At the moment I am often asked when Corona “will be over” and when everything will return to normal. My answer is: never. There are historical moments when the future changes direction. We call them bifurcations. Or deep crises. These times are now. The world as we know it is dissolving. But behind it comes a new world, the formation of which we can at least imagine.
Seven trends of enduring consumer behaviours
One of the earliest changes to our behaviour necessitated by the pandemic, were heavy restrictions on movement to comply with various types of ‘stay at home’ directives. Restrictions on free movement around the country began to impact the supply of products most Australians took for granted and the origin of products became an unexpected topic of conversation. With the sudden closure of many Australian businesses, the social and economic impact of the pandemic was felt at a very personal and local level.
Many customers responded by supporting local businesses and brands – doing their bit to ensure every dollar spent went to those nearby. What started at local coffee shops and retailers has ultimately become a larger movement. Customers are posing the question: 'How do I support local business and do the right thing?'
In a recently released KPMG International study entitled Consumers and the New Reality – 85 percent of Australians said they would be willing to pay more for locally sourced groceries and 90 percent responded positively for non-grocery items.
This was initially apparent in the response to the recent Australian Bushfires and the commitment to support businesses that were affected, evident in the success of the 'Buy from the Bush' campaign. Interestingly, a 2020 survey conducted by Nielsen1 indicated that 11 percent of global consumers said they only bought products manufactured in their country, while an additional 54 percent 'mostly' bought local products. In a COVID-19 world, promoting local takes on a sliding scale; a local community level, a state level and a national level.
The next questions to consider:
- Will your customers also focus on shopping local?
- Will your customers seek out local in a bid to support the national interest over the lure of cheaper international products?
- Or will the financial strain of the situation see cheaper products and services ultimately prevail?
In many ways, the COVID-19 pandemic has been a great leveller; people from every walk of life were instructed to press the pause button on 'normal' life.
For some, this meant more time with family and for others, more time away from family. This provided individuals an opportunity to forego the commute and use the additional time to exercise and get out of the house. The Guardian reported that home cooking enjoyed a renaissance, demonstrated by the surge in demand for baking ingredients, and 71 percent more time spent online with food and cooking content since the last weekend of February2. People enjoyed spending more time with their children, traded supplies with neighbours and gave the family pet some much needed attention. No matter the circumstance, everyone was forced to re-evaluate many of life's more arbitrary excesses and consider what really matters.
In KPMG's research, while 57 percent of Australian consumers felt financially secure, value for money was still the key driver in making purchases, followed by ease of buying.
For many, the change of pace and life striped away of complexities signalled a shift back to basics. And in turn, forced a re-evaluation of what is important and how to spend their time. This could encourage a sustainable embrace of the simpler pleasures in life. And as these new habits we've developed during the shutdown really start to embed in our behaviours businesses will need to consider how long it will take before we start to unlearn them, or even if we do.
The next questions to consider:
- Will these changed behaviours enable a meaningful shift in how we use our time?
- How could organisations adapt their customer experience and align organisational values to deliver if this shift does embed in our lives?
- What products and services will be most valued by customers?
Along with the shift back to basics in terms of what is important, the COVID-19 situation created a focus on personal finances and consumer spending. As unemployment levels rise, businesses undergo change and the global economy splutters – consumers are forced to think twice about the value they place on what they spend.
During lockdown, spending habits broke. People were forced to try new brands and to reconsider which items were a genuine ‘must have’. Some sectors were harder hit than others, but across the board, there was a marked shift in what constituted as an essential purchase and what represented value for hard earned dollars. This was observed in the beer industry, with ALM CEO Chris Baddock noting a shift away from premium products towards mainstream beer and an unwillingness to experiment.
Customers are continuing to reassess their purchasing behaviour and consider more deeply where their money should and shouldn’t be spent.
In the new reality, post the COVID-19 restrictions, what will be deemed a necessity or a luxury? For many, financial strains will dictate savvier spending habits. For others, the unpredictability and suddenness of the pandemic lock down measures may mean an increase in hedonistic or opportunistic spend when restrictions are relaxed. Many restaurants are anecdotal reporting that May has been one of their best months ever. In the April 2020 NAB Online Retail Sales Index, all eight categories saw increases, including fashion and home wares and appliances – and this growth is happening at a rate that's higher than what has been lost in traditional sales. And there has been similar growth rates overseas as well.
The next questions to consider:
- How will these divergent behaviours create a disparity of spend at the top and bottom of the brand scale, will those that sit in the middle be forgotten?
- How will your business fare in this environment?
- Are you clear about the value you offer your customers?
- Do you understand the role that your product or service can genuinely play in their lives?
A common pre-COVID-19 gripe was that we never unplug. Social media and digital technologies have reduced our attention span, damaged our basic comprehension skills and created a world of increased distractions.
Almost overnight these tools for connection shifted from being distractions to be something way more significant. Reuters reported that Zoom’s daily users ballooned from 10 million to over 200 million in March3, and Microsoft Teams added 12 million active daily users in just seven days in the same month. We all had to become experts in digital communications. These tools became an essential service as we traded physical interactions for virtual connections.
The nature of those connections dramatically changed as well, both professionally and personally. Friday's after work drinks were replaced with virtual drinks via laptop screens. Long meetings were replaced by video chats with attendees from all around the country. Group exercise classes proliferated online as did cooking classes from well-known chefs. Commute time was reduced or disappeared altogether which resulted in less time in the outside world but more time to spend with family and friends. James Mabbott, Partner in Charge, KPMG Futures and National Leader for KPMG Innovate, recently noted that the way we work has been radically reshaped, predicting an enduring increase in volume of remote working, challenging the 9 to 5 workday and accelerating the uptake of associated emerging technologies4.
The next questions to consider:
- Will this mean our behaviour as social beings will change forever?
- Physically disconnected, we found a new sense of connection with a more intimate social circle – more families are eating meals together and couples are spending more quality time together than ever before. What elements of these new ways of connecting be retained?
- Will customers continue to shun the idea of cramming into bars for more comfortable at home options?
- Will the future of live entertainment events be changed forever?
- Or will customers long for mass connection, regardless of consequence, as soon as possible? Whichever way things develop, how well are you placed to embrace, accelerate or adapt for these changes?
Beyond the intimate personal use of technology, the disruption caused by COVID-19 accelerated business’ digital transformation agendas across the globe. Pre-COVID 19, a survey by KPMG Australia of nearly 200 C-suite executives indicated that digital transformation remained the top concern5. Fast forward to COVID-19 and almost overnight organisations were forced to reimagine the way they delivered products and services to customers, the platforms they used, the way they worked and their means of engaging with customers.
A critical driver of this change was the ‘temporary’ closure of brick and mortar stores, many that were already facing viability challenges, and restrictions on other points of distribution. Services that were delivered face-to-face pivoted to online; gyms switched to online classes, medical centres delivered tele-health services, education converted to online curricula and entire multi-national workforces worked from home.
This global shift put tremendous pressure on the relationship brands have with their customers. The closure of restaurants and bars saw a significant channel for alcohol disappear overnight and distribution networks slowed to a trickle and large export industries – such as the Australian seafood industry – were left with more stock than they could move. This highlighted the importance of diversification. Direct to consumer tactics shifted to the fore, with online channels proving to be a fast and cost-effective solution. Online sales for the Super Retail Group were up 145 percent6, and the ABC reported that the 2020 Easter period was one of the largest sales period in history for Australia for online retailers. Accent Group, with brands such as Athlete’s Foot, Platypus Shoes and Hype DC, reported a jump in online sales from $250,000 per day pre-COVID to over $1.1m per day within weeks.
Optimising the necessary digital tools, technology platforms and infrastructure to enable this connection required rapid up-skilling and investment, and this will need to continue. Balancing this with the correct broader channel mix for recovery will also be important for businesses facing into the new reality post COVID-19 restrictions.
As organisations compete for the customers’ attention, what will be the winning ticket? In KPMG’s 2018 and 2019 Six Pillars of Customer Experience Excellence report, the ability to personalise the offering has been critical to the success of the highest rated businesses. However, our research during the COVID-19 lockdown period showed an interesting shift in the relative importance of each of the Six Pillars – with customers forgoing Expectations in favour of a re-evaluation of Integrity (with a focus on trust and transparency) and further, an increase in the importance of Time & Effort as a key driver for what constitutes excellence in customer experience. In the same research, Personalisation reduced by two thirds, further emphasising a shift in the way customers were viewing interactions with businesses.
Not all businesses are suffering and some were already set up to take advantage of this shift. Examples include recent market entrants with exercise apps SWEAT by Tobi Pearce and Kayla Itsines and Centr by Chris Hemsworth. However, for many, the required speed of adaptation meant it was not be possible to go beyond basics to offer a genuinely differentiated experience.
The next questions to consider:
- How will this rapid acceleration of change increase or decrease our reliance on technology when engaging with products and services over time?
- What channel mix will work best moving forward?
- Will customers become more technologically literate and increase pressure on organisations to rapidly adapt or will they begin to switch off and crave more human interaction?
- What else will organisations need to do to ensure they navigate this forced transformation successfully?
- How well is your business placed to adapt to the changing drivers of Customer Excellence?
The speed of change at the onset of the pandemic was unsettling for most and instilled fear in many. There were few who could have predicted the far reaching impacts of the pandemic and for many businesses, there was little time to prepare business resilience plans. Long term strategic plans were replaced by short term survival tactics. COVID-19 has been unique in its impact on the global economy, because never before have we been so interconnected through digital reporting channels.
The tension of the individual vs the collective has never been more palpable. It is a tension between control and surrender. For some customers, fear has been demonstrated through stockpiling – toilet paper, pasta, tinned tomatoes and flour were stripped from supermarket shelves. For others, fear drives protectionism, cocooning and risk-averse purchase behaviour, underpinning local vs global as mentioned earlier, while also extending the sales funnel for many businesses.
KPMG's recently conducted Consumers and the New Reality global research study showed that personal safety (54% increase in importance), local communities (43% increase in importance) and social conscience (42% increase in importance) – as core components of trust.
In the short term, organisations adopted various tactics in response; some went underground in a bid to wait out the storm, including many restaurants and bars; some were perceived to capitalise on fear to make quick money; some pivoted their businesses to assist critical shortages and build goodwill, including distilleries turning to making hand sanitiser; and a few focused less on overt sales and more on brand building through messaging focused on reassurance.
The impact on employees shouldn’t be forgotten. As organisations reopen for business, staff who were focused purely on the immediate response will need to be reassigned to other areas and job loss could remain a persistent threat for many Australians. As a result, the employee experience will need to be closely managed as it is inextricably linked to the customer experience. While Australia was not part of the 10-country study, Edelman’s recent global survey7 indicated that employers are expected to perform a critical role in eradicating fear through credible, timely and relevant information.
The next questions to consider:
- What will the future impact be of fear on the customer experience?
- What purchasing behaviours will prevail and how will organisations respond?
- Will there be a sense of caution moving forward or will people live more exuberantly in fear of another pandemic?
The antithesis of fear is trust, and trust is the fundamental basis of any relationship. It is hard earned, and strongest when reciprocal, but easy to lose. Prior to COVID-19, there was a notable decline in trust in key sectors including banking and finance, aged care and long-standing institutions such as the church, as well as government8. In a time of crisis, trust becomes even more important. Evidence based decision making has been a hallmark of success during the COVID-19 pandemic. Political leaders sourced expert opinion from Chief Medical Officers, with state deferral and private sectors adhering to government directives. The trust and reliance on critical expertise replaced populous opinion, with Edelman further reporting that scientists and medical doctors were the most trusted professional in their recent global survey7.
As we face tough times and we all need to be resilient in the face of adversity, tolerance of untrustworthy behaviour decreases and the veracity of information is more deeply scrutinised. For organisations, and the brands they manage, integrity is critical and brand positioning and tone of voice is as important as ever in communicating this. The challenge to maintain this integrity is evident in the backlash many brands received for ‘over-empathising’ with their customers. The flood of emails and television advertisements seeking to reassure customers during COVID-19 is sometimes criticised for promising outcomes no-one can deliver. While screen time has increased, there is another a threat to social influencer marketing with declines in the areas of travel and tourism, though opportunities for those within beauty, cosmetics and home may see an increase.
Customers are paying more attention to the brands they support, what they stand for and how sustainable they are, in terms of both environmental impact and the ability to remain able to serve. Customers are less likely to be forgiving if expectations are not met. Initially, the preference for credits was visible in the travel industry, when the almost universal grounding of flights and cancellation of travel plans caused a surge in demand for information and refunds. Many airlines are offering long term credit vouchers in a bid to retain customers and remain in business, though vouchers require a base line of trust to hold value. With the continued and sustained uncertainty of when boarders will again open there is an element of mistrust in some tourism businesses being able to survive through to the other side.
The next questions to consider:
- What will the indicators of trust be moving forward?
- Will local suppliers feel more trustworthy than larger corporate entities?
- Or will larger entities be seen to be more reliable, their scale a signal of their ability to survive?
- Will the disparity of impacts of COVID-19 on individuals affect not only where trust is placed but how it can be built too?
- Importantly, how will organisations balance the need to be authentic with the need to not fall silent at times of crisis?
Implications for businesses
In a recently released report from the global SAE Group at KPMG our team explored how the varying degrees of risk exposure to COVID-19 necessitate different responses from entities. Those who are facing high degrees of permanent change, combined with a rapid rate of recovery – fall into the surge quadrant. These are industries or companies which have the opportunity to scale post COVID-19 as consumer behaviour that was altered during the crisis is sustained in their favour. At the other end of spectrum there are those entities who face a hard reset, facing high degrees of permanent change, coupled with a slow recovery. These companies post COVID-19 will face into a lowered demand environment and will need to reconsider many aspects of their operations, service and structure in order to re-enter the market.
The other two segments are those who are experiencing lower amounts of permanent change, but need to face into either transforming to re-emerge or modifying their business-as-usual position. The modified business-as-usual group, are those businesses that are seen to be essential, may have suffered from initial lockdowns and restrictions, but need to think about which aspects of their changes they maintain and which aspects revert back to normal as they head into a new business reality.
The final sector, is the group of businesses who have the opportunity to transform to re-emerge – these companies face a protracted path to recovery, borne out of business complexities, but with appropriate capital and the appetite to change with customer behaviours they stand to remerge stronger than ever.
As Australia continues to emerge from the COVID-19 crisis and navigate through the various stages of the pandemic from reaction and resilience onto recovery and our new reality – one thing is almost certain, customers will change. It might be convenient to believe that our lives will simply snap back to the way they were before COVID-19, but all customer behaviour, business realities and popular culture discussions point to a different direction.
1 Nielsen – COVID-19 forces recalibration of priorities as world embraces new habits
2 The Guardian – Kneading to relax? How coronavirus prompted a surge in stress baking
3 Reuters – Zoom pulls in more than 200 million daily video users during worldwide lockdowns
4 KPMG Australia – Remote work is radically reshaping how we work
5 KPMG Australia – Digital transformation top CEO concern for 2020
6 Australian Financial Review – Retailers switch focus to online to keep cash flowing
7 Edelman – Edelman trust barometer special report on COVID-19 demonstrates essential role of the private sector
8 Edelman – 2020 Edelman trust barometer reveals growing sense of inequality is undermining trust in institutions