The world has changed forever. Companies that were just getting used to a business environment where the internet had reduced once proud brands to the status of commodities, by price-comparison, ‘auto-switch’ and peer-review websites, now face a Global pandemic, financial crises and the potential terminal loss of customers. To paraphrase Charles Dickens, “it was the worst of times, it really was the worst of times”.
Organisations that re-open their doors post-pandemic, may well have a very different worldview to the one they started the year with. How it will pan out remains to be see, however, we can speculate…
My view is that Marketing will polarise between two extremes. Before the internet, and certainly before Covid-19, there were essentially 4 marketing positions organisations could offer in the market.
The ‘Rip-Off’ brands were already in the process of being weeded out, peer-review sites and Social media were steadily eliminating them, but bargain brands had done well, as they seemed to offer good quality at a reasonable price. With fewer, leaner, more price conservative customers emerging post-lockdown however, even these may struggle. I see a world where the Primary driver will be a conservatism, a desire to avoid or eliminate risk. In such a world, customers will go for either one (or perhaps a creative mixture of both) of two positions.
We have long known that in the customer’s mind, there is a clear link between price and quality. The customer will allow an increase in price if, and only if, there is a corresponding increase in quality.
The interesting thing is that we know what price is (to two decimal places, e.g. $34.12), but what is Quality?
‘Quality’ is whatever the customer says it is, nothing more. ‘Quality’ exists only between the ears of the customer. Finding out what the customer thinks is important is the key to quality and therefore to success.
We can expect ‘cheap and cheerful’ to always find a place. Companies can embrace the Proposition-flattening, commoditizing nature of the internet and offer a range of products that are unexceptional, generic and yet priced at a point that will gain significant traction in the market. Such offerings will yield very low margins and so will require;
- High volume sales
- Efficient, cost effective and large distribution networks
- Smart, cheap (but still effective) marketing
- Extremely low cost-bases
It will not be much fun working for these companies, and it is not without risk (there is only one cost leader in any segment and the price wars as companies seek this position can be an economic blood-bath), but at the right ratio of price: quality, many companies will do well.
The other likely winning position is perhaps more sustainable, and that is High-End Brands. Does anyone doubt that, when the Global lockdown ends and we return to something closer to normality, that Harrod’s and Selfridges in London will again be full of shoppers? Will Rolls-Royce, Aston-Martin and Ferrari still sell cars? Will Prada still sell expensive bags to ladies? The answer, in each case is “Yes”.
Customers that emerge from the pandemic will want to do business with those they trust. Trust and security will be the only things that matter post Covid-19. If your product seems ‘OK’ and is really cheap, the trust is not as significant because the downside of failure is so minimal. For everything else, for anything that requires a more substantial commitment from the customer, the need for trust is paramount.
The reason Big Brands are so successful is long debated in the business media but essentially it comes down to Trust. People trust brands, they know what they are getting, and they trust the brand to deliver its benefits reliably. The old maxim in IT used to be “Nobody ever got fired for buying IBM”. Whilst that particular organisation may have lost its way in recent times, that level of trust is what customers will seek.
So organisations choosing not to go down the loss-leader/cost leader route, need to invest heavily in their branding and they need to engender trust. Fortunately, this may not be all that difficult.
The phenomenon of ‘Behavioural Economics’ suggests that many, perhaps most purchase decisions are made emotionally, not rationally. Our brains look for short cuts in the known and familiar and instinct and gut feel are far more important that most customers realise. Even the most expensive of purchases often (usually?) have a heavy emotional component. Think of your last house purchase. Now perhaps you had a big spreadsheet and a long list of criteria, and perhaps you scored each property you considered and then bought the one that scored highest. My bet is you viewed a certain property, fell in love with it, imagined yourself standing in the kitchen and then made an offer.
So, it will be with your customers post-pandemic. They will be looking for partners, for brands, for someone to trust. The re-emergence of awareness that the customer experience is important, along with the phenomenal power of Social Media can be powerful enablers. Organisations that build their brands around the customer experience, that have intimate knowledge of the customer, his hopes, his dreams and his fears and which use customer-centric Branding strategies, fuelled by engaging Social Media can yet rule the Post-Pandemic world.
The choice is stark;
Be the cheapest
Be a trusted, customer-engaged High-Brand, or