I’ve been a consultant for over 40 years and have worked through Watergate, 9/11, the 2008 financial crises, COVID, and now, the dramatic impact of recent tariffs and the instability caused by their imposition. In the midst of COVID (the last period of prolonged instability), we wrote a brief summary of what we’ve learned about consumer decision making through the past disruptions, identifying a few defining characteristics:
- Consumers buy only what they think they (may) need.
- During the crisis, price is not a barrier to a perceived need.
- Coming out of the crisis, when the economy and confidence are shaky, price becomes a barrier.
- When uncertainty reduces the availability of preferred brands, consumer loyalty is tested and can easily shift if a new product or service is more readily available, and performs well during the crisis.
- Coming out of a financial crisis, pre-crisis loyalty can also fall prey to better value and/or experience
The teachings of behavioral economists recognize that consumers (i.e., we humans) are dramatically influenced by the information readily available to us (“availability bias”). This heightens concerns when we hear about mounting danger and offers opportunity for the brands that get us through the danger to become a part of our lives long after uncertainty subsides.
As we enter this next period of uncertainty, we want to revisit these principles and introduce a few new ones to keep in mind as you navigate this chapter.
Consumers default to more instinctual decisions
During periods of uncertainty, our instincts (what behavioral economists call “System 1 thinking”) drive more and more of our purchase decisions. When we are anxious, we quickly grab at the first seeming solution without the patience to pause and make a more considered (“System 2 thinking”) decision.
Thus, marketers need to sharpen their offerings and promotions in recognition that consumers will be apt to pick their favorite brands (when available and accessible) – unless a quicker fix looms as an option. Physical availability was a clear problem in COVID and will likely become a problem again in some categories due to tariffs.
Consumers prioritize preserving what they have over growth and/or risk
Behavioral economics has another core principle called “prospect theory,” which describes how consumers go about making decisions, especially when they are on less stable ground. At all costs, people want to preserve what they have rather than risk losing it; what’s more, they are more likely to choose an option to prevent a possible loss than to pursue something risky even for a larger potential gain – a bias known as “loss aversion.” In times of uncertainty, when pitfalls seem to lurk around every corner, consumers are primed to make decisions they believe will help them at least maintain the status quo.
The Recommended Path Forward
At HawkPartners, we believe the clearest lever marketers have to use during uncertainty is communication. Past crises show that marketers should recognize the discomfort consumers are feeling and take advantage of the fact the consumers will likely simplify their decisions, often focusing on one dominant attribute when thinking about purchasing a brand. Our recent work on Message Resonance highlights that brands can most effectively communicate that dominant attribute by promoting a message that:
- Speaks their language – talks how consumers talk and speaks easily to the consumer
- Connects emotionally – uses language that brings comfort, safety, etc.
- Communicates how the product/service meets a need – in this case, this ideally will be a quick fix with an available product or service
I am not sure how long these uncertain times will last; but marketers who can tap into the minds of their target consumers, understand their current needs and biases, and communicate effectively are certain to fare best.