Fri, 25 Mar 2022 14:56:47 GMT
"Things are normalising… but they are not normal" Seth Carpenter, Morgan Stanley's chief global economist
Economists have cut growth forecasts for 2022 and inflation is a word on many people's radar right now. In the UK inflation rates have even reached the highest level in 30 years. In the US prices are rising rapidly with 7% year-on-year increases. In Ireland prices for food, fuel and housing are to hit 40 year highs. This trend ripples across developed markets (inflation is on track to reach 4.7% at the end of this year). Between war, covid, and the shrinking natural resources and supply chain disruption, rising costs and falling disposable income are a reality for many. The odds are against today’s younger generations - among many pressures, they’re considerably less likely to own a home than past generations were at the same age... and now that's up against it for everyday items from bread to beer, milk to vegetables.
Inflation, consumption and pressure
While young people can be generally budget conscious (having tighter budgets/lower salaries than older cohorts), they are also more ethically conscious than ever before when it comes to purchasing trends. We’ve seen the dynamics of value and values-led purchasing cause great debate in the marketing world lately. Many young people are witnessing this high inflation for the first time in their lives.
“It’s still costing a lot more to live in the UK than a few years ago. Petrol is mental. The hairdresser has gone through the roof - probably because their overheads have gone up and they have to pay staff more so they can also live.” Avene, 30, UK
“Petrol and diesel are insane here! Electric bills are astronomical for some people … luckily we picked a fixed rate or ours would have tripled… no fun!” Helen, 31, Sweden
Low mood around inflation and trade offs is one to be aware of too - some people might have felt great saving some money by cutting back on experiences in the pandemic and now, rather than spending it on exciting long-awaited adventures or luxury items, are forced to eat into it for necessities (to literally use it to eat). The shrinkflation phenomenon is also seeing companies reduce the size or quantity of products, rather than increase prices that pass on costs to others. This leads to disappointing consumers complaining or being a part of an engaged subreddit page with over 20k people venting.
All this is leading to tangible shifts in purchasing experiences and habits. Young people we spoke to talked about feeling shocked more and more when getting the bill in restaurants or looking back on receipts. It’s making them more selective about occasion planning - where they go and how often.
"Highest inflation rate in 30 years, meanwhile they are still claiming millennials cannot buy homes because they eat too much avo-toast!" Ellen, 25, Denmark
For Gen Z the conversation around inflation can also be linked back to perspectives on responsible consumption - sustainability and the reassessment of consumption trends in culture more deeply.
“I think over consumerism is a part of modern day culture due to the fact that there is a new trend every week and in order to keep up. Brands make cheap, low quality versions
for a trend that ends a week later. With the internet and media constantly changing, brands are forced to keep up in order to stay relevant, which in turn, harms the environment. In order to promote a sustainable lifestyle, there needs to be a cultural shift, not just a marketing campaign. Purchases need to be made out of necessity, not a want or because its what cool right now.” Peter, 16, Ireland
Prioritising security and impact with finances
Young people’s emergency savings were hit especially hard over the pandemic. Some who have sustained job security may have savings built up over Covid, but those living on the edge will be most likely to be affected - many young people are likely to fall into this category, they are just starting off in careers and many wouldn’t naturally be at the lower end of the salary scale. This means people are thinking more strategically about how they can improve the security of their finances. Some in secure employment see the current economic outlook as an opportunity to advocate for higher salaries and perks.
“Besides the price of alcohol going up, a lot of my friends would be aware of what’s going on with inflation now. A good few of them are using this to advocate for salary rises in work. On top of rent being so expensive they have a strong case to make to their employers to keep up with the times we’re living in.” Mark, 27, Ireland
This consciousness means younger talent is getting more aware of economic policies around inflation and that some companies may have to ensure staff can continue to live comfortably by paying a living wage. But it seems like the ‘great resignation’ might play a more significant role in wage conversations as research shows salaries are not increasing to match inflation costs (Mercer finds that 45% of US employers don’t factor inflation into salaries and less 25% said they will be making changes to their salary budgets because of inflation).
Elsewhere, the rise in interest in cryptocurrency reflects how young people are challenging and ‘hacking’ norms in conventional savings and personal finance management. Digital natives are quick to learn and experiment with ways to generate wealth quickly and more ethically. In the context of war creating unstable economic realities when it comes to access to funds, those engaged in these worlds are seeing the value of cryptocurrency investment/use pay off. A young Russian comments via Twitter “I tried sending money to my parents via Western Union and I can’t…Bitcoin is now the only viable way to transfer money to Russia…Good thing my dad is pretty into Bitcoin and it was easy for us to just switch…”
Tech-driven finance trends have also seen a surge in interest for new ways to invest and find wealth ‘hacks’. Innovative apps like Alinea tap into cries for more purpose-driven investment opportunities and the desire to share and learn from peers and experts alike. Other disruptors like Engine No.1 - ‘an investment firm purpose-built to create long-term value and bring common sense back to capitalism’ which uses ESG data to drive economic value - Clim8, or campaigns like Make My Money Matter (an ethical pension movement), are turning heads and changing how young people approach financial planning.
Pre-empt consumer behaviour and be transparent: Tapping into Behavioural Economics is a must in terms of pre-empting likely consumer behaviour when it comes to price hikes and shrunken product offerings. Above all, consumers want to feel the purchasing contract is fair. Being upfront with supply chain issues and price hikes will help manage consumers’ disappointment at not being able to access the products they want and/or deal with the reality that many of their everyday go to’s are now more expensive. Communicating changes and identifying pain points is key to managing quality expectations. Being reliable and transparent goes a long way. As McDonalds in the UK knows all too well, letting people know their favourite Big Tasty is coming with only one tomato slice and not two is a big deal for some…
Promote price hike resistance / value for money: Another strategy is to empathise with the challenges people are facing and respond to them by sticking to a promise and reminding your audiences that nothing has changed (if that’s the case) can be a reassuring sense of security and comfort. While many might understand the reality of price increases on the supply end, it’s still ripe territory for brand switching and complaints. Hero products with no price hikes are worth promoting.
Manage the short-term but don’t sacrifice the long-term (or the right thing): The jury is out as to how long the impact of rising inflation will affect us, but optimistic economical predictions point to a better situation by the end of the year. And while current rising prices are putting short-term pressure on shoppers, it is also putting short-term pressures on businesses, potentially jeopardising long-term decision making. It may be tempting to put transformation plans around ESG commitments on the back-burner, but efforts like these can do a lot of heavy lifting - for young talent and shoppers alike. The public at large are increasingly understand the interconnectivity (from supply chains to production) of how we consume as a global society, and as a result reassessing purchasing priorities. There is a case to be made for a renewed focus on brand purpose communications, which can help people rationalise paying more/recommendations.
While not your typical company, Tony’s Chocolonely, an impact company that makes chocolate, are a great example here. The brand communicates how they and their customers pay a premium because that is the true price to provide farmers with a living income (with cheaper chocolate someone is always still paying a price): “At Tony’s we’ve got a vision of equality across the entire supply chain… Everyone gets a fairer share and consumers rest easy knowing a sweet treat doesn’t come at the cost of human rights violations.” Tony’s Chocolonely Annual Fair Report 20/21
By The Youth Lab - the insights, strategy & trends division at THINKHOUSE the youth marketing company.view more - The InfluencersTHINKHOUSE, Fri, 25 Mar 2022 14:56:47 GMT