How manufacturer and retail brands can win in down markets
To state the obvious; the world is a strange place.
It’s also churlish, not to mention boring, to go over the reasons why the last few years have been even more strange.
Without doing so, however, it’s difficult to write about future events without relating to past ones.
All aspects of our lives were affected by COVID, the way we work and socialise, and how those two intersect, might never return to our previous normal.
There have been several million think pieces about these changes and how good/bad/indifferent they are, and I won’t add to that pile.
My biggest takeaway from the whole thing is how much people want the ‘new normal’ to feel like the old one – only improved.
BUCKING THE TREND IN LOCKDOWN
This is good news for those looking to predict consumer behaviour, as creatures of habit are far easier to manage.
One of those habits that we Brits go back to is to invest in improving our homes when economic slowdowns hit.
It makes sense, upgrading a property is an investment that we believe will pay off later, and feels less frivolous than other forms of high-ticket spending.
Lockdowns exacerbated this, with many of us working from home in unsuitable environments, or just getting sick and tired of staring at that feature wall.
Some of the stats are both incredible and entirely understandable at the same time, with COVID credited for driving 86% of home improvement projects in 2020, and almost two-thirds in 2021.
This has meant a gold rush for product manufacturers, retailers and service brands that support the DIY and home interest markets. It’s also forced the hand of retailers to invest more in the digital estate screen-to-store experience for customers.
For this, retailers in the space have enjoyed revenues at pre-pandemic levels, spending 6% more on home improvement products in 2021 than in 2019, according to Barclaycard.
All of this makes for pleasant reading in hindsight, but it wasn’t all roses at the time.
WATCHING AND WAITING
As a B2B specialist agency that works with many of the UK’s leading home improvement brands, we watched anxiously as builders’ merchants and retailers closed their doors at the start of the pandemic.
We then held our breath as we waited for Central Government to confirm the status of these crucial sales channels as key services – there was some celebration at SLG towers that night… metaphorically speaking, we were more than likely at home doing another Zoom quiz.
The two-and-a-half years since have been boom time for brands.
Several of our clients swung from concerns about too much stock to worrying about how quickly they can re-stock to meet demand. In a lot of cases, the reality ended up being a world away from the initial panic, which is all great news, until now.
With inflation and fuel costs rising (with the potential to severely impact supply and demand), material cost rises owing to continued supply chain disruptions (first COVID and now the Ukraine conflict) and a drop in consumer confidence, it may be that those businesses are set to feel some of what other sectors like hospitality have.
EVERYTHING is ‘doom and gloom’ on the economic front at the minute, and I suspect you’ve not come here for more of the same.
Instead, I’ll try to offer some encouragement to construction product, DIY and home interest brands – taken directly from investment-Guru and wealthy guy Warren Buffet; ‘Buy the Dip’.
Mr Buffett is legendary for his annual addresses at his Berkshire Hathaway conferences, and many of his maxims become cliché – largely because they’re true. And this is one of them.
In simple terms, Buffett says that there are some bargains to be had for those that can invest, and that even if your focus isn’t immediate conversion, you’ll find yourself at the front of the queue when the audience is motivated to purchase in the future.
Incidentally, here’s the man putting his money where his mouth is with a recent spree of investing.
MAKING YOUR VOICE HEARD
Brands that are brave now are likely to steal a march on the competition, keeping themselves in the minds of audiences and cultivating brand recall in preparation for consumers to start spending again.
Excess share of voice (ESOV) is very real, and as your competitors lose their nerve on brand-centric spending you may find that you have a lot more space in which to win hearts and minds, while still being able to keep your sales pipeline alive with more tactical activity. You’ll have to fight your instincts and, most likely, your Finance Director, but there’s a payoff.
This doesn’t mean going crazy with the advertising budget, but investing time, effort, and resource into one’s own brand to make sure everything we do is as effective, measurable, and appropriate as possible.
This sets the bedrock for those big campaigns to come and ensures that you can chase short and medium-term returns at points in time when our audiences are motivated to engage with us.
Of course, I’m the MD of a B2B-specialist integrated agency (the best in the North, in fact…), and I’ve a vested interest, but I’m not alone in my thinking.
If you don’t want to take my word for it, there are some pearls in this recent missive from Mark Ritson:
“Summarising a century of data, the reason brands should maintain their brand building budgets in a recession is not because of the recession itself, nor the behaviours of consumers. It’s because your competitors lose their nerve and are vulnerable because of it. If you can keep your head and your brand budget while those around you are reducing theirs, you will earn the post-recessionary benefits.”
What have your experiences been, have you been able to spend through previous dips or has belt-tightening been the order of the day?
What are you thinking about going into this period of inflation and (likely) recession?
Connect with me on LinkedIn here and let me know.
We are in the business of making a difference. This may be just the right time to discuss what that’s all about.