During the “Great Recession of 2008” consumers made changes to how they spent available monies. They ate more meals at home. They chose lower priced products. They increased shopping at discount outlets. They cut back on non-essential products. They spent less on out-of-home personal care and experiences. While spending against consumer packaged goods (CPG) categories remained significant, consumers made choices. They spent less on mid-tier brands, making choices to opt for value or indulgence. They shifted more dollars toward discount outlets, seeking lower everyday prices for pantry staples. In short, consumers sought ways to stretch their dollars.
While every economic downturn is unique, consumer packaged goods (CPG) brands are once again faced with challenges, and those challenges will continue into 2023. Inflation is at an almost 40-year high. The pandemic is still very much a reality. Supply chain issues continue to be a challenge. Interest rates are higher than they have been since the downturn of 2008. These realities are forcing consumers to make many of the same choices they made in 2008. As the economy continues to face uncertain times, CPG brands face increased pressure to maintain sales and profit. In this environment, it is more important than ever to develop and execute a resilient and adaptive strategy that allows brands to weather the storm and emerge stronger as the market recovers. Here are some thoughts for how brands can continue to drive growth and profit during the economic downturn.
TABLE OF CONTENTS
Consumers need their dollars to go further. Brands who communicate and deliver on a value proposition are poised to win during an economic downturn. Value does not always, or only, mean “least expensive”. Value means many things, and can be delivered to consumers in several ways.
Multi-Function - When consumers need their dollars to stretch further, products that can be used in multiple ways offer significant value. Ordinary white vinegar is a great example. Used in many cooking and food preparations it also functions as an excellent household cleaning product. Brands who offer and communicate multiple ways to use/consume their products create a competitive advantage among consumers looking for ways to save money. Also consider products that might be used as a main meal on one occasion and as a meal preparation component for an alternate occasion. This opportunity allows a brand to be in the consideration set of the shopper multiple times.
Value Added Features and Benefits - Through a deep understanding of consumer needs and preferences, brands can win by offering and communicating unique functional or nutritional benefits that deliver against those needs and preferences. For example, a brand that is able to communicate a health benefit (i.e. high protein) for a snacking product offers incremental value and creates an advantage over competitors. A compelling and unique value proposition is always a winning strategy to drive growth and attract new buyers.
Value for Money - While absolute price is often a determining factor when money is tight, brands can win by offering value in different ways. Small size offerings create a lower price point for consumers who are seeking to reduce per trip spend. Larger pack sizes offer a reduced per-serving cost for consumers seeking to reduce total spend, but not necessarily per trip spend. Offering the right pack-size allows brands to retain high-value/high-potential consumers and also attract value seeking consumers.
Focus on Indulgence
While consumers are looking to tighten their belts during an economic downturn, they continue to seek out treats and indulgent experiences. This represents an opportunity for CPG brands as consumers look to fulfill these needs while keeping spending under control. For many, this means consuming more meals, indulgent treats and occasions at home. By focusing on a consumer’s desire for indulgence, brands can operate at the premium end of the price spectrum with consumers willing to pay for those indulgent occasions because they represent dollar savings versus taking that experience out-of-home. Instead of out-of-home premium coffee beverages, brands can communicate offerings that will elevate the at-home coffee experience at a fraction of the cost. For consumers looking to reduce discretionary spending on out-of-home personal care, brands that offer a premium experience in an at-home environment can capitalize on the trend of consumer spending. Brands who communicate and deliver an indulgent product experience can capitalize on altered consumer behaviour during periods of uncertainty.
Distribution and Availability
During difficult economic times, consumers shift more of their dollars toward value and discount outlets. Consumers are also willing to “cherry-pick” products across retail outlets in order to save money. Ensuring wide product distribution and availability in discount channels will increase the opportunity to enter the consumer’s consideration set during an increased number of shopping trips. An economic downturn challenges brands to evaluate channel strategies and focus on driving growth with the right products in the right channels to capitalize on consumer demand and altered shopping behaviour.
Laser Focus on the Portfolio
Laser focus of the portfolio is critical all the time, but especially in times of economic uncertainty. Complex brand portfolios can be a distraction and dilute marketing and sales resources. Companies must focus on brands and categories with the highest growth potential during an economic downturn. Within brands, look to optimize assortment, and work with retail partners to fine-tune category and aisle assortment, with focus placed on products most likely to continue to drive growth. Focus on products and SKUs that deliver unique features and benefits, as well as a compelling value proposition. Laser focus on portfolio optimization does not mean turning away from innovation. Successful companies continue to invest in innovation research, concept testing and product development during a recession in order to accelerate growth coming out of recessionary times. Continued portfolio optimization during an economic downturn allows brands to focus precious resources on the products most likely to drive immediate growth while also preparing the portfolio for accelerated momentum as the market recovers.
Create Meaningful Consumer Connections
During times of uncertainty, consumers crave connection. They desire uplifting, positive messages in the advertising they consume. Brands who leverage data to deeply understand their consumers’ attributes, needs and preferences are well positioned to create and nurture lasting engagements with high potential/high value consumers. Unique consumer communities provide the additional benefit of stretching marketing dollars through the distribution of User Generated Content. Consumers trust the recommendations of others, or word-of-mouth, more than most other forms of advertising. Brands who curate authentic, unique consumer relationships will benefit during recessionary times, and those benefits will continue during more positive economic times.
An economic downturn creates challenges for brands and consumers, alike. Within every challenge lies opportunity waiting to be capitalized upon. Brands who understand the changes consumers make during times of uncertainty, and who focus their portfolio and marketing and sales efforts optimally are poised to win and continue to drive growth and profit. The pillars of value, indulgence, distribution, portfolio optimization and consumer connection never go out of style, but laser focus on them during challenging times can help brands not only survive, but also thrive, win over consumers and emerge even stronger on the other side.
About the Author
Krista Thompson is an Information Services executive and consultant with BritOn Solutions Group. With over 20 years experience delivering profit enhancing marketing and sales guidance to Consumer Packaged Goods manufacturers and retailers, Krista has a passion for analytics, innovation and business transformation. She is known for orchestrating and leading change, harnessing the power of team and creating value for stakeholders.