The four different types of customer you'll find in a crisis

I love reading about the history of marketing because I often learn a lot from it and in honesty, I'm absolutely fascinated by psychology. I love to understand how and why people think the way they do and how that influences their behaviour. I've been amazed at the plethora of trends and patterns you can see in customer behaviour and the marketing strategies that have helped people to propel forward or completely undermine their performance during and after a crisis.

When the going is good, marketers often pat themselves on the back, believing their results are based on clever adverts, appealing products or fantastic service packages. It's not. It's based on how people feel about their future. How much they trust in business and the economy and how they feel about their lifestyle, values and disposable income.

During any time of crisis, customers reduce their spending. Sales drop. Businesses cut costs, reduce prices and postpone new ventures. Marketing budgets get cut indiscriminately because it's easy to do without having to fire people (or use the new option of furloughing them instead) I get it. I, like everyone else, am facing a pile of bills, stagnant or falling income and a shrinking nest egg. I'm also getting a deluge of emails from companies telling me how much they care about me (which I'm not entirely sure I believe bearing in mind the last time they contacted me was when the GDPR regulations came in.)

As wave after wave of bad news hits our headlines it starts to erode our confidence. Globally we are dealing with a form of grief and a situation that is, to quote every email hitting your inbox right now, unprecedented. People are prophesying that the recession we're about to hit is going to be the severest since the Great Depression of 1927...and it truly might.

The only thing I do know for sure is that there will undoubtedly be an economic downtown, but as a species, we will find a way to adapt, evolve and recover...

Marketers now face a profound challenge of understanding "the new normal." Whilst most in our industry talk about buyers in terms of demographics e.g. "Over 30" "New Mum" "Middle Class" "Green lifestyle" now we need to start talking about the psychological state of our customer in crisis instead. A state which transcends race, age, gender, class and creed.

There are now four groups that your customers largely fall into to:

The slam-on-the-brakers feel the most vulnerable and hardest hit financially right now. They're reducing all types of spending. Whilst this group is usually low-income, many anxious high-income consumers fit in this bracket as well.

Pained-but-patient consumers tend to be resilient and optimistic about the long term but less confident about the prospects for recovery in the near term. They're economising in all areas of their life, though less aggressively than the "slam-on the-brakers". They remain unscathed by unemployment and represent a wide range of income levels. I'd definitely put myself in this group right now I think. As news gets worse, pained-but-patient consumers will increasingly migrate into the slam-on-the-brakes category.

Comfortably well-off consumers feel secure about their ability to ride out current and future bumps in the economy. They consume at nearly the same levels as before the crisis hit, but they're being a bit more selective about their purchases. These are people primarily in the top 5% income bracket, it also includes those who are less wealthy but feel confident about the stability of their finances—the comfortably retired, for example.

The live-for-today segment is just carrying on as usual, though they're a bit more annoyed and bored than usual. They are generally unconcerned about savings and have responded by just extending their timetables for making major purchases. They have more disposable income right now because they're usually spending money on experiences rather than stuff (except for expensive consumer electronics)

Regardless of which group your customers belong to, they will be sorting your products and services into four categories:

• Essentials - necessary for survival or central to well-being.

• Treats - justifiable indulgences.

• Postponables - needed or desired items where the purchase can be reasonably put off.

• Expendables - unnecessary or unjustifiable.

All consider basic levels of food, shelter, and clothing to be essentials, and transportation and medical care are also usually in this category too. Beyond that, how people prioritise is highly idiosyncratic.

Positioning for Recovery

Right now, it’s critical to monitor how your customers are re-assessing priorities, reallocating funds, switching brands, and redefining value. It's also a good time to develop a pipeline of innovations that are ready to roll out on short notice because most customers will be ready to try a variety of new products once the lockdown ends and the economy improves.

Companies that wait until the economy is in full recovery to ramp up will be at the mercy of better-prepared competitors. Even during a recession, new products have an important place. Live-for-today customers, with their undiminished appetite for goods and experiences, often appreciate them and become early adopters. In 2001, for example, Procter & Gamble’s successful introduction of the Swiffer WetJet established a new product category that eased the chore of mopping floors and weaned consumers away from cheaper alternatives.

Data suggests that after most recessions have ended, consumers’ attitudes and behaviours seem to return to “normal” within a year or two. Following more extreme downturns, though, consumers’ heightened sense of economic vulnerability can persist for a decade. I would certainly expect that to be the case with Covid19. The deeper and more prolonged a recession is, the greater the possibility that there will be profound transformations in consumers’ attitudes and values so marketers should prepare now for a possible long-term shift in consumers’ values and attitudes.

The slam-on-the-brakes and pained-but-patient segments—by far the large majority of consumers—may well retain the consumption habits they’ve learned - They’ll seek value and trusted brands, remain considered in their purchases of treats, and continue to delay purchases of postponables.

So what have I actually learned from all this research so far?

1) The shock of Covid19 will continue to accelerate pre-existing trends towards reduced materialism, commitment to sustainability, higher expectations of corporate social responsibility and resentment and cynism of marketing that treat people as soulless and mechanical consumers, or fakes a sense of empathy that they don't really feel.

2) What's clear to me now more than ever is that during and after the lockdown is over, it would be stupid to ignore these changing expectations. Many businesses are putting their customers under a microscope right now, but their customers in turn are examining them and their response to Covid19 more closely than ever and this will have an effect on their buying choices in the future.

I'd be interested in hearing your thoughts.