For the past few months we’ve observed average income households making changes to their spending habits in order to cope with rising prices. We’ve also reported on a determination to protect certain types of spend, particularly that focused on health, happiness and making the most of right now.
But as prices continue to rise and the heating gets turned on, are coping mechanisms having to evolve? Are those who were previously ‘comfortable’ now having to make bigger sacrifices, and are brands helping or hindering?
For medium income families, the past few months have been about finding ways to prevent outgoings from rising too much but with minimal personal impact. For example, using savvy switches to high performing supermarket own label products. As prices have risen further and Autumn heating and lighting costs are starting to impact outgoings, less comfortable sacrifices are being made.
People are finding more radical ways to cut back. Sometimes they can spend time rather than money, but often they’re forced to decide what they’re most willing to give up.
Affluence doesn’t necessarily make you immune to the need to cut back. While average income households are struggling to balance the household books, higher income households are protecting themselves from financial catastrophe further down the line. In the end, the cutbacks being made are very similar: reducing energy and fuel consumption, cancelling services normally paid for, cutting down on treats and pausing expensive plans. Any unnecessary spend, including on products and brands previously considered essential, is already vulnerable and everyone is sure that they’re going to have to cut back further.
When brands offer help (such as lower priced alternatives or creative ways to save) it is gratefully received. If they get it even slightly wrong customers are quick to condemn.
We asked a selection of FastQual ready respondents (a mix of medium to high income) to talk to us about:
1) If and how they’re currently responding to the cost-of-living crisis
2) How the cost-of-living crisis is impacting on their Christmas plans
3) Brand who are being particularly helpful or unhelpful
The level of compromise people are now dealing with has big implications for brands and retailers. If they’re now willing to close off whole rooms and stop going to the hairdressers, which brands will they sacrifice next without too much deliberation?
And yet, taking action isn’t without risk and brands which get it wrong are judged harshly. Now is a time to stay close to your customers, to build customer empathy in your organization, and to ensure that customer understanding is involved in every decision.
Some responses to the cost-of-living crisis have become commonplace: switching supermarkets, tumble drying less, hoodie blankets over heating. But bigger sacrifices are now required to balance the household books. This financial crisis isn’t just about savvy shopping, it’s about deciding what to give up.
While households with bigger incomes are more likely to have a monthly buffer, that doesn’t mean that they see absorbing price increases as an option. Large financial commitments mean that redundancy or businesses failing would be catastrophic. Some have savings, but they don’t want to eat into them unless they have to.
The cost of brands is being weighed up ruthlessly against other potential uses for that money (whether that is avoiding overdraft or allowing other areas of spend to be protected). Even brands and retailers which people feel a strong connection with, and which were previously bought or used as a matter of course, aren’t safe.
I switched from Boots daily contact lenses to monthly ones from an online retailer and it’s saved me stacks.
I used to shop in M&S and Waitrose all the time but now Aldi and Lidl are my places to go, and I’ve become a huge fan of Morrisons.
Despite how gorgeous they smell I no longer buy Method products and have switched to various own brand cleaners that do the job just as well.
I didn’t think I’d be willing to but I’ve stopped buying my favourite everyday Tropic products because I just can’t justify the price now.
I’d rather use a bar than shampoo in plastic bottles and it smells so good, but £8.95 is just too much now.
I’ve stopped going to Pret for my coffee and wrap or salad and now make both at home instead, it was costing me more than I can now afford.
During a cost-of-living crisis it is of course easier for budget brands to be helpful, and actions connected with price and offers most readily spring to mind. However, by helping customers to manage their spend, reducing costs/waste elsewhere, or by focusing on durability and versatility, even premium brands can improve relevance.
HELPFUL
ALDI COPY-CAT MAKEUP
I don’t know how Aldi get away with their Bobbie Brown and Liz Earle copies but they’ve grabbed my attention and they’re really good. I’d rather have the real thing but I couldn’t justify it right now so these products soften the blow.
HELPFUL
CUYANA WOMEN’S CAPSULE WARDROBE
A friend put me onto Cuyana when I was in the States. It looks expensive but their approach helps you build a wardrobe containing fewer, better (and more ethical) items which last for years. I don’t think it costs me more than if I constantly bought cheap, throwaway fashion.
HELPFUL
BLANKET HOODIE
I bought oodie’s, with sherpa lining, for all of us. It came to a lot but there was a bulk discount and they’re so warm and easy to wear that it will save on heating through the Winter. Apparently these are the cosiest so I’m counting on the kids wanting to wear them a lot!
People are having a tough time and, as we’ve seen, are making sacrifices in order to get by. When brands show themselves to be out of touch, they are judged harshly. Customers are easy to offend and they’re not giving credit for trying.
MISJUDGED?
WAITROSE ‘STOCK UP FOR CHRISTMAS’
Waitrose popped up on Facebook telling me to save money by stocking up a cupboard with mince pies & cake, ready for Christmas. Everyone knows you just eat it & buy it again, and I bet Waitrose know that too. It felt like they were taking advantage, which didn’t feel right just now.
MISJUDGED?
HSBC MONEY SAVING TIPS
HSBC put my mortgage rate up to 4.95%, costing me £459 extra per month. Then they sent me an email about tips such as checking my energy provider and spending less at the supermarket. That really takes the biscuit. As if we aren’t already doing these things!
MISJUDGED?
SAINSBURY’S SUBSTITUTIONS
It’s started to get me angry that when Sainsbury’s bring me a much more expensive substitution they don’t deduct the difference from my bill, they issue me with a voucher which means I only get it back when I shop with them again. So I have to wait for my money.
Your customer’s lives are changing fast and, because they’re under pressure, they can be quick to take offence when brands get things even slightly wrong. Any product or service which could be considered unnecessary, or where a cheaper alternative exists, will need to work hard to avoid being cut, even amongst those who were previously willing to pay more for it. Staying close to your customer’s evolving needs and ensuring that customer understanding translates into decisions will be crucial in order to: