For CMOs, inflation is both challenge and opportunity

Infla­tion is pro­found­ly impact­ing con­sumers’ rela­tion­ships with brands, pre­sent­ing mar­keters with seri­ous chal­lenges. But could it also hold long-term oppor­tu­ni­ties for CMOs?

Accord­ing to Mind­share UK, just 16% of peo­ple agree with the sen­ti­ment: “I feel con­fi­dent that I can take this hit with min­i­mal changes.” More than eight in 10 (85%) of us will be on the look-out for cheap­er alter­na­tives when shop­ping.  

As infla­tion ris­es and more con­sumers look to save mon­ey in any way they can, mar­keters are hav­ing to review their strate­gies. PepsiCo’s chair­man and CEO Ramon Laguar­ta recent­ly said the com­pa­ny would make retain­ing con­sumers the top pri­or­i­ty as the cost of liv­ing ris­es. 

“We think the con­sumer is very ear­ly in this process of adjust­ing to the new infla­tion­ary envi­ron­ment,” he said on an earn­ings call in April, adding that he expect­ed new con­sumer behav­iours as they adapt to the new real­i­ties. 

The food sec­tor faces the most seri­ous impact from infla­tion. Some man­u­fac­tur­ers are retrench­ing. Danone, for instance, will put greater empha­sis on its essen­tial prod­uct lines.  “We will go back to fun­da­men­tals, rather than what was fash­ion­able at one time or anoth­er,” its chief exec­u­tive, Antoine de Saint-Affrique, told the Finan­cial Times in May. 

Pricing power

Chris Burggraeve is founder of mar­ket­ing strat­e­gy con­sul­tan­cy Vicomte and for­mer glob­al CMO at AB InBev. He thinks one key issue for mar­keters is sus­tain­able pric­ing pow­er. “This comes from long-term strate­gies that focus on stake­hold­er val­ue rather than short-term share­hold­er val­ue,” he says. “The com­pa­nies that are suf­fer­ing from mar­gin com­pres­sion at the moment are those that don’t have sus­tain­able pric­ing pow­er – they haven’t invest­ed in devel­op­ing their brand so that cus­tomers are will­ing to pay more for it.”

Burggraeve cites the exam­ple of Ama­zon Prime: sub­scrip­tion prices for the ser­vice in the US have recent­ly risen by 17%, a move the com­pa­ny felt con­fi­dent about because of its brand loy­al­ty.  Proc­tor & Gam­ble is also in a good posi­tion here, argues Burggraeve.  “CMOs need to lead the fight in the board­room to per­suade the CEO and the CFO to invest in the brand so that in this new world of high­er infla­tion their com­pa­nies have effec­tive, sus­tain­able pric­ing pow­er.”

Brands that feel unable to increase their prices have anoth­er option.  Recent research by Havas Media Group iden­ti­fied a 77% net increase in the num­ber of peo­ple who say it is more impor­tant that brands help them to save mon­ey than before the cri­sis. There was a 75% increase in the num­ber of peo­ple say­ing it is more impor­tant for brands to offer prod­ucts and ser­vices that are priced fair­ly in terms of qual­i­ty than before the cur­rent eco­nom­ic down­turn and the rapid rise in infla­tion.

How­ev­er, CMOs must look beyond pric­ing. Jor­dan James is head of key hold­ers at Unlockd Mar­ket­ing; he has worked with Any­time Fit­ness and Crowne Plaza Hotels & Resorts, among oth­ers.  He encour­ages CMOs to focus on per­ceived val­ue or added val­ue over com­peti­tors. For exam­ple, ben­e­fits like longer-last­ing or hard­er-wear­ing prod­ucts will be increas­ing­ly appeal­ing, he argues. There will also be poten­tial to tap emo­tion­al appeal, such as offer­ing a treat for the fam­i­ly.  “There’s also a place for a focus on tra­di­tion,” he says.  “As a soci­ety, tra­di­tion calms and sta­bilis­es us.”

When times are hard and brand loy­al­ty comes under pres­sure, man­u­fac­tur­ers must be ready to lis­ten to their cus­tomers more care­ful­ly so that they can respond to demands and pref­er­ences at a quick­er pace.  

A focus on user-gen­er­at­ed con­tent (UGC) can help here, accord­ing to Ed Hill, senior vice pres­i­dent EMEA at Bazaar­voice, a retail tech­nol­o­gy provider.  “UGC is all about con­nect­ing with con­sumers, build­ing com­mu­ni­ty, and cre­at­ing a con­ver­sa­tion between cus­tomers and a brand,” he says. “It isn’t about the ques­tions they should be ask­ing, but about lis­ten­ing and respond­ing to cus­tomer feed­back to under­stand wider sen­ti­ments towards a prod­uct offer­ing or the brand itself.”

Hill points to kitchen paper brand Plen­ty, which used what it learned from cus­tomer reviews to help cre­ate ‘Handy Tow­els,’ a sin­gle-sheet paper prod­uct for mul­ti­ple rooms in the home that can be use with one hand. 

Sim­i­lar­ly, Unilver’s UGC iden­ti­fied a demand among its con­sumers for a Ker­atin Smooth dry sham­poo. In the absence of such a prod­uct, the com­pa­ny pro­mot­ed oth­er dry sham­poos in its lines along­side the Ker­atin Smooth sham­poo.

Building loyalty

Loy­al­ty pro­grammes offer mar­keters anoth­er oppor­tu­ni­ty to retain increas­ing­ly promis­cu­ous, price-focused con­sumers. Dur­ing the pan­dem­ic, 62% of busi­ness­es report­ed that their loy­al­ty pro­grammes kept cus­tomers engaged in the cri­sis, accord­ing to Anta­vo, a loy­al­ty man­age­ment plat­form.  Tiered pro­gramme own­ers – where those cus­tomers who spend more are placed in high­er tiers offer­ing more gen­er­ous rewards – have report­ed a 1.8 times high­er return on invest­ment com­pared to those that do not offer tiers. Mean­while, near­ly three-quar­ters (72%) of com­pa­nies sur­veyed planned to revamp their loy­al­ty pro­grammes over the next three years. 

“Busi­ness­es need to be increas­ing their invest­ment in exper­i­men­ta­tion,” says Dan Peden, prod­uct direc­tor at mar­ket­ing agency Jour­ney Fur­ther. “Whether it’s on a web­site or in a store, hav­ing an exper­i­men­ta­tion team or agency will help fuel cus­tomer insights and improve your cus­tomers’ brand expe­ri­ence. When done prop­er­ly, exper­i­men­ta­tion allows you to chal­lenge what you thought you knew about your cus­tomers and remove your opin­ions from the con­ver­sa­tion.”

Neces­si­ty, it’s often said, is the moth­er of inven­tion. CMOs who are pre­pared to think more broad­ly and cast them­selves as thought lead­ers in the board­room have an oppor­tu­ni­ty to reimag­ine not just their mar­ket strate­gies, but their brand’s entire ethos.