Love and money: marketing through a downturn

The relationship between brands a consumer has been pitched as one of care and passion. But when an economic downturn bites, consumers find themselves asking “where’s the love?”

The mood is perfect, the ambience as good as you could hope for. Soft music plays in the background, two glasses sit companionably next to each other on the table, and the fire is lifting the early autumn chill. The object of your affection casually leans forward and whispers seductively in your ear…

“I love you… economic conditions allowing, of course.”

Ah, how to bring a promising romance to a crashing end, possibly with an amount of shouting and the sudden departure of one of the glasses from the table, heading in the general direction of the fireplace.

We wouldn’t do this (one would hope) to anyone we were serious about building a relationship with, would we? Yet, why do some brands think this is the way to navigate the stormy economic waters we find ourselves in now? As the new Life Trends report puts it, where’s the love?

“Shrinkflation” describes a reduction in the quantity or size of a product, while retaining its price. An example is charging as much or more for a chocolate bar that looks the same but weighs less. This trade-off forces consumers to pay increasing prices for diminishing returns. While this isn’t a new practice, the cost-of-living squeeze heightens consumers’ attention to value—and they can easily shout about it to alert others.

Accenture — the company behind NEXT — is making a big point here. People notice this surreptitious erosion in the value of what we offer them — and they use the same social media channels that brands have used to persuade people that the brand cares about them to warn others.

The dangers of lovewashing

We need a name for this phenomenon, where the relationship between brands and consumers proves thin and easily broken on the brand side. “Relationshipwashing”, perhaps? Or, more directly, “lovewashing”. It’s directly parallel to “greenwashing” — trying to win the marketing benefit without actually putting in the work.

If you genuinely want a relationship with a customer, you need to work at communication. People get annoyed at shrinkflation because it feels deceptive. You’re just getting less for the same money, without any warning. Nobody wants to build a marketing plan around “pay the same, get less”. But then, nobody really wishes to do the hard bits of a relationship negotiation, but it’s necessary if you want that relationship to survive.

And there’s a cost. What you do to that relationship now, during the downturn, will persist in many customers’ minds. Will you rebalance the cost/value equation when energy or materials prices start falling again?

Storytelling the pricing process

Like many EV drivers, I’ve been watching the price of rapid charging when on long trips creep up. That’s understandable, a direct impact of the rise in fuel prices. And the vast majority of them have been very communicative about it: regular emails explaining why. They top some good storytelling about needing to keep their margins up to keep building out the recharging network that makes EV driving better and better.

They’re communicating as the terms of the relationship change. There’s some love there.

What’s far more interesting in the near future is the question many drivers are asking. Which of those suppliers will start to lower their prices in line with the fall in electricity prices? In what is still a relatively small, early adopter-focused marketplace, people remember. And they reward those who treat their customers well with their business.

A shared love

Of course, there are other approaches bar playing with pricing. Recently, I attended the investor call for a sustainable outdoors pursuit brand I’m a micro investor in. Their approach to handling the downturn was straightforward: minimise their discounting of stock, protect their margins, and continue to build relationships with customers through storytelling (marketing) and customer events.

But then, this is a business built not on price, but on the environmental impact of their product. They’ve done the work in advance to build a strong relationship with their customers: pay us an above-average price for your gear, and we’ll make sure we minimise its impact on the environment. (They even have a repairs service, to keep it going for years — or decades — to come.)

And they’re making it clear: there’s no point hanging on for an end-of-season sale. Buy now if you need it because discounts aren’t coming at the moment.

The dangerous discount seduction

Discounting is a dangerous game. I’ve been reading my way through the series of books, starting with Diary of a Bookseller, which tell of life as a second-hand bookseller in a small Scottish town. They’re non-fiction, often laugh-out-loud funny, but carry a certain air of melancholy, as the business is made ever harder by Amazon.

List second-hand books on one of Amazon’s marketplaces, and it is all about the price. You have to list lower than the existing lowest price to sell, and that leads to a rush to the bottom and books selling for literal pennies. Between that, and the growing competition from the charity bookshops, who don’t even have to pay for their stock, it’s become a tough market.

The physical book trade is learning — slowly, but it’s getting there — that its only competitive advantage over the global behemoth is relationship. It needs to romance the user. The two first-hand bookshops that thrive near me do so with events and signings; things that build community around the book. One devotes space on the ground floor to a small coffee shop, and the whole of the second floor to an events space. It’s not the place to go to get the book you want cheaply, but the ideal destination to discover new things — and join a community.

Amazon, meanwhile, is ruthless on price and delivery, but is almost impossible to contact if you need help or assistance as a customer, or a seller on their platform. There’s no love, just prices.

No love in social media

Social media managers know that, too. Unless they’re spending serious money on paid ads, finding someone to speak to on any of the social platforms is an exercise in frustration. These are businesses built on an illusion of interest, like Facebook’s algorithmic memories, but who thrive through not paying the price for moderation and support that their scale would imply. But, because they can price aggressively, and steal more share in straightened times, they will survive.

And those smaller businesses, that have invested in genuine emotional connection with their customers in the good times, should be able to weather the economic storm through that connection — as long as they keep communicating. If you really love a restaurant, you’d much rather they pushed the prices up a little to keep the quality the same, and told you so, rather than sneakily downgrading the quality of your meal — and thus your experience.

This is, perhaps, one of those “mushy middle” situations: if you’re not big enough to compete on price alone, nor small enough to rely on relationship and community to support your business through hard times, you can find yourself making bad decisions at times like this. But that just leaves you as one of a group of undifferentiated brands. You’re actively inviting customers to make purchasing decisions based on marginal value for money gains. There’s no love here: you’re the quick hookup on the dating app.

So, here’s your choice: love and be honest with your customer, even if the news is bad. Or join in the rush to the bottom with the price cutters.

This article is one of five linked pieces exploring the ideas in the 2024 Life Trends report: