How Have Consumer Landscapes Changed In The Last 12 Months
As expected, the consumer landscape in the last 12 months has undergone a significant shake up, with accelerated changes in consumer behaviour as a result of the pandemic. With many activities and behaviours taken for granted on hold due to restrictions, social distancing and hard lockdowns, people retreated online.
This has dramatically changed the purchasing behaviours that advertisers have witnessed during the last year and have impacted the current landscape now that non-essential retail is beginning to open its doors again.
With many industries, like B2B services, E-commerce, Hospitality, Leisure and Sports industries relying heavily on face to face customers, this required an extensive shift in business models and marketing that roughly equated to ‘survival of the most flexible’.
Across advertising platforms, there has been a boom, a positive shift in engagement and purchasing, especially Social Media Advertising, where there are multiple social touch-points to keep customers loyal.
Now, we look at how this consumer landscape changed and what the future could hold with the rollout of the COVID-19 vaccine.
Consumer Trends At A Glance
- Long term shift to online E-commerce
- Fluctuating behaviours as vaccines and lockdowns recede
- Decrease in shopping frequency
- Reduction in the density of shoppers
- Decrease in tourist spending
- Surge in health and hygiene
- Trading down, concentration on essentials and value-based purchases
A Shift To Value And Essentials
Based on a survey completed at the end of 2020, Mckinsey suggested that even though some countries had reopened, many global consumers still saw their incomes fall. Consumer optimism has taken a hit over the last 12 months, and this behaviour seems here to stay into 2021, even temporarily.
With many people having expected COVID-19 to negatively impact their finances, and many seeing this come to fruition, consumers are more mindful about their purchases. There has been a noticeable global shift to value-based purchases and behaviours that indicates less expensive products with a perceivable value given to the customer are in higher demand.
For example, McKinsey’s survey found that consumers in the UK, US, China, India and Korea (Perspectives on Retail and Consumer Goods, p.10) were among the most likely to be more mindful of their spending, changing to less expensive products and conducting more research into products before purchasing.
This indicates a trend that is likely to continue into 2021 as consumers slowly edge out of that value over luxury mindset and begin branching out into purchasing once again for pleasure rather than necessity.
More Saving, Less Spending
Unsurprisingly, a general trend that emerged, specifically in younger generations, was a more tight-fisted approach to spending, with many of the under 25 demographic angling for a more cautious approach to spending their hard-earned income.
Credit Suisse undertook a recent survey to determine how the pandemic had impacted their consumer behaviours, and up to 90% of young respondents suggested that they planned to save more because of the pandemic.
This will naturally impact brands that focus their advertising efforts on the younger generations, as this demographic has been one of the hardest hit, financially, during the pandemic and the turbulent market in the aftermath.
It’s suggested that an enduring change to consumer behaviour will be a ‘decline in consumption‘, with trading down and price sensitivity governing a large number of purchasing behaviours, as well as an ‘overall reduction in discretionary spending’ (McKinsey, p.21). This, of course, will shake up advertising and force businesses to take this new, mindful audience into account.
Online E-commerce Is Here To Stay
Within the global market, more developed countries where improving technology and a culture of immediacy has taken over, it’s expected that the majority of consumers will maintain – or even increase – the dependence on the world wide web for grocery shopping, retail, non-essential goods and even working from home.
With many companies having abandoned the strict 9-5 in-office routine, it is likely that this dependence on a digital economy will only increase. Many industries, where feasible, have already seen dramatic shifts in the way their employees are working, with, often, little to no impact on the success of their companies.
Those companies that have thrived in the remote-working world will likely continue to maximise the opportunities that present them, taking advantage of lower expenditure and a workforce that is still just as productive.
And of course, in an increasingly digital economy, the resulting impact will be a reduction in-store traffic and a more competitive online market for advertisers, especially within the realms of Facebook Advertising and Pay Per Click Advertising.
Peak In In-Store Traffic Straight After Lockdowns
While the overwhelming trend seems to point to more consumers sticking with online shopping even as the lockdowns recede, the vaccines are rolled out, and life slowly starts to look more normal, in countries where hard lockdowns are eased, there will be a noticeable shift towards in-store purchasing in the immediate aftermath.
This has been noticeable during April, specifically in the UK, as national lockdown restrictions began to let up, and shoppers took to the high streets once more. Advertisers within E-commerce specifically have noticed a sharp rise in CPC compared to previous weeks and months, and certainly in direct comparison to the same period in 2020.
Decreased appetite in online products within specific industries is certainly something that advertisers are navigating right now, certainly within sectors where consumers can purchase the same items in a physical store, where this hasn’t been the case for nearly 18 months.
Increase In Digital Competition
As with any market, an increase in activity means increased competition. As more and more advertisers, businesses and organisations realise that the lift in online shopping isn’t going anywhere, there is a consequent lift in the number of businesses to compete with.
This is certainly visible in the overall rise in CPM that Facebook as a channel is seeing when comparing May 2020 with May 2021. The average CPM in May 2020 was around $11, and the average CPM for May 2021 is $15.74 across the channel.
While this information is specific to campaigns targeting audiences within the United States, this inflation has been seen across industries as CPM rises, CPC increases, and it becomes harder for some marketers to get their ads in front of relevant, converting audiences.
Creative new targeting strategies, utilising first-party customer data and inventive methods of encouraging new and engaged shoppers to purchase will be the way forward for many advertisers.
Appetite For Travel ‘Soars’
During the pandemic, international travel was restricted, with personal travel entirely prohibited in many countries and commercial travel limited to instances of absolute necessity. There was, consequently, an 80% reduction in international travel and related tourist spend during 2020.
Video conferencing and digital meetings overtook face to face business encounters; business air travel dropped; those who could still travel within their own country chose to do so through private transport, avoiding airports where possible.
And so naturally, as there was a bust now, there will be a boom. As lockdown restrictions ease and international travel becomes more prevalent, the appetite for travel is likely to increase. Countries and markets depending on tourism will likely see a dramatic increase in demand. Companies within the travel industry could well experience a lift in appetite as people get to go abroad for the first time in a year.
This, of course, will significantly change how people purchase holidays and will likely impact those cities and regions that have profited so well during the ‘staycation’ trend.
Overall, retailers and advertisers will face multiple challenges as the consumer landscape continues to shift following a year of drastic changes. The main focus should be on hassle-free shopping, a focus on omnichannel advertising that reinforces the brand’s message; encouraging new users to try something new, and returning users that the brand retains their core values at heart.
Consumers have changed where and how they engage with brands, and advertising strategies will need to reflect this. Staying relevant at multiple touchpoints is key, and maintaining customer loyalty through communication, holistic marketing and incentives for first-time shoppers.
Knowing how to tackle these changes is critical to success, and this is where it’s especially beneficial to rely on advertising experts to generate those all-important strategies.
Why not see how our team of experts can assist you and your business? As well as specialising in Facebook Advertising and Google Advertising, we also provide a holistic, full-funnel approach to marketing and can offer tailored plans to suit your needs.
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