As businesses and economies closed down due to the COVID-19 pandemic in 2020, consumers also tightened up their budgets.
According to data from McKinsey, most consumers were more conscientious about purchases than before the pandemic. Because of this, most households primarily budgeted around essential products and services.
But, now, as economies begin to swiftly reopen following mass vaccinations, business owners and marketers might also be wondering what this could mean for the next year of revenue.
Specifically, many business leaders are asking, "Will consumers continue to spend cautiously, or will they spend more freely in 2021?"
To help businesses prepare and navigate for the coming months, I asked nearly 300 random consumers, "Which best describes your budgeting plan for the next year?"
Here's what they said and tips for how to navigate future spending behaviors.
How Consumers Will Spend Money in the Next Year
As economies reopen, people return to work, and household revenues start to rise again, you might think that people will be racing to online or physical stores to shop for all the things they didn't have the budget for in 2020.
However, when looking at the results of our small survey, it seems that people are cautiously optimistic about their 2021 budget.
Although one-third of respondents say they plan to "loosen" their budgets and spend more money than they did in 2020, a whopping 43% plan to keep the same budget they had in 2020. Meanwhile, nearly one-quarter of respondents will tighten their budget and spend less money in the next year.
If you sell non-essential products or services or rely on your customers to have a larger budget, you shouldn't panic just yet. Keep in mind that this is just one small survey of a random consumer group. Additionally, had we polled people in different industries, locations, or age ranges, the results might have been different.
However, what this survey does remind us of is that people are still more conscientious than ever about the products and services they're purchasing -- and likely will remain that way for months to come.
Ultimately, to turn audiences into customers, it's still more important than ever to market your offering's value -- even if you don't sell something that's 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, each dollar they spend has to be worth it. This means that the products or services they buy have to help them do something essential, solve a common pain point, save them time or money, or fulfill other major needs.
As a marketer or business owner, it's important to learn the ins and outs of your buyer persona, their needs, and what motivates them to make a purchase. Then, you must use your messaging to explain why your offering will be worth their money.
2. Differentiate yourself from competitors.
As a budget-minded person myself, I -- like many others -- do detailed research before purchasing a product or service. When I decide I need to buy something, I look at all the brands that sell it, their reviews, and the product's cost. While I might buy the cheapest version of something, I also might consider a higher-end version of a product if something about it is better quality than the more affordable option.
For example, I recently helped my parents pick out their first smart TV. While almost all of today's smart TVs have similar apps and features, we chose a Roku TV because Roku's marketing emphasized a simple, easy-to-understand user interface and setup. While it was also quite affordable, the UX alone was the reason for purchasing it over other competitors.
As a marketer, it's important to remember that people look into many different factors when making a purchase decision -- especially when it will be a larger investment. And, sometimes, the price of the product isn't the only deciding factor. That's why it's important to market elements of your product that are different or better than a competitor's.
3. Leverage customer-generated content.
If you're struggling to differentiate your product or service, but know you have loyal customers who love your brand, leverage them in your marketing.
Research shows that prospects trust customer reviews, videos, how-tos, and other user-generated content similarly to how they'd trust a word-of-mouth recommendation. Ultimately, when a prospect sees that someone like them has benefited from your brand's offerings, they trust that you sell something of good quality and value and might be more motivated to buy your product than a cheaper alternative from a competitor with poor or minimal reviews.
Need some examples of how to collect and market excellent 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 with tighter budgets to your brand. Even if your discounts or sales are temporary, a prospect might purchase an on-sale product, love its quality, and return to the brand later because they've gained a sense of trust and loyalty to it.
If it isn't possible to offer sales or discounted services, you could also consider a customer loyalty or rewards program that allows frequent shoppers to eventually receive a free or heavily discounted product. This way, they might feel like every penny they spend could go towards a reward in the future.
5. Highlight your brand's mission or purpose.
In 2020, the same McKinsey survey mentioned at the beginning of this post, also found that people were beginning to also shop at brands that shared a similar set of values to their own. With this in mind, it's becoming more common for brands to invest in purpose-driven marketing, or campaigns that highlight a mission, purpose, or set of values the company is serious about.
For example, Kréyol, a Black woman-run fashion brand, embraces Haitian culture and global female empowerment with its clothing and product lines. The company's "For women, by women" mission aims to improve the lives of women, artisans, and entrepreneurs around the globe by featuring their clothing and designs on the Kréyol site.
"The whole idea behind Kréyol was for me to be able to provide a platform for artisans, specifically women of color, to be able to highlight the wonderful work that they do,” CEO Joelle Wendy Fontaine said in an interview.
While Kréyol's marketing and business strategy spreads awareness of beautiful artisan fashion, prospects might also be more driven to support the brand because of its trustworthy and authentic mission to improve the lives of women around the world.
Navigating Changing Purchasing Behaviors
As the world continues to reopen and evolve following the pandemic, so will spending habits. While some people will start to begin spending more, others will remain cautious for the next year or beyond.
As a marketer or business owner, you'll need to listen to your audiences and continue to follow data about your target persona's to learn how their approaches to money are changing and what efforts you'll need to take on to continue to win them over.
To learn more about the latest marketing trends and consumer behaviors, check out our recently published State of Marketing Report.