The cost of living crisis truly set us all back in terms of financial freedom. I love to treat myself to shopping trips; daytime dates; evening meals with my partner and friends; going to see live music; and travelling. I always think “money will come back around, but this time will not. Make memories now and get the money back later“.
Even though we’re seeing some economic recovery, my financial attitude and habits I’d built up in times of crisis is cemented in my behaviours and mindsets to brands even now. My previous mantra has been a little more tricky to sustain. After all the outgoings like Netflix, the gym, and groceries leave the bank, I don’t feel as carefree about my spending.
Now, travelling to London to see Harry Styles performing and having a fun weekend sightseeing and eating in restaurants, just makes me feel guilty.
It’s hard to keep up the thought of “money will come back around” when everything else is so expensive, and less money seems to circle back to me.
Customers are holding back on the things they love, and we should be paying attention to this. I used to be loyal to certain brands – now my loyalty has changed because I value bargains more. I’m cautious on where I spend my money, and who I spend it with. I know I’m not alone here…
Embracing frugality and forcing ourselves to change mindsets
We’ve all, in one way or another, been victims of the cost-of-living crisis that has plagued our society and wallets over the last 18 months. Inflation hitting a 41-year high in October 2022, and surging bills have forced changes in businesses, and our own consumer behaviour.
With UK consumer prices 2.3% higher in April 2024 than a year before, according to the Consumer Prices Index (CPI), customer spending considerations isn’t showing any early signs of recovery. Our behaviours we formed during crisis are difficult to forget about.
So what does the new frugal mean for overall customer behaviours and thought patterns? What must businesses across all industries do to adapt and keep up?
No more retail therapy or “little treats”
I find it even more difficult to part with my cash now if I haven’t managed to save money. I’m always going for the cheaper options. I’ve signed up to Tesco and Asda loyalty programmes just to see what savings it brings to my dreaded food bill.
I’m not the only one adapting to my shrinking disposable income. Tesco’s Clubcard members have grown 6.2% year on year to over 22m consumers. That’s because Tesco is clearly doing the right thing in bringing meaningful discounts through their programme that will actually make a difference to the overall shopping bill.
If it’s between losing, for example, nearly £50 on a product, or signing up to a programme to get a huge price reduction for the same item, I know what I’m choosing. Customers now have a different perspective on the value of money.
Put simply, customers can no longer afford those little treats – the little experiences that used to fill their free time. Where customers used to be loyal to a designer fashion brand or go to their favourite festival every year, they’ve now had to open up a loyalty card with their local supermarket.
How can businesses learn from this new normal?
Now there are signs of slow recovery. Inflation is back down to 2%, energy and fuel prices have retreated from their record highs. Does this mean we’re going to return to our previous behaviours?
Maybe not. At the start of 2024, 55% of UK consumers felt that the cost of living crisis isn’t getting any better. 40% felt that it’s improved but that it’s still a problem. Even though inflation is easing, it has still put a huge hole in most households’ budgets. To ensure that customers come back without guilt at spending money on their business, brands need to incentivise.
Look into successful loyalty programmes. See where you can offer discounts and at the best times of the year. Offer new customer rewards, and personalise marketing and savings for old, returning customers.
This can all be done to help you as a business, too. Work on a strategy to bring in those customers who value their money differently in the new dawn of economic crisis. As a result, your customer base may even grow. People are seeking bargains and brands who want to help – take advantage of this!
Now is the time to work harder and put the customer’s worries first.