The best entrepreneurs, business leaders and investors have deep insights into their customers’ thought process and behaviour. They are acutely aware that their customers’ needs and desires are constantly evolving and seek to provide as much value as possible at every turn. But every now and then, an event comes along that changes consumer behaviour dramatically and forces businesses to re-evaluate their understanding of their consumers, forcing them to rethink business models, go-to-market strategy and competitive positioning.
It is safe to say that the current crisis is certainly one such event. What will this crisis mean for consumer behaviour? Which sectors will benefit and which will suffer? Which businesses should double down on customer acquisition and which should lie low and re-evaluate their business models? These are some of the questions we asked Rahul Kansal, Consultant at Futurebrands Consulting. Rahul is a Marketing veteran with a deep understanding of the Indian consumer, and we were very lucky to have him speak to our Blumiers. It was a truly fascinating discussion with thought-provoking insights that were valuable to everybody who joined. Key takeaways below!
The Wings and Roots of the Indian Consumer
The Indian consumer has changed dramatically over the last 15 years, thanks in large part to technology and the internet, which unleashed the ‘individual’. With access to global thoughts, ideas, and access to a larger array of goods and services, we discovered a latent desire for materialistic pleasures and the joy of experiences. We moved from a largely ‘collective society’ to a more individualistic one, where consumers grew WINGS. While previously, the Indian consumer focused mostly on saving for a rainy day, the new mantra increasingly is ‘spend today in expectation of a brighter future.’ With increasing disposable incomes and a more secure future, consumers are actively seeking to avail credit to holiday abroad (unthinkable a few years ago). Today, we prize experiences more than assets and want to rent rather than own.
And while it feels liberating to grow wings, there is an equally strong force drawing us back to our ROOTS. We are torn by our desire to fly and our desire to stay firmly rooted to the ground. The constant rat race, environmental degradation and a decline of moral ethics, leaves us yearning for simpler times and a feeling of community. The burgeoning popularity of Ayurveda, yoga, cow’s ghee, etc. and our demand for sustainable and organic products is a result of this desire.
Polarisation of Society
Another important characteristic of our world today is a sense of increasing tribalism and polarization, driven in large part by the nature of social media. Whereas earlier media (in the form of newspapers and television) tended to be more inclusive and objective, the algorithms of social media today ensure that we only hear opinions we already hold, amplifying these voices and strengthening our beliefs. This has dangerous effects. We are less able to entertain the opinions of the other and are hostile with anyone who disagrees with our point of view. This has massive implications for the fabric of our societies, which are being torn at the seams.
COVID-19’s Impact on Consumer Behaviour
In the Short-term (next 6-12 months)
- There will be a clipping of the wings and a greater return to the roots in the short-term. Consumers will spend more cautiously, focusing on satisfying their essential needs rather than their discretionary desires. Savings will take precedence over credit. This crisis may make people realize that they do not actually need certain products and services, and may choose never to go back to them. Consumer durables purchases will likely be postponed.
- As a society, we will become more insular and inward looking, socializing (physically) will likely decline going forward. This insularity and cocooning could lead to greater tribalism.
- There will be a larger focus on health, hygiene and sustainability, with consumers becoming hyper-vigilant and demanding greater transparency and accountability from businesses.
- Sectors that will be the most negatively impacted are travel, hospitality, physical sports, entertainment, and the physical sharing economy (renting of clothes, carpooling).
- Tailwind sectors are anything that involves a Do-it-Yourself (DIY) angle – this crisis has underscored the importance of self-reliance. Other sectors are online education and entertainment (OTT), gaming, virtual hangouts (online events, music), affordable pleasures (online food delivery, chocolates and candies, low-cost cosmetics, alcohol).
- Many consumers are experiencing the digital medium for the first time and will be exposed to various digital products and services (online education, gaming, e-commerce), which has accelerated consumer adoption of digital services dramatically. This is a massive opportunity for such businesses to acquire customers, there has never been a better time.
- There will be a greater work-from-home culture among teams, with many businesses realizing that employee productivity is equal or higher from home. We will see a decline of physical meetings and business travel.
- Certain offline sectors that were struggling before the crisis (e.g. newspapers) may not survive and disappear altogether.
In the Long-term (>12 months)
- Overall, there will be dampening of the hedonistic chasing of pleasure and deepening of the return to roots (sectors like pharma, health, medical tourism, sustainability, insurance, education will see permanent benefits). However, over time things will gradually return to normal and the demand for travel and luxury products and services will rise.
- Worryingly, this crisis could lead to increased tribalism of all forms (across ethnic groups, socio-economic classes, across regions, nations). A few examples – the rich will become even more materialistic because they realize that life is ephemeral and want to enjoy the moment even more. Those who are poor will become even more savings conscious and focus on sustainability. This could lead to greater income inequality and resentment of the poor towards the upper classes. Another example is the increasing resentment towards China and how politicians across the world are using this to rouse their voter base.
- There will be a further erosion of trust among consumers. Brands and businesses need to think of innovative ways to build and retain this trust by focusing on health, transparency, and sustainability.
Questions from our founders
- When asked about the potential impact on Kirana stores, Rahul mentioned that he felt Kirana stores are here to stay. This crisis has only underscored their importance, providing a sense of trust, community and convenience to customers. He did feel that this crisis will hurt larger format stores with their value proposition to consumers diminishing.
- Audiobooks present a massive opportunity due to their digital consumption nature and the fact that India is a largely oral tradition with a penchant for oral story-telling.
- On companies focused on stock market investing, Rahul believes they will benefit greatly once the crisis bottoms out and people realize that it may be a good time to invest. Such businesses should focus on increasing customer education and creating strong content at this time.
- Micro-mobility start-ups should position themselves as a better alternative to public transport since people are wary of public transport and are looking for safer alternatives.
Rahul Kansal signed off by encouraging entrepreneurs to stay strong and to remember that every crisis has a silver lining.