We continue our series of insights into consumer sentiment and future behaviour, based on our COVID-19 global study.
We talked to 4 500 people in 9 countries across the globe about how they feel, how they view the future and how they think their behaviour will change over the next 12 months. These topics were the basis for grouping the people into consumer segments defined by the data we gathered. This resulted in four very distinct groups of people, present in each country, although some groups are more prevalent in certain regions.
By identifying these consumer segments, we enable businesses to better understand economic and social changes and how consumers' are reacting to this. Here are the four segments we extracted from our research:
- Comfortable optimists
- Considerate spenders
- Cautious wait-and-seers
- Financial survivors
Let’s take a look at each segment separately:
1. Comfortable optimists
In the first category, people are optimistic about the future. Many of them were able to save up the same or even higher amounts of money during the lockdown.
Considering they are still well off financially speaking, they don’t feel guilty to spend money (often on high-quality brands), and they are going to continue with their purchasing habits.
It’s no wonder this segment is optimistic about the future, as they don’t have to worry about finances and survival. Nevertheless, like the other groups, they will review their financial plans/savings/investments to further optimise and grow their wealth.
What do Comfortable optimists mean for your business?
- If Comfortable optimists are your key target consumer group, then you are pretty safe. Your customers are still happy and positive. They don’t need much reassurance, as they are optimistic that the future will be bright again once the pandemic is over.
- In uncertain times every customer is at risk. The more your product is a non-essential item, the more you will need to show its worth to all your customers, including the Comfortable optimists.
- Maintain an honest and trustworthy relationship with them and keep highlighting the value your products or services bring to their lives.
- Creating experiences that revolve around enjoying life in a safe environment together with the family, will keep them interested - even if your product comes at a higher price.
2. Considerate spenders
In this category, there are prevalently younger generations. As the crisis hit, they realised they should be more careful with their money, or, at least, believe they should. Being a part of the society that was impacted by the crisis, especially financially, they are looking into smart ways to save their money.
They do this by reviewing financial plans, monthly bills, and going to cheaper stores. On the other hand, they are quite optimistic about the future as they have a set plan on how to save money which will allow them to still enjoy life and treat themselves once in a while.
This segment is most keen to prioritise eco-friendly, ethical and local when purchasing products.
What do Considerate spenders mean for your business?
- If your products are "commodity", i.e. products which can easily be bought elsewhere and possibly cheaper (e.g. food, fashion, monthly or yearly subscription plans), then you'll have to invest heavily in engaging with the Considerate spenders.
- They are at risk as they will save wherever they can so there is enough money left for enjoying life and purchasing "guilty pleasures".
- Positioning your products or services as essential contributors for enjoying life both in the short and long term will be crucial when communicating with this group.
- The concept "good value for money" fits perfectly with the Considerate spenders, which also means that any price increases need to be considered carefully.
- However, value is not linked only to money for them; it is also a combination of quality, offering enjoyable experience and taking care of life in the long term. Positioning your products as ethical and environmentally friendly will resonate the best with this type of consumers.
3. Cautious wait-and-seers
The Cautious wait-and-seers are set apart by two elements: a rather pessimistic mindset and they don't like change. Like the Comfortable optimists, they are also not heavily impacted by the pandemic, at least not financially. Most often, they will keep spending at the rate they did before the crisis, but they will also re-think buying cheaper options especially when easy opportunities pass by.
However, unlike the Comfortable optimists, they are pessimistic about the future and feel somewhat disoriented in the “new normal”. They don’t have a clear plan on how to tackle the crisis and are rather inert to change, even though they understand they need to adapt.
What do Cautious wait-and-seers mean for your business?
- So far, this type of consumer has probably been your most loyal customer as they don't like when things change.
- But now, when the world around them is changing rapidly, they feel at a loss. Cautious wait-and-seers are aware they should do something, but they don't have a structured plan to tackle the change. However, they will adapt their behaviour if it's easy enough and if opportunities are close and attainable. This translates to visiting cheaper stores and buying more affordable products.
- Therefore, make sure to stay relevant, possibly by offering discounts once in a while.
- As they are anxious and quite pessimistic about the future, reassurance messages without being too optimistic will keep them interested in your brand stories.
4. Financial survivors
In the fourth category, the crisis has struck people the hardest. For them, every penny matters now and they have to save on anything they can. They have to modify their spending habits the most and are not in a position anymore to spend money on unnecessary goods. Also for essential products, they will look for the cheapest options.
As they are struggling financially, they have a pessimistic view of the future and are worried about how they will be able to deal with the changing economic situation.
What do Financial survivors mean for your business?
- Having financial survivors in your customer base will undoubtedly hurt your profit.
- These consumers are in distress and will appreciate any support they can get. Ideally, you could offer them more discounts or cheaper products.
- They will not generate a profitable revenue short-term, but long-term they might turn into your best advocates. By helping them get over this crisis, you will build and maintain a relationship with them based on trust and reliability.
What is this consumer segmentation telling us?
The financial situation of a household is one of the key drivers of current and future consumer behaviour, even more than before. Spending power is dictating what people are buying.
Watching the trend in spending power, especially of key customer groups, will be an essential part of any sales forecasts.
However, not all behaviour can be explained by someone’s salary. Mindset and attitude are equally important. It is crucial to understand how customers are coping with the current situation, mindset-wise to successfully engage with them.
Businesses need to ask themselves who of their customers are struggling with the change, why and what reassurance they need.
Every consumer is pushing a reset button, some harder than others. All consumers, regardless of how they are dealing with the pandemic, are reviewing their needs; whether they have to or feel they should. While in the last decades we got used to living in a “consumption world”, buying what and when we need it, today consumers think twice before they spend. “Do we really need this?” is the question many people ask themselves.
Brands and products will have to show their value adequately; otherwise, they will fall off the shopping list.
Even if brands can show their value, some customer will still look for cheaper options. Either because their primary concern is to pay bills, or because they want to save money so they can afford other products.
Portfolio optimisation with possibly lower budget products will, for many businesses, help to avoid losing too many customers.
Fresh insights around the corner
These four distinct consumer ways of handling a crisis will lead to specific behaviour and needs. While we continue adapting to this new COVID reality, we want to support businesses and help them find their way and communicate better to their customers. Companies can apply our insights to customise their approach, messaging, and products based on target groups, and much more.
