Declining Consumer Spending — Where We Stand in 2021 and How It Affects Your Marketing
The economic uncertainty is impacting consumer spending. Find out how to adapt your marketing according to the latest consumer behaviour.
Published August 27,2021
Last Updated August 27,2021
Covid-19 hit different industries, consumer segments, and parts of the world – differently. Even though we have seen an increase in consumer spending in the US, and some economists continue to forecast growth in consumer spending, that doesn’t mean the rise in consumer spending applies to the entire world population.
“The Covid-19 pandemic created a tale of two economies: those who were able to save, and those who struggled to make ends meet.”
Source: Investopedia
There is a growing probability that the economy contracting we have seen during Covid-19 will leave marks and eventually make consumers more cautious about their spending.
The unemployment effect
Various businesses that were dependent on a large group of people gathering or travelling have been severely affected, many of which have been forced to close their operations permanently. Once a business closes, the employees are left without an income. And in 2020, we have witnessed 114 million people lose their jobs due to Covid-19 and the resulting lockdown.
Current statistics show the unemployment rate is still higher than pre-pandemic:
The Supply Chain Strain
On the other hand, the suppliers experienced a lack of product demand or constraints in their delivery. For instance, when Starbucks closed its coffee bars due to the Covid-19 lockdown, its dairy suppliers suddenly had to pour millions of gallons of milk ‘down the drain’.
Furthermore, in June 2021, Starbucks has seen supply chain constraints, putting the coffee chain in an uncomfortable position of having to apologise for shortages to their regular customers.
When we consider how the dairy supply chain doesn’t stop with dairy production, instead, it goes further to encompass the overall farming industry and its ecosystem – we can get a glimpse of the gravity of the situation.
The Temporary Financial Support
Even in the developed economies where businesses have had the grace of the government’s financial support to bounce back, we have to note that these injections have been dispersed selectively. In many cases, the financial support did not help sustain business profitability.
The effects of the economic uncertainty
As a result of the collective state of uneasiness, many consumers have been rendered fearful in their ability to spend their disposable incomes freely. Judging by the preliminary readings of consumer sentiment across the US, the consumer confidence index slumped to 70.2 in August 2021, down from 81.2 in the previous month.
To put things into perspective, this is the lowest reading since December 2011, showing how consumers don’t trust the pandemic-induced market shakedown will soon end.
Source: Trading Economics
Let’s not forget countries that have been hit hard by the lockdown measures, such as countries that depend on tourism to keep the economy moving. For this reason, many economic analysts expect the global recovery to be uneven and dependent on the rate of vaccination against COVID-19.
What does this mean for your marketing?
Marketers nowadays face the task of applying high consumer sensitivity. As a result of the global uncertainty, some consumers may be experiencing one circumstance today, while the next day, they may be living a very different reality.
The question at hand is – how to properly segment your audience to enable highly personalised targeting based on the circumstantial context of your customers?
Marketers must stay perspective-elastic, develop customer-centric feedback loops, digging into the first-party customer data, grouping customers into granular cohorts, and applying iterative marketing methods to match the customer’s changing situation and the most current circumstances.
Final thoughts
The market inconsistencies after 2020 are still unfolding into 2021, bringing with them the ever-evolving veil of uncertainty about the future.
The holy grail that can help us stay agile in the years to come — the real-time updates on the 360-degree customer view — is quickly becoming a necessity. Learn more about how a centralised Customer Data Platform (CDP) can enhance your marketing ROI, or get in touch with us today.
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