All industries have made a variety of predictions about the epidemic's impact. In the early stage of the outbreak, there were many who were optimistic that there would be a "consumption rebound" after the end of the epidemic. But with its spread around the world, it seems that the "consumption rebound" will be slightly bleak, if looking from the perspective of current consumer psychology,.
What does consumption restraint mean？
Many researchers in the consumer goods industry believe that, unlike the consumption rebound after SARS in 2003, 2020 will be a more moderate and conservative year even after the epidemic ends. Because the larger the area is affected, the deeper the extent of the economic shutdown will be, and the revenue of all walks of life would have been greatly affected. Some enterprises have been forced to close down. Consumers will choose to retain as much liquidity as possible due to varying degrees of income reduction, uncertain employment prospects and concerns of inflation and rising prices.
But consumption restraint doesn't mean inelastic demand and low-cost goods. We believe that in the post-epidemic , the behavior of consumers will be more driven by inelastic demand, but there will still be hedonistic and experiential consumer demand. Because of the containment factors, consumers will consciously control the trial and error cost, and hope to choose the most suitable product, rather than "discard" after a more willful purchase.
In addition, due to the conscious control of expenditure, consumers tend to choose partial satisfaction between different needs, rather than spending money at will. This means that products and services themselves need to be more persuasive.
Three questions of product test
For consumers, products and services are the user value that consumers ultimately obtain. The user value in consumers' mind is equal to the price they are willing to pay. Due to the change of consumption mentality after the epidemic, three questions of product test will be put in front of consumer goods enterprises:
Question 1: does your product provide high user value?
Question 2: does your product have a precise positioning?
Question 3: does your product have a smooth value chain (not just supply chain) upstream and downstream links?
Four pillars of product strategy
Facing more rational and picky consumers, businesses need to adjust their product strategies in time. We summed up four suggestions:
Focus on specific groups and scenes
Due to the huge Chinese market, both mass market products and niche market products can be further classified as long as they are sorted out. In the past, it was difficult for a SKU store model to continue to succeed. Even McDonald's, which is famous for its standardization, has begun to segment the Chinese market, constantly exploring the balance between universality and pertinence, and has produced many innovative products and store models in the past few years.
The epidemic has changed many behaviors of consumers. For example, young consumers who do not cook are forced to cook at home during the epidemic, and it will last for a while, and some people may keep it from then on. Because this behavior is new, many small families who did not purchase dishwashers may begin to re-measure the return on investment of a dishwasher. However, not all dishwashers can get opportunities. Small on-stage dishwashers and sink dishwashers suitable for small family space will have greater growth space.
Return to core competitiveness
Because consumers are more careful to examine the advantages of products, products that lack core competitiveness and follow the imitation route will surely be squeezed into the crowded price war track. If a product has the ability to focus on the crowd and scene at the first point, it should consider how to provide unique advantage performance for this group of target users.
Product resource matching
Supporting high-quality services with products
Enhance user stickiness with complete experience
In the field of consumption, we have noticed a trend: the boundary between products and services is becoming increasingly blurred. In a more restrained post epidemic era, service is an extension of products and an important means of user loyalty. Good products are easy to understand, and good services are: when developing products, enterprises should focus on the full cycle of use, and provide support at different stages of user journey.
New energy vehicle manufacturers carry out the innovation of charging service at the same time of model innovation, because charging service guarantee is an important condition to persuade users to turn to electric vehicles.
Even products with low unit price, such as cosmetics and mother baby products, are also actively involved in resource construction "private domain traffic", and try to extend the links with users through providing information, after-sales, social networking and other practices.
The VUCA (changeable, uncertain, complex and fuzzy) world has been put forward for many years. This epidemic may be one of the most thorough vuca experiences. In a changing world, strategies need careful consideration on one hand and flexible application on the other.
Author: Georgia Guo
Georgia Guo is an Innovation Systems Methodology Expert who is good at architecting and deploying innovative projects in complex business environments. As director of McDonald's China Innovation Strategy, she established the first innovation team of McDonald's China.She worked for IDEO and PWC before. The Clients she served for including North Face,Coca-Cola and HENGDELI,etc. She graduated as senior Master of Management in Strategy and Innovation, Oxford University.