As consumers demand brands absorb rising costs, how can they keep their customers?

New research has revealed the impact that the cost-of-living crisis is having on customers, with almost a third of UK consumers admitting that they can no longer afford to buy from their preferred brands - and many demanding that companies absorb the rising costs, rather than passing them on to the customer. 

The figures – taken from a survey of 1,000 consumers and 500 marketers, conducted by Ello Group – make for dire reading across the consumer space, with areas such as brand loyalty, spending scale backs, and increased expectancy of offers/deals all featuring heavily within the report.

31% of consumers can no longer afford to buy from brands they have been loyal to in the past.

Coming straight off the back of a global pandemic and Russia’s invasion of Ukraine, the cost-of-living crisis is less a case of adding fuel to the fire, and more a matter of crashing a gas tanker straight into a volcano.

Rising prices due to supply-chain issues and materials/ingredients shortages had already forced many into tightening their belts, with the recent increase in household costs exacerbating an already drastically deteriorating situation.

40% of consumers have had to scale back on their spending.

Price hikes for gas, water, and National Insurance have been announced in the past few months. Add to this the latest £3,549 energy cap increase, which represents on average an 80% rise per household, and it is no surprise that consumers are spending less and being thriftier with their ever-dwindling disposable income.

Rowing against the tide

There is no denying that it is an intensely difficult period for brands and businesses, with the current crisis having the potential to rival the pandemic.

However, the findings of the report do point towards some areas in which brands can combat the impact of the cost-of-living crisis.

43% of consumers believe that brands should be absorbing rising prices.

In comparing datasets from 2021 and 2022, unsurprisingly, we can see that price remains the most important factor to consumers – a trend which is echoed in the marked increase in the importance of loyalty schemes and discounts/deals.

Whilst this may spell further gloom for brands already struggling to keep their prices down, it does also provide an opportunity for those looking at ways to retain their loyal customers.

Interestingly, there is a disparity between consumer needs and brand prioritisation. As highlighted in the below graphs, whilst consumers view price as the most important factor, brands are setting more stock in quality and customer service.

Perhaps the most interesting difference is in the area of quality. Although quality does rank second in order of importance for consumers, it has seen a substantial decrease compared to the previous year.

Clearly brands do not wish to let the quality of their products slip; they have undoubtedly spent time and resources on getting these products to their current condition, and must also consider post-crisis life. However, during these turbulent times, a slight realigning of their priorities so as to match those of the customer may help in both retention and attraction.

In discussing the customer retention section of the report, Anwar Sultan, chief digital and strategy officer of Ello Group, commented:

“Cost of living also impacts cost of goods for businesses, so it’s not always easy for businesses to just pass on savings to their customers. But, what they can do is be very very transparent on what cost increases look like and how they’re made up. Also, if price is going to be such a key factor, businesses should be thinking about how they’re going to add value to their customers in different ways.”

Maintaining brand loyalty in a crisis

With consumers desperate to make savings wherever they can, it’s no surprise that brand loyalty is down in almost every major consumer sector. So how can brands keep hold of their customers without cutting into their already decreasing profit margins?

As Sultan mentions above, in the current climate it is not always possible for brands to simply absorb the cost increases, so it is vital for them to find other ways in which they can maintain the loyalty of their customers.

This is where providing an exceptional customer experience is integral. In troubled times it is more important than ever before to build connections with your customers, and make them aware that you are really listening to them and fully understand their situation.

This may well mean increased funding and support for your customer service staff, who will be bearing the brunt of the complaints and frustrations incurred by the price increases.

It is not always possible for brands to simply absorb the cost increases.

Even if you are unable to match the price that a competitor is offering, by adopting a personalised approach and really exploring the products and areas that are most important to the customer, you may be able to provide discounts/deals in other areas – thus maintaining loyalty to your brand.

In discussing the role that customer experience can play in placating disgruntled consumers in this climate, the report highlights three key areas that brands should focus on:

• Engage early on – In a world where there’s more competition, consumers are reducing spend, brand switching is increasing rapidly and therefore there’s less loyalty than ever before, brands can’t afford to wait too long before engaging.
• Focus your attention on all customers (not just the big spenders) – Yes, some customers may not be able to spend right now, but ultimately, it’s connection that keeps customers coming back, so even if it’s a ‘not right now thanks,’ as long as you’ve built a relationship with them, they’ll come back eventually.
• Take a softer tone – Customers want to see empathetic, human communication from brands, which slowly over time builds trust. This softer marketing approach which hones in on human centricity is the only way forward.

Despite it becoming something of a buzzword, there is no denying that we are currently living through an unprecedented time – and in some cases, despite your best attempts, consumers will be dictated purely by price.

However, it is still important to do all you can to support your customers during this time – even if much of it may be in vain. Because there will be a post-crisis world, and even those customers who had to leave will remember the level of customer experience they received, and may well return when they are able.

Building these meaningful customer relationships during adverse periods, is something that Anwar Sultan strongly endorses:

“At Ello Group, we believe that adding extra value that is meaningful to that individual customer and actually improves their life outside of the transaction with that particular brand, is critical to maintaining a great relationship and connection with the customer.”