The changing face of the consumer
While many businesses having undertaken a huge range of transformations over the past year, it’s important to remember that the customer has also changed.
We argued in a previous article that the businesses best placed to prosper in the wake of the COVID-19 pandemic would be those that have metamorphosed rather than hibernated during the crisis. Much of what we’ve seen since would seem to support this view.
It’s obvious, after all, that many companies have lost out, that others have hung on by the skin of their teeth and that others – not just the biggest players – have done very nicely in a period of extraordinary disruption. By and large, those in the second and third groups have avoided the mistake of simply biding their time and waiting for the world to suit them again.
But what happens if we apply the same analogy to customers? Have they been dramatically transformed as well? Most significantly, should businesses take account of the possibility that consumers have pivoted towards different ways of spending their money?
One reason this issue demands attention, of course, is that there’s an enormous amount of pent-up demand out there. Unlike in the aftermath of the global financial crisis, when much of the money pumped into circulation was retained by the financial sector, the fiscal and monetary responses to COVID-19 have left the public holding the bulk of the bounty. The spike in money growth is essentially unprecedented in modern peacetime.
As a result, the battle for the “pandemic pound” is already giving way to the fight for the post-pandemic pound. So, how might this transition impact on entrepreneurial thinking?
Lost custom and the search for solutions
A good starting point for assessing the new consumer landscape is the reality that some customers will, in all likelihood, never return. This is why enterprising businesses should now be chasing the clients of today and the future, not those of the past.
By way of illustration, let’s begin with a snapshot of the tourism industry. Right now, it’s still challenging to travel abroad, meaning many people will have to be content with donning their waterproofs and remaining within the confines of the UK for a few more months.
Some would-be holidaymakers, though, might be less than thrilled by the prospect of a staycation. So, what might they do with all the money they don’t spend on a wet week in Bognor? Sure, they might save their cash for another rainy day, but they could also choose to lavish it on other things.
For the tourism industry, then, these are consumers who won’t return – at least in the short term – unless the sector can come up with novel ideas to regain their interest and custom. And for everyone else, if we treat this as a zero-sum game, they’re a potential source of additional income.
As we’ve seen, it’s companies with a strong grasp of their function and what they offer that have been able to shapeshift successfully. Meanwhile, it’s those wedded to their form – that is, how they deliver their offering – that have found themselves in trouble, as they can no longer operate in a way they may have spent years perfecting.
New models and novel thinking
Home delivery offers some of the most compelling evidence of metamorphosis of companies and customers alike. Importantly, it also demonstrates that the ability to change is by no means confined to corporate titans. Many small businesses that have long struggled on the High Street have benefited from a forced switch.
Takeaways are a ubiquitous example. Formerly the poor cousins of restaurants, they’re now the High Street’s new cash cows. Platforms such as Uber Eats and Just Eat have equipped them with a steady audience through “front and centre” virtual shop windows that they could never have afforded in a physical world. If what we’re witnessing becomes a permanent shift in how people spend “a good night in”, as seems likely, more restaurateurs could themselves pivot and choose to run delivery kitchens.
The “not on the High Street” model is also giving rise to the sort of approach favoured by companies such as online florist Bloom & Wild, which makes a conspicuous virtue of what it doesn’t do. Specifically, Bloom & Wild doesn’t equip you with a beautifully presented, cellophane-wrapped bouquet: instead it delivers flowers by Royal Mail in letterbox-sized packaging, along with instructions on how to arrange them yourself. Like Gousto or Hello Fresh, it merely provides the ingredients – leaving the customer to do the rest.
All of this constitutes an evolution of what can be called “pull sales” or “self-service sales” models, which benefit from huge customer recognition of value. Ikea was a pioneer in this field, in which the key to a transaction is the price anchor – the comparison that determines how much a consumer will pay.
It’s vital to understand, for instance, that Bloom & Wild isn’t in competition with supermarkets: it’s in competition with stylish High Street florists. Similarly, Gousto and Hello Fresh aren’t competing with takeaways: they’re competing with local bistros, where diners may be content to pay £25 for a bottle of wine – a price most of us would rarely deem acceptable in other settings, including the weekly shop.
Key lessons as “normality” grows nearer
We previously said the pandemic had driven many thousands of companies into the commercial equivalent of a coma; those content simply to bank on waking up to discover a miraculous return to business as usual were liable to be gravely disappointed.
This is basically how things have panned out. The sleepwalkers have awoken to an ongoing nightmare – one from which they might never be able to escape – while enterprises with a more entrepreneurial outlook have found innovative ways of re-establishing and reasserting their relevance.
The disparity is already crystal-clear. Some responses have been adaptive and creative; others have been at best passive, and at worst, damagingly inert. Ultimately, we’ve seen grand-scale proof of a longstanding and generally reliable business dictum: staying the same is rarely an option.
More than ever before, companies have needed to understand what they’ve always done well, what they could do better and, above all, what they might do differently. Crucially, they’ve also needed to understand how consumers perceive value. This has required them to be flexible and fleet-footed, thus proving another useful axiom: minds are like parachutes – they work best when they’re open.
The challenges will keep coming as consumers realise how they, too, have changed during the past year. So, there’s no time to relax, even if it might seem the worst is over. Although something akin to normality is now close, businesses chasing the post-pandemic pound must recognise that very little – their customers included – will ever be quite the same again.
Paul Kirkham is a researcher in the field of entrepreneurial creativity and Ingenuity Learning Support Development Officer at Nottingham University Business School’s Haydn Green Institute for Innovation and Entrepreneurship (HGIIE). David Falzani MBE is a Professor at HGIIE and president of the Sainsbury Management Fellowship.