QUICK READ: McKinsey still acts like they know everything but just out of college analysts don’t really know how to quantify consumers’ behaviors in an era when they can’t be quantified. Some changes in the way consumers shop are taking place but if you respond too much to the other side you’re going to lose market share.
I’m not sure why so many CPG companies hold McKinsey in such high praise. Their latest report “ The Great Consumer Shift” makes some great points but misses the boat on implications.
Consumers are switching brands at unprecedented rates. Private label sales are up in double digits in some cases as 75 percent of US consumers trying a new shopping behavior in response to economic pressures. 36 percent of consumers are trying a new brand and 25 percent are incorporating a new private-label brand. Some 80 percent of customers who started using a private brand during the pandemic indicate they intend to continue using it once the COVID-19 crisis subsides.
Shoppers have cited a number of reasons for switching brands, with availability (in-store and online), convenience, and value leading the pack.
For marketers, this highlights the need to quickly become aware of when shoppers are migrating brands or retailers and then to manage the logistics to ensure product and service availability. But it goes deeper than this. For a lot of products, brand equity is in the trash because marketers value their equity more than consumers do.
Consumers are saving more
If the pandemic has shown one thing it’s that we all need to save more and spend less as the government is too dysfunctional to help.
Around 40 percent of US consumers have reduced spending in general, and they expect to continue to cut back on nonessentials specifically. With overall consumer spending declining, intent to spend in essential categories is increasing. Even among those with higher incomes, we see that while essentials show spending momentum, intent to buy discretionary products still lags significantly.
What can brands do?
1ne: Make sure you fight for EVERY customer and take care of your best customers. You may need to rething your strategy of growing a brand to one of making your brand as profitable as possible.
2wo: McKinsey says that a digital presence is one of the answers but that’s a canard. Yes, people are spending more time online but they are also using more ad blockers and some wifi products even offer the option to block out ads. Ask yourself this “is a consumer really going to come to our website to make a purchase decision?”. For hard goods, the answer is probably yes, for grocery store products the answer is probably no.
3hree: Understand that some products are easily bought online but also understand when consumers get back to shopping, after the pandemic, that these people will be purchasing in stores.
4our: Your advertising should reflect the reality of life today and position your product as something that makes them feel good or solves a problem for them. The meal home delivery services, for example, are leveraging the trend of more people cooking at home.
5ive: Brand can’t remain silent about social issues that are important to consumers. You just don’t have the option of not saying anything, you need to demonstrate that you’re interested in more than just sales and profit.
6ix: Fully understand your competition at the retail level. We decided, late last year, to take a client on a three-city tour to visit retailers that sold his products. What he found was poor shelf position, products not displayed to leverage consumer choices, and that they were being outflanked by competition who was aggressively using POP displays and end-caps.
7even: Monitor shoppers closely. Will they go back to the same behaviors per pre-pandemic or will they change behaviors permanently?
9ine: Review every one of your company processes. Eliminate those that don’t add value to your customers. Empower customer service people to make every customer happy.
McKinsey would like you to think that a seismic shift is underway but that may or may not be true. It’s an opportunity to get your shit together and become a brand that can quickly respond to consumers needs.
Originally published at https://www.newmediaandmarketing.com on August 6, 2020.