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What skills do marketers need to plan a cost-of-living-crisis exit strategy?


With more and more businesses becoming over-reliant on price promotions, The DMA’s Ian Gibbs discusses the need for a cost-of-living exit plan – outlining tips and guidance on forming a long-term strategy to acquire new customers and enhance loyalty.

2nd Oct 2023

The UK business landscape is one of varied signals right now. Retail sales were up in June but dropped off again in July in the face of summer washout. Inflation has eased off to below 7%, yet we now face warnings of an impending recession. Marketing budgets remain under immense pressure, yet the IPA’s Bellwether report tells us that record levels of sales promotions are driving marketing spending forward.

The Data & Marketing Association’s (DMA UK) latest update to its long-running customer engagement research – “How to Win Back Customers and re-Build Loyalty” – also identifies a couple of seemingly contradictory data points. While consumers are quite pessimistic about the world around them, they are more optimistic about their own circumstances.

Loyalty declines as price sensitivity rises

Dig a bit deeper, however, and it’s clear that while times are tough, this feeling of optimism is being driven by a sense of personal empowerment. Savvy consumers are taking more control of their spending habits. They are shopping around and using promotions, vouchers, and discounts like never before; therefore, navigating around industry-wide price increases as a result.

While generally, a happy consumer is a loyal consumer, in the context of a cost-of-living crisis, this is a double-edged sword. Price promotions are an even greater driver of new product purchases than they were two years ago; the knock-on effect is that consumers are becoming hooked on cheap deals. This in turn heightens levels of price sensitivity and has a profound downward pressure on brand loyalty.

In fact, 63% of consumers say they often change their minds about what brands they buy from based on deals and offers, and 48% say that they would stop buying from brands if they stopped offering promotions and discounts – both figures are at record high levels.

48% of consumers say that they would stop buying from brands if they stopped offering promotions and discounts.

Overall, this has contributed to a picture of declining loyalty where 61% of consumers say that they feel less loyal to brands and companies than they did a year ago. This represents a huge leap from the 41% recorded in 2022.

How to plan an exit strategy

This is why it is so vital for businesses to have a cost-of-living-crisis exit strategy in place. In other words, a strategy that enables marketers to create deeper connections between consumers and brands, so that price isn’t the only consideration when making purchase decisions. Without such an approach, there will only ever be a downward pressure on business profits.

Marketing teams need the right set of skills in place to determine the impact of an over-reliance on price promotions and to take a long-term approach to planning how they reach potential targets, acquire new customers, and build loyalty once they have done so.

Specifically (and in no particular order), businesses should be asking themselves whether their marketing teams…

  • Can plan for both short-term and long-term growth, and whether they are aware of how the planning decisions they make to reach short-term KPIs will impact future business performance.
  • Are aware of the levers that they can pull to increase loyalty. The impact of brand activity for example, or enhanced customer and user experience.
  • Have sufficient customer data to understand what drives trial and repeat purchases beyond price. For example, what product functionality and features and after-sales care are they looking for?
  • Know how to measure price elasticity – i.e., the extent to which demand decreases or increases when a change in pricing occurs. Ultimately, marketers are chasing price-inelastic products and services where demand is less sensitive to pricing changes.
  • Are aware of the appropriate blend of sales promotions to use in the marketing mix. Clearly discounting is a vital tool for stimulating short-term demand and for many it would be unwise to dispense with it entirely, but marketers must be conscious of what other marketing activity it should be blended with to reduce price sensitivity.
  • Know how to measure marketing effectiveness in a way that speaks the language of the boardroom and ensures the long-term success of a business.

Awareness of the issue is the first step to dealing with it. Secondly, it is vital to put a plan in place, guided by your customer data insights, to determine how best to engage and communicate with them.

Data-driven marketing insights are essential for developing more meaningful relationships with customers, which leads to sustainable business growth and less reliance on price promotions.

While it is not solely the responsibility of the marketing team to develop a cost-of-living crisis exit strategy, it is vital that business leaders ask themselves whether they have the right skills and training in place to ensure that they come out on top when the economy recovers.


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