The article is written by Dave Timothy, Senior Account Director at strategic packaging and design consultancy Anthem Worldwide
Looking back at previous times of austerity, our lives and shopping habits seemed a lot simpler then. People used to save up for what they wanted and ‘make do and mend’ was a way of life, rather than a fashionable hobby. However, with so many years of boom before the bust, we have tasted the good life, and we liked it!
This factor appears to have shaped consumer thinking as there has been a distinct polarisation in purchasing patterns. People are trading up to premium products while also shifting down to value products. As a result, the brands in the middle are being squeezed and need to act quickly if they want to retain customer loyalty. This is a pattern we’re seeing again and again, from fashion to cars, fragrances to nuts!
There are several reasons for this shift. Firstly, now it’s clear that times are going to be difficult for a while, people are looking for quality products that they know will last. It makes sense to invest an extra £40 on a pair of shoes if you know that the more expensive pair will last you several years, rather than one season.
Also, we want to cheer ourselves up with a treat. So if we buy Impulse to use during the week we can afford to buy a bottle of Prada perfume to wear at the weekend or in the evening. Hence why premium brands such as Prada’s new Candy perfume are still launching onto the market with packaging exuding quality and major advertising spend to support it.
There also appears to be growing consumer interest in heritage, as people take comfort from brands that have been around for years. A number of luxury brands also fit this category. This is why Hermes posted record sales in 2011 ($3.8 billion) globally, while Burberry saw worldwide sales up 21% in the last quarter of 2012 and is opening a new flagship store in Regent Street. However, in the UK this trend is driven not purely by British shoppers, but also tourist shoppers making the most of a weak pound. At the other end of the spectrum, there is a more complex picture.
It’s not so much about low cost; it’s about value. Products need to be low cost and functional, or more expensive products bought at a discount price. The demise of discount fashion retailer Peacocks and slow down in Primark’s ‘fast fashion’ appeal are both a case in point. We want products to do the job they’re supposed to. Buying a pair of trousers that look shabby after a couple of wears is a false economy.
In the hard hit travel sector, it’s the discount airlines which are doing well. They are functional, getting you from A to B. Also, importantly, they have strong, no-nonsense branding—you know what you’re going to get when you fly EasyJet. This is a factor which value brands across many markets should note—branding and packaging should act as a signpost for consumers, clearly reflecting the product’s value and functionality.
Otherwise, value brands will also feel a squeeze from another phenomenon—the deal hunter. Consumers love a bargain, so if they can find a high end product at a low price, they will buy it. Deal sites such as Moneymarketingexpert.com point to deals on cosmetics as much as on financial products, while eBay continues to go from strength to strength. A growing number of ‘Members Only’ websites like Secretsales.com and Cocosa.com, are offering flash sales of end of range premium brands. However, as TK Maxx flounders it seems that there are only so many discounted premium goods to go around.
All of which is bad news for the mid-range brands. The past year has seen a number bite the bullet, including La Senza, Thornton’s and Jane Norman. For the squeezed middle, times are hard. With no great change in the economy predicted at the moment, they need to think boldly. They can’t compete on price—but given that the consumer desire is for ‘value’ they shouldn’t have to.
Their opportunities lie in making the most of the fragmented media environment to create and communicate clear and differentiated brand values that remind consumers why they are relevant—and worth an extra penny or two. So, they need to adopt a new approach and a new way of thinking—one that looks to build brand ideas from the shelf out. This means developing brand ideas that drive compelling packaging design, and also inform the other critical brand touch points that the consumer and shopper encounter on the journey to purchase, both offline and, significantly, online.
As polarisation increases, they can also explore opportunities to trade up or down—perhaps creating exclusive or value variants as part of their brand repertoire. Otherwise they risk a continued loss of relevance and control, handing this over to thriving online discount retailers who make money from them instead.
About the Author
Dave Timothy is Senior Account Director at Anthem Worldwide, UK. He heads up the Nestle account team at Anthem. This covers a full range of design services across their Confectionery, Professional and Food & Beverage teams, working with brands like KitKat, Smarties, Aero and Nescafe on a regular basis.