The recent rise in interest rates will hurt consumers and put a halt to some spending. During the pandemic, consumer savings rates exploded, but their savings were draining, and credit card debt increased again. What effect will this have on consumers and the brands they buy?
Profits for corporations have increased rapidly, while labor costs have not. The profit increase reflects the ability of firms to exploit kinks in the supply chain. Most of these price increases have gone to profits, not to labor. That’s going to cause problems.
Recent research indicated that more than half of consumers are willing to change brands because of high prices. Some brands don’t seem to care. P&G, for example, said that they would most likely be raising prices again on their brands. This makes private label companies salivate.
Bob Hoffman has often said that marketers mistake brand equity for convenience, and I agree with him 100%. The idea that consumers will continue to pay high prices for products that are interchangeable is a fantasy.
It’s hard to understand how the FED could raise interest rates when the economy contracted last quarter, but it has always been reactive instead of proactive. When interest rates increase, this causes goods and services to become more expensive because borrowing money becomes more expensive. A house or car will cost more if the interest rate is higher. This causes consumers to spend less, reducing the demand for goods and services. This will be especially true for products like car loans and mortgages.
When interest rates increase too quickly, it can cause a chain reaction that affects the domestic and global economies. It can create a recession in some cases. If this happens, the government can backtrack the increase, but it can take some time for the economy to recover from the dip. I believe that we are headed for a recession, and it’s going to be a nasty one.
Major U.S. corporations report record profits despite rising inflation as companies pass rising supply chain costs onto consumers. The analysis of Securities and Exchange Commission filings for 100 US corporations found net profits up by a median of 49%, and in one case, by as much as 111,000%. Those increases came as companies saddled customers with higher prices, and all but ten executed massive stock buyback programs or bumped dividends to enrich investors.
Somehow brands feel that customers are so devoted to them that they’ll be able to overcome the media reports about their excess profits. That’s bullshit. In my conversations with brokers who sell to the top grocery chains, they see a more significant influx of private label brands and decreasing orders for some brands as volume has dropped off. One broker said, “most brands a deaf to what consumers are saying about high prices.”
Some of the nation’s largest retailers have been using soaring inflation rates as an excuse to raise prices and rake in billions of dollars in additional profit. They think consumers don’t notice or believe their propaganda that their brand is so strong they can get away with it—more horse shit.
Companies, products, and people continually reinvent themselves to keep up with consumer preferences and ensure they’re on the right side of history. Although rebranding and other such changes are nothing new, they seem more frequent these days. It won’t work anymore.
The fact is, your customers have dramatically changed, even if you haven’t. The pandemic has affected the lifestyles and motivations of many people and led to new ways to buy goods and consume information. According to this Forbes article “50% of consumers say the pandemic caused them to rethink their purpose and priorities. (Accenture)”. Following these times of greater insecurity and strict rules, people demand more from life than just making a living. The pursuit of purpose has kickstarted again, with fulfillment and adventure at its core! People feel confident to challenge the status quo and pursue what truly brings them joy, to life to the fullest. And want to connect with brands that reflect those values!
75% of consumers say the pandemic will drive long-term changes in their behavior. (Forrester)”, this stat is also from Forbes article and we are already seeing it happen in regard to what consumers expect and value. Customers know brands have the technology tools to automate and personalize many aspects of customer service, and they wish it to happen. They have realized the convenience of digital channels and now expect them to work smoothly for all brands. They also seek more self-service models with the help of knowledge centers, bots, or communities. Just look at all this data: “93% of customer service teams say customers have higher expectations than ever before. (Hubspot)”, plus “58% of consumers say their customer service expectations are higher than they were a year ago. (TalkDesk)”. There is no way to ignore it! Either brands can blindly continue the same approach to customer service or find new ways to adapt and evolve to their expectations.
Brands need to stand for something “bigger.” These past years have brought social issues to the forefront, and brands that don’t recognize that societal concerns influence their customers are at risk of being left behind. Consumers are more aware of the “social consciousness” of brands, which brings a new approach to branding: if before brands should stand behind great products, now they should also stand behind great values. They need to stand for something, adopt more ethical business processes and implement sustainable initiatives if they want to retain their customers’ trust and loyalty.
Also, consumers are starting to get sick of all the ads and pieces of meaningless information being shoved into their faces every minute. To counter the constant onslaught of promotional content to which consumers are subject, brands have started to find ways to market themselves without relying on traditional brand elements and visual identity. Sometimes without even showing their brand names or logos, leveraging their unique value propositions and focusing on providing valuable resources and information that their target audience craves. In the same way, several brands are partnering with other like-minded brands to collaborate on common causes and genuinely contribute to adding value to others.
Any brand that thinks it can maintain the status quo will lose. Branding is evolving but never, ever believe that your brand is essential to consumers.
