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Three things you need to know about the 'next-normal' consumer

Companies must rethink consumer interactions. Because if they act now, they can help to shape what the future of customer relationships looks like. 

5th Oct 2020
Partner at McKinsey & Company
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Customer persona end of lifecycle
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As the world begins its slow pivot from managing the COVID-19 crisis to recovery and the reopening of economies, it’s clear that the lockdown has had a profound impact on how people live. The period of contagion, self-isolation and economic uncertainty will change the way consumers behave, in some cases for years to come.

These rapid shifts have important implications for any consumer-facing company. Because many of the longer-term changes are still being formed, companies have an opportunity, if they act now, to help shape the next normal.

Three takeaways are emerging from our efforts to form a holistic view of the new post-COVID-19 consumer:

1. COVID-19 is changing how consumers behave across every aspect of their lives 

As consumers sheltered at home, adoption of new digital services took place at a blistering pace. In addition to growing health and hygiene concerns, economic recession, and the related decline in consumption, the scope of the change to people’s lives is staggering.

Take shopping as an example. What we buy has changed across categories. Think fewer cosmetics and more flour. The explosion of small brands, underway before the pandemic, has given way to a strong preference for global A-brands. After years of growth, out-of-home consumption has almost disappeared; many of us have stopped going to stores entirely. In many markets the surge in ecommerce has compressed the equivalent of several years of growth into just a few months.

For many workers, the office is now in the living room. For the cohort still able to work during the pandemic, work is largely remote and digital, with a sharp uptick in the use of digital collaboration tools. Zoom’s daily user base grew from ten million people to 200 million in three months, and Slack’s paying customers have doubled.

Consumers stuck at home are spending more time but likely less money on their entertainment, as the trend toward digital options accelerates. Downloads of gaming apps increased more than 30%, year over year, while 45% of consumers report using more online streaming services at home. Netflix added 16 million subscribers in five months while Disney+ nearly doubled its subscriber base to about 50 million - a feat that took Netflix seven years. 

2. Broad shifts to new behaviours hide significant variations

While headlines have been prone to making sweeping statements about our new digital world, the reality is that the pace at which we arrive at the next normal, and the route we take to get there, will be anything but uniform. The forces driving behaviour changes will likely continue at differing strengths over the next six to 24 months, with frequent starts, stops, and resets.

Whether the new behaviours fade out or last into the next normal depends on a number of factors:

  • Consumer experience - Are the new behaviours appealing and a good experience? Are they more satisfying than the behaviours they replace? The answer to these questions will have a significant effect on whether new behaviours will stick.
  • Consumer segment - While many consumers overall have been adopting new behaviours, there are significant generational and cohort differences. For example, Gen Z, which had a high degree of digital adoption pre-COVID-19, is unlikely to exhibit a significant increase, but the survey indicates that they are much more likely to be economically impacted by the crisis due to their disproportionate exposure to self-employment and, in particular, to the sharing economy.
  • Values - Behaviours that are driven by personal values, such as sustainability or the desire for personal interaction, are apt to vary in their long-term adoption rates across countries and regions, depending on local infrastructure and other conditions. For example, when restrictions ease, will there be a backlash against remote experiences and a drive for physical reconnection? The emphasis on health and hygiene that has led to an increase in single-use plastic reversed some of the pre-existing focus on sustainability. Will that last or will consumers come to see COVID-19 as a wake-up call, a glimpse of the potentially catastrophic consequences of climate change?

3. Companies must rethink how and where they connect with consumers

With the World Health Organization (WHO) stating that COVID-19 will be with us for some time, companies must prepare for a rapidly changing environment that may bounce between periods of lockdown and transition. As consumers go in and out of these cycles, the new trends may wax and wane, but they will mostly persist until we move past the transition phase for good.

As these new behaviours solidify, companies will need to adapt. Many companies will need to increase their investment in insights and plan to stay on top of the changes. As consumer-facing companies look at the landscape of a changed consumer journey, they should focus on key points of engagement with their customer:

  • How consumers get information - With many consumers switching brands, raising awareness of one’s brand to improve its consideration is crucial for marketers. At the same time, a flight to online sources for information and entertainment has increased the importance of digital channels. Marketers hoping to reach consumers need to meet them where they are. Increasingly, that’s online.
  • What consumers purchase - With health concerns paramount, both shopping the aisles and going through checkout need to become as touch-free as possible. Already, consumers concerned about infection have moved decisively away from cash payment to cashless systems and credit cards. Getting customers to buy will require an omnichannel experience that includes drive-through, curbside pickup, and other delivery options that cater to the new emphasis on health, safety, and convenience. We have also seen shoppers migrate to established large brands in a desire to seek out trusted sources. Given the likelihood of continued uncertainty, companies should focus on efforts to renew and build trust with consumers through excellent shopping experiences and in the way they engage with the community during this difficult time.
  • Where consumers purchase - Online shopping has surged, but a significant amount of shopping will still happen physically in stores. Retailers should rethink store layouts and opening hours to make in-and-out shopping safe and quick. They also need to optimise for a different kind of shopper, most notably, one who shops less frequently and consumes less overall - but buys more per shopping trip. Store assortments will need to evolve as well, to reflect new economic realities. Value will become increasingly important along with catering to the demand for multiple price points. High-growth categories are likely to include household essentials and health, while highly discretionary categories will most likely see a drop in demand. There will be increased opportunity for both large national brands and store brands.
  • How consumers experience - With consumer preferences changing rapidly, retailers and other consumer-facing companies need to provide a strong feedback loop. That means improving their ability to collect data and qualitative feedback to stay ahead of the trends. Given the long list of things consumer-facing players might need to undertake in the short-to-medium term, it is crucial to plan ahead. A short diagnostic exercise will help companies to identify their biggest opportunities and risks and to prioritise actions in response.

While the details of the next normal are still unclear, its overall contours are coming into focus. Because many of the longer-term changes are still being formed, companies have an opportunity, if they act now, to shape a positive future.

 

The author would like to thank Victor Fabius, Sajal Kohli and Sofia Moulvad Veranen for their contribution to this article.

 

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