Research from McKinsey highlights a shift in consumer behavior due to COVID-19 pandemic. The impact can be categorized into 5 trends:
The research validates the consumer sentiment and behavioral changes that stem from a wide range of uncertainties rooted in the pandemic.
To help us better understand these key consumer behavior trends, Ray Wang, CEO and founder of a Silicon Valley-based advisory firm Constellation Research, and I invited Brian Gregg, senior partner at McKinsey and co-leader for North America Marketing and Sales Practice, to join our weekly show DisrupTV. Gregg serves clients in consumer-facing industries, with deep experience in e-commerce, retail, consumer technology/media and consumer packaged goods. Gregg has functional expertise in a multitude of marketing and sales disciplines including digital marketing, CRM/Loyalty, customer experience, agile operating model, omnichannel strategy, and consumer-centric innovation. Here are my main takeaways of our conversation with Brian Gregg:
In most countries, confidence about economic recovery has dipped slightly since April. Consumer spending is subject to more scrutiny. The research points to consumers being more mindful of spending that is likely to last for all of 2020. 40% of US consumers said they are more mindful of where they spend their money. Independent of the McKinsey research, I believe there are three spend barriers for discretionary spend since the pandemic; 1. relevance, 2. safety and 3. accessibility. 40% of US consumers are planning to spend less, with greater focus on essentials.
The research highlights the fact that during financial uncertainty, the spend is likely to shift more towards essentials such as groceries and household supplies.
According to the research, most spend categories saw more than 10% growth in their online customer based during the pandemic. Many consumers plan to continue to shop online even when stores open safely. In the US, e-commerce is growing across all categories. Gregg reminds us that in the past 3 months, we have witnessed 10 years of digital commerce adoption. The pace of adoption, scale and change is unlike any other time in history -- number of hours and transactions online have massively increased.
"In addition to e-commerce, other digital and contactless services—including curbside pickup, delivery, and drive-through service—are also seeing much higher adoption rates. While some of these habits are seen as a work-around to the crisis, many at-home solutions to regular activities will likely be adopted for the long-term." -- McKinsey
Will the change to digital commerce stick after the safe re-opening of brick-and-mortar stores? I believe this behavior will stick. The next normal is about decentralization and digital is the only option for companies to stay relevant.
Due to the supply chain disruption caused by COVID-19, certain products and brands could not meet the demand of consumers. As a result, consumers changed their shopping behavior and tried new brands from different retailers. "Value, availability, and quality or organic products were the main drivers for consumers trying a different brand."
Over 60% of global consumers have changed shopping behavior, many of them for convenience and value. In the US, the percentage was 75%. The top three reasons for shopping for a new brand in the US were: 1. value, 2. availability, 3. convenience. Gregg notes that this amount of change in brand loyalty is unlike any period. The amount of market share up for grabs is unlike anytime. Gregg noted 20% of Americans have changed their grocery stores. Brand loyalty is changed due to digital capabilities of retailers.
Gregg's advice to businesses is to ensure availability of your products -- this requires stronger visibility to supply chain process optimizations and efficiencies. The second focus area is convenience -- e-commerce, contactless payments, online order and curbside pickup are example capabilities. Gregg also placed a strong emphasis on making sure brands are delivering real value to their stakeholders. The value chain equations must be analyzed and improved during times of uncertainty. Speed to value is how brands demonstrate relevance, and sustained relevance overtimes earns trust and loyalty. To remove friction and deliver optimal flow of value, all lines of business leaders must work together to co-create value. Delivering value is a team sport which means all lines of business -- sales, marketing, services, commerce and IT -- must have a single source of truth about their stakeholders.
Consumer's decision as to where to buy products was based on demonstration of safety. Consumers expect enhanced cleaning and physical barriers. They also expect hygienic packaging and clear demonstrated care for employees. "During these trying times, consumers have a heightened awareness of how businesses interact with stakeholders, local communities, and society more broadly. The actions that businesses take during this pandemic are likely to be remembered long after COVID-19 has been conquered," McKinsey research.
According to Gregg, in the next normal, the spend and engagement behaviors during the pandemic, powered by digital transformation initiatives and technologies, will continue to drive relevance in the future.
More than 70% of survey respondents do not feel comfortable resuming their "normal" out of home activities. More than 3 out of 4 who adjusted their behaviors due to the pandemic said that easing government restrictions will not change their cautious behaviors. Consumers are following guidance from medical experts for reassurance.
I encourage you to watch our entire interview with Brian Gregg. The customer experience is as important as your company's products and services. To gain trust and customer loyalty, companies must be able to create value at the speed of need. We also spoke with Ali Cudby, CEO ofYour Iconic Brandand author of the #1 bestselling book, Keep Your Customers, about measuring total lifetime value of customers and myth-busting common beliefs about customer retention strategies. Cudby added great insights on how companies can keep their customers in the Next Normal.