New research shows that 34% of British consumers are planning to spend less on luxury items in 2021, as a result of financial anxiety stemming from the ongoing pandemic.
New research from RAPP and Code, which is part of Omnicom Precision Marketing Group, reveals that a third (34%) of UK consumers plan to spend less this year across six key sectors: luxury, retail, automotive, travel, technology and financial services.
RAPP and Code’s research puts the pandemic’s knock-on effects as one of the primary reasons, but their data does offer some light at the end of the tunnel for hard-hit retailers, manufacturers and brands.
Consumers stated that they would be prepared to spend more money if they were treated as individuals. It is in the younger consumer age groups where this becomes more apparent. 89% of consumers aged between 16-24 would spend more if they felt they were being valued, and the figure is 77% for 25-34 year-olds.
The past twelve months have caused many people to re-prioritise, resulting in the definition of luxury changing considerably. Recent articles we’ve published on the evolving needs of luxury travellers (here) and how the definition of luxury has changed (here) could be part of the reason why people feel they will be spending less on what is considered to be ‘traditional luxury’.
Our own experience is showing that many things never regarded as a luxury now are. However, these are yet to permeate into the minds and definitions of consumers who still view glitz, glamour, shiny physical objects and pampering solely as luxury.
It is highly probable that in terms of actual pounds sterling, at least the same amount will be spent on what is the modern-day, up-to-date definition of luxury but it will not be regarded as such in the minds of the consumers.
About the RAPP and Code Poll
The RAPP and Code poll involved 1,000 consumers in uncovering the nation’s current and future spending habits along with their expectations and desires from brands as influenced by the COVID-19 pandemic.
The findings show that travel and luxury will be hit hardest, with 41% and 34% saying they will spend less in these spaces, respectively. However, the cuts don’t stop there as respondents also report intensions to reduce spending in retail (31%), automotive and technology (both 30%) as well as financial services (27%).
What does this mean for brands?
Intended cuts in consumer spending is a challenge brands must face this year, as in any period of economic uncertainty. However, the research also uncovered consumer wants and needs for the year ahead, showcasing what brands can do to capture new audiences, retain existing customers and drive continued loyalty.
Consumers now expect communications to be tailored to them as an individual. They want brands to go beyond basic personalisation by considering their values, needs and behaviours.
But there’s a long way to go. Almost half of those surveyed (49%) said that all six sectors did a bad job on individualised marketing in 2020. Luxury performed the worst, with only 10% believing the industry did a good job at communicating to them as individuals.
Automotive and travel similarly ranked low, with 11% and 12% respectively, while financial services and technology scored 18% and 19%. Retail fared better, with a third (33%) saying the sector delivered individualised communications.
The expectation gap is real, and these findings clearly show that in order to succeed, brands need to evolve their customer relationships and treat customers as individuals.
Caroline Parkes, Chief Experience Officer at RAPP, said: “As we emerge from lockdown, the depth of the pandemic’s economic impact will become more apparent. Our research has highlighted the consumer’s cautious mindset, which means that brands have an important job to do to help instil confidence and give customers exactly what they are looking for.
Generic messages will do a brand no favours in this post lockdown world – the gap between the winners and losers will become wider. Consumers have told us they want to be treated as individuals, which means that the brands that find smarter ways of combining customer research with social and data sciences will come out on top.
Adapting to and predicting the values, needs and behaviours of an individual using AI and machine learning will allow brands to approach that consumer with real one-on-one communication, not just a first name at the top of an email.
Only then will brands – regardless of sector – deliver the value and hyper-targeted experience people are looking for as we all re-enter the world after what has been one of the most bizarre years to date.”