New Era Challenges to Growth
27 May 2015|Matt Woodhams
Challenges to growth are nothing new. But these challenges are now changing with shifts in culture. We have now entered a “post-ownership age”, with rapidly changing consumer behaviours and attitudes. Consumers’ perceptions of needs have transformed as the burden of ownership has developed in response to the recession. People see ownership as adding layers of responsibility and worry to their already busy lives.
Gen Y is at the centre of these cultural shifts with less money, but more knowledge. One response to this is a changing nature of status and self-fulfilment. With the decline of the materialistic status (seen as vulgar, harmful and unsustainably irresponsible), fulfilment is increasingly sought from experience and achievement. In parallel, millennials seek to define identity through a narrative and an ongoing ‘story of self’, seen most significantly through social media.
The new era of savvy consumption presents a significant challenge for brands. People choose more wisely where to spend their money, often opting for a few quality possessions over quantity. While there are fewer stigmas around doing the “budget thing” – spending money in trendy cheap restaurants, flying with budget airlines and shopping in discounters. The most frequently cited evidence for this in the UK is the increasing appeal of the hard discount food retailers with Aldi now one of the top 6 UK supermarkets and Tesco and Sainsbury’s suffering losses in share, profitability and property values. Brands need to adapt to this transformation by understanding how people think about the value exchange – consumers have become increasingly “outcome” not “input” driven, making choices in a far more holistic way – for example trading a visit to a mid-market supermarket in order to afford to eat out later in the week. This means that brands aren’t just competing with other brands in their category, they’re competing with “everything” for consumers’ headspace, in a complex series of value/experience trade-offs.
The burden of ownership has resulted in social disapproval for vulgar or irresponsible consumption and a decline of bling and super conspicuous branding. Consumers want real and authentic. So the need for a meaningful brand purpose is now more important. People define themselves not by what they own, but by what they do and the narrative they create. This has played out with an increasing demand for meaningful stories, entertainment and experiences. Brands have the opportunity to find growth through harnessing the demand for experience over product. Red Bull has been amongst the most successful (and extreme) examples, taking a functional energy drink brand and building an experience ecosystem around the core idea. More prosaically, brands across multiple categories are increasingly focussed on emotional and physical experiences, not just product delivery – from Yeo Valley Dairy’s “Yeoniversity” to Burberry’s flagship store experience to Brewdog’s “Equity for Punks”.
This changing status has an impact on the traditional model of manufacture or service provider straight to consumer. Disruptive models have offered different approaches – Spotify and Netflix disrupted the consumption of music and TV with streaming services and Zipcar provides easily accessible mobility rather than the expense and hassle of owning a car. Technology has been a key enabler to this disruption. It inevitably changes consumer relationships with brands – the relationship is now as much with Zipcar as with Volkswagen as the brand experience is primarily provided by them and powered by Volkswagen. But there is nothing stopping brands from disrupting categories themselves. Brands need to understand where and how – where consumers are willing to spend money, what their changing needs are, and how to adapt business models to find growth.
The post-ownership age doesn’t mean the end of nice things. This isn’t about a monastic lifestyle. It is about less “baggage”. And it means fewer, better things but more experiences. Brands have to think about how they can be accessible on demand but not over-powering when they aren’t needed. They need to offer more variable ways to give consumers unforgettable experiences. And at the core they need to create genuine breakthroughs not incremental evolution to justify their existence beyond just product.
Image credits: Added Valueprev next