allows the organization to anticipate and respond to changing consumer demands - and that delivers success.