Brand aid: Let Consumer Confidence Index reveal consumers’ concerns
Using the Consumer Confidence Barometer to understand today’s worries about a possible cost-of-living crisis
What are consumers thinking?
Since we entered life under COVID-19, marketers have been acutely interested in indicators that prove consumer confidence is returning. GfK’s Consumer Confidence Index crashed in the early stages of COVID-19 from -9 to -34. This ranked among the lowest levels of consumer confidence since the 2008 financial crisis. Confidence sank to -36 a few weeks later. But the GfK survey showed clear evidence of recovery when it went from -33 in November 2020 to just -7 in July 2021. Since then, confidence has clearly slipped. It was down just one point in August from -7 to -8 but September saw a five-point plunge from -8 to -13. Are consumers losing their nerve?
The headline score (the Overall Index Score) of the GfK Consumer Confidence Index is created from five sub-measures. September’s results are notable because all these sub-measures decreased. The measure on personal finances looking back a year slipped four points from zero to -4. But there was a bigger drop for sentiment on personal money looking forward a year with the number falling six points from 11 to 5.
The score on the economy for the year ahead slipped one point from -43 to -42, but how we view the economy over the next 12 months crashed 10 points from -16 to -6. And the measure on major purchases gave up three points to register a score of -6. This question looks at whether consumers think ‘now is the right time for major purchases such as furniture or electrical goods’. Average those five sub-measures out and you get the September headline score of -13.
We also publish a sub-measure on savings intentions asking consumers if they think now is a good or bad time to save. While we don’t fold that into our Overall Index Score, it’s useful to note that it also slipped by three points, from 25 down to 22.
When all the sub-measures head downwards, you know that consumers sense danger. It was clear in September that consumers were revealing anxieties about a possible cost-of-living crisis in the UK. Just think of their concerns: rising prices for fuel and food, the growth in headline inflation, tax hikes, empty shelves and the imminent end of the furlough scheme. Britain’s tabloids were warning of a ‘new winter of discontent’. The results of our survey seemed to indicate that consumers might well be slamming on the brakes in the face of a potential cost-of-living crisis.
What actions should brands take?
This month’s five-point plunge is not welcome news for marketers targeting good sales volumes in the run-up to Christmas. It’s difficult to navigate through an emerging climate of worry but brands do need to take account of the mood. Consumers are clearly fretting about the future both in terms of their personal financial situation and the general economy.
When consumer confidence drops, shoppers tend to spend less and this really is an unwelcome picture going into 2022 and beyond. Our major purchase index shows the reduced inclination to make big-ticket purchases. And consumers are also less motivated to save.
So what actions should a marketing team contemplate?
- First, look calmly at the state of play and avoid slashing costs. Take a long, hard look at expenditure and by all means carefully contain costs where it makes sense. Is this a temporary blip as we finally wriggle out of the COVID-19 crisis? Or are there bigger trends at work? Whatever your analysis tells you, make sure you continue to support your brand and understand the changing needs of your customers. Carefully fine tune your marketing budget and adjust your strategy and tactics. If you panic, it’s certain you’ll weaken long-term performance. GfK’s Consumer Confidence survey tracks the consumer mood every month Index making it an excellent tool for getting the sharp insights you need. It’s one of the most respected surveys of its kind. Each month since January 1974 it has provided subscribers with a snapshot of how UK consumers feel about their finances and the wider economy, and their outlook for the next 12 months.
- Second, segment your customers. If you conclude there will be a prolonged period of consumer weakness, is this something that affects every single customer? Are all of your customers going to shut the front door and sit things out? Or is the picture more nuanced? Are some of your customers sufficiently well-off to maintain historic spending patterns regardless? GfK’s Consumer Confidence survey will help you in your segmentation work because it provides detailed breakdowns based on income, age group, gender and geographic location.
- Third, segment your product / service portfolio too. Which part of your offering is an essential item to your customers? Which part can a consumer do without for a period of time? Where do you think your customers are likely to make cut-backs? Where are your vulnerabilities?
Seasoned marketers know these are the right actions to take. They know too that the right decisions must be based on the right consumer insights. So gather the data, understand the data and then formulate the strategy and tactics that are right for the specific circumstances of your line of business.
The authoritative survey that makes headlines
GfK’s Consumer Confidence Barometer survey is an authoritative source for wire services, as well as leading business, marketing and retail writers. The Bank of England, leading economists and financial institutions watch and comment on the Index every month. Our long-running survey is often the first port of call for top writers and commentators who need to demonstrate they have their fingers on the pulse of how consumers feel.
Keep pace with consumer confidence
GfK’s Consumer Confidence Barometer (CCB) has provided essential context for businesses and organisations during times of crisis. It has offered insight into the UK’s thinking through boom and bust, the Brexit vote, and most recently, the coronavirus pandemic.