Future Talks special: How COVID-19 changes consumer behaviour and marketing decision making

by Jade Teunissen | Apr 22, 2021 | Interviews, TNXTO News

Last Friday, the first edition of the Future Talks special series took place. The guest speaker was none other than Prof. Dr. Peter S.H. Leeflang. He took us into the world of Marketing and today specifically into the impact of COVID-19 on consumer behaviour and marketing decision-making. Curious about the impact on this, read on!

Impact of COVID-19 on consumer behaviour
The impact of COVID-19 can be approached in two ways. The first approach is the Sheth model, or the immediate impact of Corona. The second approach looks more at the long-term trends, or the megatrends on which COVID-19 has an impact.

Immediate impact on consumer behaviour
COVID-19 is leading to a unique and significant shift in consumer behaviour. This immediate impact of the crisis, according to Jagdish Sheth, can be summarised in eight effects.

  1. Hoardingcaused by feelings of scarcity, or feelings of perceived threat. Here, hoarding is an instinctive response to reduce feelings of perceived threat. The emotional arousal during the onset of a crisis results in reduced rational thinking, e.g. toilet paper hoarding (increase 845%) reflects the impact of the crisis on our psychological well-being.
  2. Improvisation, in the form of alternative services such as take-away meals and online education. People are able to respond more flexibly to constraints: doing more with less and seeking solutions to overcome constraints imposed by government measures.
  3. Delayed demand, postponing the purchase of major durable goods or leisure activities such as recreation or sports. This is based on uncertainty about the future with regard to the financial aspect, for example losing one's job.
  4. Embracing digital technology. Online has come to play a huge role in our lives, for example video calls, online health monitoring, consultations, lectures, but also social contact through social media or online sports and pub quizzes.
  5. The shop comes homeSince the crisis, it is not only the big chains but also local shops that have started to deliver to the home as a result of complete lockdowns and isolation quarantine.
  6. Blurring of boundaries between work and private life. There is no longer any distinction to be made as everything takes place from the same place. Your home is your gym, your workplace, your shops, your restaurant and your leisure activities. Solutions are needed to distribute space and time for all these different activities from home. For example, you can provide equipment and materials such as grids to distinguish between work hours and leisure hours, creation of clear work space, home sports equipment.
  7. Reunions with friends and family, consumers are using the Internet more to get in touch with others (including the elderly). The Internet makes it easy to reach people all over the world thanks to the rapid introduction of video calling programmes (Zoom, Teams). In this way, people can share stories, facilitate online reunions, check that they are OK, share information and make new experiences.
  8. Discovering talentSpending more hours at home and fewer distractions leads to the discovery of new talents and hobbies. For example, there is an increase in home cooking and baking (Hello Fresh) and more consumers are becoming producers (Youtube).

Long-term impact on consumer behaviour
The second way to approach the impact of COVID-19 on consumer behaviour is by looking at Megatrends. As a result of the pandemic, consumers are now re-evaluating their life priorities, which may result in new values and new spending criteria. As a result, the crisis may reinforce the following five megatrends (identified by Euromonitor International).

  1. Connected Customerswhere both consumers and businesses are looking for stability, value and stronger emotional ties with reliable suppliers. For companies, this leads to more vertical integration of businesses. For customers, it results in more involvement with reliable, important and well-known brands (such as IKEA, Maggi, Knorr and Disney). Moreover, they look for reliable information and pay more attention to (non-commercial) websites and TV broadcasts.
  2. Healthy Living, Consumers are no longer limited to diets and exercise, but now also value mental health, sustainability and ethical food. There is more focus on healthy lifestyles and habits at home, on cleaning and hygiene routines, on air quality management and on digital health solutions.
  3. Middle Class and Lower Class Retreat, the middle and lower classes find it difficult to maintain their economic position and their lifestyle. In response, they are turning to solutions such as renting and borrowing, sharing products and offering and buying second-hand products.
  4. Shopping ReinventedSocial distance leads to a shift to online shopping among many customers. Online purchases are increasing in both the food and durable goods sectors. At least part of the current shift to online shopping will be permanent.
  5. Shifting Market FrontiersSome markets have reached their limits, while others see new opportunities for growth. On the one hand, for example, the travel industry has suffered enormous damage and, due to the above-mentioned trends, may never fully recover. On the other hand, many services are now also offered online. Some of these can be continued after the pandemic, increasing the potential number of customers that can be served, for example, education or theatre.

Marketing decision-making
Many managers take a short-term view and struggle to ensure that their new, short-term actions are still in line with their longer-term strategy plans. For this reason, companies are urged to calibrate and redefine their purpose, products, channels, pricing/promotions and their communications.

Purpose
Companies adjust their objectives and launch initiatives to contribute to the COVID-19 approach. Linking a cause of moral importance to brand advertising is called purpose marketing or cause-related marketing. It is part of a company's social responsibility. Such activities are found to have a negative impact on shareholder value and a positive impact on consumer attitudes and purchase intentions.

Product
Many companies are examining their existing product portfolios to take into account the changing market conditions during and after COVID-19. Some of them have developed great out-of-the-box ideas that redefine their product portfolios. However, reuse or redesign is not easy. First, you need to investigate whether changes in sales/consumer behaviour are expected to be permanent or temporary. If the changes are permanent you need to:

  1. Consider how the assets can be used in other directions,
  2. Searching for opportunities to cooperate with other companies
  3. Looking at other customers in other (geographical) markets and market segments
  4. Specifying the portfolio and looking for opportunities to meet the needs of customers who have lost their supplier due to a shake-out in markets.

If the changes are expected to be temporary, cease operations for some time and restart as soon as there are indications that the markets are recovering.

In times of contraction, such as the corona crisis, it appears that...

  • R&D investments and innovations bring higher returns
  • Consumers are more receptive to new products/services
  • It makes sense to critically evaluate the size of the range.
  • The share of private labels is increasing at the expense of national brands.
  • Sensitivity to advertising is usually greater than in a period of expansion, so it is necessary to continue investing in branded products (authentic, transparent and safe brands).

Channels
Companies with a multichannel strategy (offline + online) perform better in terms of share of wallet and revenue. Such companies reacted better during the pandemic because they were already prepared to offer their products and services online where others were not, and could therefore better respond to changes in the customer journey. For example, some retailers used their shops as distribution centres, 'buy local' initiatives enabled producers to sell products that would otherwise have been exported and local retailers created pick-up or home delivery platforms.

Pricing and price promotions
In times of decline, price has to be handled with care due to the increasing price sensitivity of consumers. However, price sensitivity is lower for "unique products", which create "value for money". In addition, avoid price promotions; many customers already stock up on products without a promotional price cut. Use non-price promotions instead.

Communication
What we observe in an age of shrinkage with regard to communication is that...

  • Advertising expenditure is falling, especially in the mass media. Advertising expenditure is more sensitive to economic fluctuations than the economy as a whole. The sensitivity to advertising may be greater in a period of contraction than in a period of expansion. However, if competitors reduce their communication expenditures, the vote share of those who continue to communicate will, by definition, be greater and will be more effective
  • Communication can be used to support brands in a period of contraction. By supporting brands, consumers of these brands are less likely to switch from national brands to private labels and these brands can regain the market position they had before the crisis more quickly and at lower cost.
  • Shift within media and messages. There is relatively less outdoor advertising (due to less traffic), and relatively more direct mailings. There is also more use of content marketing with blogs, vlogs etc. Furthermore, we see a shift towards more use of empathic and cooperative messages.
  • Communication becomes more focused on individuals. Advertising in times of crisis is more focused on retaining existing customers than on gaining new ones. It is suggested that combinations of traditional and social media be used, as these two types of media opportunities can create synergy when used in combination. Interactive communication with customers can also provide input for new 'solutions'.
  • Moving towards customer orientation. The time is ripe for companies to respond to the immediate and fundamental needs of their customers. In order to respond to these needs, the customer experience must be measured. VALEX is an index that measures customer experience from a fully customer-centric perspective. In other words, from a value-in-use perspective, where it is the customer who creates value through the use of products or services in the entire customer journey. Furthermore, personalised approaches focusing on "how can we help you" provide insight into the challenges customers face and offer opportunities to help them. However, such messages are only effective if they are authentic and followed through.

This article is based on Peter Leeflang's presentation in the first edition of Future Talks special, an initiative of Consultive Search and Leadership services and The Next Organisation.

If you have any questions regarding this article or if you would like to discuss the future and the future-proofing of (your) organisation(s) with us and/or with peers, please contact us!

Did you find this an interesting article and would you like to have further talks with us on this subject?
Then feel free to contact us!

Subscribe to The Next Organization newsletter.

The Next Organization newsletter keeps you informed about activities within The Next Organization, current developments within our profession and interesting and relevant articles. You will receive this newsletter approximately once every quarter.

GDPR

Registration successful!