With businesses and economies closing due to the COVID-19 pandemic in 2020, consumers also tightened their budgets.
According to McKinsey, most consumers were more conscientious about shopping than they were before the pandemic. For this reason, most households mainly budgeted for essential products and services.
But now that economies are starting to reopen quickly after mass vaccination, business owners and marketers may also be wondering what this could mean for next year’s revenue.
Specifically, many business leaders ask: “Will consumers continue to spend cautiously or will they spend more freely in 2021?”
To help businesses prepare and navigate the months ahead, I asked nearly 300 random consumers, “What is the best description of your budget plan for the next year?”
Here’s what they said and tips on how to control future spending behavior.
How consumers are going to spend money in the next year
When economies reopen, people go back to work, and household incomes rise again, you might think that people will run into online or physical stores to shop for all the things they didn’t have a budget for in 2020.
However, if you look at the results of our little poll, it seems that people are cautiously optimistic about their budget for 2021.
Although a third of respondents say they are “loosening up” their budgets and spending more money than they did in 2020, a whopping 43% plan to keep the same budget as in 2020. Meanwhile, nearly a quarter of those surveyed will tighten their budgets and spend less money in the next year.
Data Source
If you’re not selling essential products or services, or are relying on a bigger budget from your customers, don’t panic just yet. Remember, this is just a small poll of a random group of consumers. If we had also interviewed people in different industries, locations or age groups, the results might have been different.
However, this survey reminds us that people are still more conscientious than ever about the products and services they buy – and they are likely to remain so for the months to come.
In order to turn target groups into customers, it is ultimately more important than ever to market the value of your offer – even if you are not selling anything that is considered “essential”.
Tips for marketing your product or service in uncertain financial times
1. Make your value proposition a priority.
When someone is on a tight budget, every dollar they spend must be worth it. That means the product or service they buy must help them do something essential, resolve a common weakness, save time or money, or meet other important needs.
As a marketer or business owner, it is important to understand the specifics of your buyer personality, their needs and their motivations to buy. Then you need to use your messages to explain why your offer is worth the money.
2. Differentiate yourself from your competitors.
Since I am a price-conscious person myself, I – like many others – do extensive research before I buy a product or service. When I decide to buy something, I look at all of the brands that sell it, their reviews, and the cost of the product. While I might be buying the cheapest version of something, I might consider a higher quality version of a product if something about it is of better quality than the cheaper option.
For example, I recently helped my parents choose their first smart TV. While almost all smart TVs today have similar apps and features, we picked a Roku TV because Roku’s marketing was focused on having a simple, easy-to-understand user interface and setup. It was also quite affordable, but the UX alone was the reason to buy it over other competitors.
As a marketer, it’s important to remember that people consider many different factors when making a purchase decision – especially when it’s a larger investment. And sometimes the price of the product isn’t the only deciding factor. Because of this, it’s important to market elements of your product that are different or better than a competitor’s.
3. Use customer-generated content.
If you’re struggling to differentiate your product or service but know that you have loyal customers who love your brand, use them in your marketing.
Research has shown that potential customers trust customer reviews, videos, guides, and other user-generated content similarly to how they would trust word-of-mouth. When a potential customer finally sees that someone like him has benefited from your brand’s offerings, they trust that you are selling something of good quality and value and may be more motivated to buy your product than a cheaper alternative from a competitor with bad or bad ones minimal ratings.
Need examples of how to collect and market great UGC, testimonials, or reviews? Check out this guide.
4. Consider discounts or sales.
If your brand can afford to offer small discounts or sales, this can be a great way to attract people on a smaller budget to your brand. Even if your discounts or sales are temporary, a potential customer can buy a product on sale, love its quality, and later return to the brand because it has gained a sense of trust and loyalty.
If it is not possible to offer sales or discounted services, you could also consider a loyalty or rewards program that allows high volume buyers to eventually receive a free or heavily discounted product. That way, they might feel like every penny they spend could be used for a reward in the future.
5. Highlight the mission or purpose of your brand.
In 2020, the same McKinsey survey mentioned at the beginning of this post also found that people were also starting to shop with brands that shared values similar to their own. With this in mind, brands are increasingly investing in targeted marketing or campaigns that highlight a mission, purpose, or set of values that the company takes seriously.
For example, Kréyol, a fashion brand run by black women, embodies Haitian culture and the global empowerment of women with its clothing and product lines. The company’s mission, “For Women, by Women”, aims to improve the lives of women, craftspeople and entrepreneurs around the world by showcasing their clothing and designs on the Kréyol website.
“The whole idea behind Kréyol was that I could offer artisans, especially women of color, a platform to highlight their wonderful work,” said CEO Joelle Wendy Fontaine in an interview.
While Kréyol’s marketing and business strategy is raising awareness of beautiful craftsmanship, potential customers may also be more motivated to endorse the brand because of its trustworthy and authentic mission to improve the lives of women around the world.
Navigate the changing buying behavior
As the world continues to open and evolve after the pandemic, spending habits will change too. While some people are starting to spend more, others will remain cautious for the next year or beyond.
As a marketer or business owner, you need to listen to your target audiences and continue to track your target persona’s data to see how their approach to money is changing and the efforts you need to make to keep them engaging.
To learn more about the latest marketing trends and consumer behavior, read our recently published State of Marketing Report.