The inflation crisis has barely passed, or rising interest rates and the conflict in Israel started to weigh down consumer confidence. “A crisis is not just an objective fact. ‘Fearonomics’ makes people adjust their behaviour”, Johan Hellemans of WPP Belgium points out.
Price remains important
The National Bank of Belgium saw “a slight increase in consumer confidence in September, with households having more confidence in the macroeconomic outlook again. Still, they remain more cautious about their future personal situation.” However, in GroupM’s fortnightly recession monitor, nearly half of all consumers still say they only have just enough to make ends meet. Two thirds also say they are being more cautious about spending.
In an exclusive analysis for RetailDetail, Hellemans states that “It is therefore not surprising that price remains a particularly important aspect in the buying process”. “Since the beginning of the year, we have not really seen a decline in price awareness. On the contrary, since the last measurement in September, it seems to have risen again somewhat. For example, we see that 77 % (+ 4 % compared to February 2023) say they often compare prices. 72 % (+ 3 %) say they compare prices in detail and 68 % (+ 2 %) say they look out for the lowest prices.
Brand loyalty does rise
Apart from price sensitivity, the market research company does sees that brand loyalty has increased since the beginning of the year, from 31 % to 37 % in September. This means that price sensitivity does not mean that consumers would not be willing to pay more for good quality. “In July, we saw just over 50 % of consumers indicate that they are willing to do so (+ 9 % compared to February) – but meanwhile it has fallen back to 44 %. It already seems to support the consumer confidence figures, where we can speak of a moderate upward trend, but where we still see some reservation or reluctance among consumers.”
“Belgian households have also not yet forgotten the high energy and food prices of last winter. Now that we are a year later and inflation is slowing down, those same consumers also continue to wonder why costs remain so high for them. Of course, just because price increases are decreasing does not mean that prices are lower on an aggregate basis. However, many fail to see that retail margins remain thin in many cases, while ‘greed inflation’ is openly debated and price rises are attributed to greed and excessive profiteering.”
Recession more likely
Meanwhile, young families are facing rising interest rates and higher house prices or rents. “These are not discretionary purchases. People have no choice but to bear the higher costs.” Economists further argue that the impact of Israel’s escalating conflict could become quite significant. The possible rise in oil prices could make it harder to keep inflation low. In addition to political uncertainty, economic indicators suggest that the likelihood of an economic recession is increasing.
“However, this is not the first crisis we face as a society. Over the past twenty years, we have become crisis veterans, so to speak, navigating our way through a permanent state of crisis. That “permacrisis” even became Collins English Dictionary word of the year for 2022. In this regard, the 2008 financial crisis was not just an economic crisis, but a demarcation point where a number of fundamental principles of our liberal democratic society were eroded – values that also underpin consumerism and the function of marketing and branding as accelerators of future growth. This disillusionment with liberalism, consumerism and corporations is not a passing trend, but a fundamental shift in attitudes that is already shaping our society today. We can see its effects on perceptions of political parties, media, government, non-profit, as well as commercial brands.”
Brands under surveillance
There is a shift towards sustainability and corporate social responsibility as consumers increasingly expect companies not only to make a profit, but also to make a positive contribution to society and the environment. This is further reinforced by the rise of social media, reviews and 24/7 access to information, making us more exposed to consumer activism and polarisation.
“Delhaize has experienced this first-hand, in its franchising operation, but this even seeps into day-to-day marketing activities. For example, marketing towards a segmented target group has become so much more difficult without offending anyone. Another example: everyone can say they are the cheapest, but consumers can verify the price of a product on the spot and immediately online. Brands are therefore actually under constant surveillance in a way, and one misstep can quickly lead to a wave of negative publicity.”
“Collective fear”
“A crisis is not just an objective fact. Fearonomics causes people to recalibrate their perceived purchasing power and needs portfolio, and adjust their behaviour, with at the base less discretionary wealth. Collective fear also hampers the sector, even despite the automatic adjustment of wages which moderated the impact of inflation in Belgium. This means the cautious optimism could soon turn back into a negative spiral. The previous crises have not yet been digested and the next ‘real’ crisis is already announcing itself. Winter is coming again, both literally and figuratively”, Hellemans told RetailDetail.
In such a fearful context, people are more likely to look for four things, Hellemans explains: safety, security, control and guidance. How people deal with these in a digitised world has also fundamentally changed, often resulting paradoxically in many cases in it just becoming harder to discern what can and cannot be trusted.
“To be successful in this complex environment, brands must constantly work to build trust by being consistent and authentic in their communications, listening to their customers’ needs and being transparent in their operations. Only then can they hope to maintain or restore consumer trust. However, brands are succeeding increasingly less well in this: our study shows that trust in brands has fallen sharply over the last few years. The retail sector follows the general trend there. We do see different stages here for retailers and online stores (“online commerce sites” or OCS): in the period 2012-2015, trust in retail brands fell, while brand trust in OCS remained stable. Then again, in the 2018-2021 period, retail remained more stable than OCS. Trust fell further for both in 2022 and 2023. However, the difference remains small!”
This article is part of a series of three, based on the new WPP brand study 2023. Last week, we highlighted why customers gave Delhaize’s brand positioning an uppercut. The third article portrays the (few) winners and (many) losers of the current price wars.
WPP’s BrandAsset Valuator is known as the world’s most comprehensive and long-term research on brands and brand valuation. WPP-BAV uses the rich insights from this research to offer a range of services, including brand monitoring, brand audits, brand positioning, engaging presentations and workshops. In addition, the research can be used to meet your company’s KPI and benchmarking requirements.
The BAV study has been conducted annually in Belgium since 2012, building on previous studies dating back to 1996. The Belgian database includes more than 2,500 brands. In 2023, 15,695 people aged 18 to 74 were surveyed online to gain a thorough understanding of how brands are perceived in Belgium.
Want to maximise the power of your brand and ensure a strong position in the market? Then contact johan.hellemans@wpp.com today to find out how their services can help you achieve your brand goals.
