The COVID-19 pandemic has knocked consumer confidence hard, with profound and far-reaching implications. It has disrupted every aspect of daily life, including employment, consumption, and freedom of movement, creating uncertainty about what is safe and what lies ahead. Standard business has been upended, vaporizing certain norms consumers have always expected and assumed. This has created challenges and opportunities to which every organization — brand owners, especially — must now respond.
By early May of 2020, confidence levels had fallen to below 100 on the Organization for Economic Cooperation and Development’s consumer confidence index, plummeting sharply to the lowest level since 2015. This indicated a stark reversal from confidence in the general economic situation and a willingness to spend to an attitude of pessimism and cost consciousness — a significant shift that occurred in a matter of weeks.
Established brand loyalties and purchasing behaviors shifted too, as spending fell across all industries, with larger purchases hit especially hard. Our own research shows that this is the result of lockdown measures restricting both people’s ability to earn and spend money, and expectations that household income will continue to fall in coming months.
Now, as companies work to prepare for what happens after the pandemic crisis eases, rebuilding confidence has become a business imperative, paving the way for a confidence economy.
An Experiential Issue
From Airbnb to Uber, some of the most successful entrepreneurial brands in recent years have become so by reinventing an experience — changing the way we do everyday things like booking accommodations and hiring a ride service. These companies know that a brand is a bundle of promises and that experience is where those promises are proved.
Through a purpose-led approach to innovation, the best brands have transcended immediate gratification to create an array of meaningful experiences that have revolutionized our daily lives and experiences. By linking its Apple Card to an iPhone user’s Wallet app, Apple turned paying by credit card into a smart financial management opportunity. Carnival reimagined the cruise experience by embedding smart digital technologies into the physical environment of its ships to create made-for-me personalized experiences that passengers access through a wearable smart medallion, for example.
Brands such as these live and breathe the belief that a successful brand offers experiences that create value across every interaction. In short, experience is critical. And as people lose confidence through negative experiences — and gain confidence from the new experiences built around them — experience is especially salient for any company’s response to COVID-19.
The Cost of Confidence
Brand owners must now identify meaningful confidence-building experiences to create. To do this, they need to understand the cost of confidence — the investment required to provide people with reassurance, set against the degree of commitment for people to make a product or service part of their lives.
In essence, the cost of confidence rises in proportion to commitment level — commitment being psychological or emotional effort, as well as time and price. Buying a carton of eggs, for example, requires a lower cost of confidence compared with booking a cruise, as the latter generally involves other considerations, such as meals and connecting transport, thereby involving a higher level of commitment.
Brand owners must also determine the confidence factors most appropriate to their products and services. For many, health and sanitation will be key areas of focus. A bank, for example, will need to build customer confidence around touching an ATM screen and handling the physical money withdrawn. For others, timeliness might be a more important confidence factor. An e-commerce retailer, for example, will need to consider how to build shoppers’ confidence that their order will arrive on time. How will a travel company build travelers’ confidence in booking a vacation in six to 12 months’ time amid fears of a brewing second wave of COVID-19 infections?
Before they can truly earn customer confidence, brand owners must have confidence in their own understanding of the human impact of COVID-19 on the people they serve. This requires strengthening their human insight to understand people more deeply than ever.
Transcending the One-Off
Already, confidence-building actions are starting to emerge. To encourage the return of visitors once lockdown restrictions are eased in the U.K., tourism agency VisitBritain has developed the “We’re Good to Go” standard and symbol, which hotels and attractions can use to show that appropriate physical distancing and cleanliness measures are in place. In air travel, Emirates introduced a rapid COVID-19 test for passengers, while Southwest is leaving middle seats on its planes open for social distancing until at least the end of July. In the Netherlands, one Amsterdam restaurant is testing the use of “quarantine greenhouses” for socially distanced al fresco dining.
One-off actions are not enough to rebuild lasting confidence, however. Nor can confidence be built by advertising alone. Instead, companies must create new transformative and meaningful experiences that help reduce uncertainty — one of the root causes of lost confidence — and add value at every step along the customer journey.
Listen, Learn, Reassess, Pivot
To build confidence effectively, credibly, and sustainably, brand owners must listen and learn, reassess, then pivot. To do this, they must optimize three essentials today.
Empathy. Deep understanding of the human impact of COVID-19 is key to creating new experiences that build confidence and add real value. A brand owner’s response must be underpinned by in-depth understanding of people’s attitudes and behaviors — what’s changed, what hasn’t, and what further changes may occur.
Valuable insights can be gained by understanding how people have responded to COVID-19 by innovating for themselves. Do-it-yourself social activities conducted virtually rather than in person, which has become a regular occurrence for many during lockdown, may continue after the lockdown ends, especially for friends and family located too far apart to meet regularly in person. The opportunities for brands lie in learning which products or services they could provide to enable and enhance such virtual interactions — such as a “home pub” experience.
During the early stages of the COVID-19 pandemic, Ford demonstrated empathy by introducing payment relief for coronavirus-impacted customers financing or leasing through Ford Credit. Subsequently, constant contact with dealers has ensured that its strategy is shaped by evolving customer sentiment. Meanwhile, U.S. auto insurers Allstate and American Family announced that they would refund part of their customers’ premiums for April and May in response to a notable dip in distance driven.
Adaptability. People’s attitudes and behaviors won’t change just once because of COVID-19; they will constantly evolve. Companies must therefore continually evolve their customer experience, too. Brand owners will need to assess people’s needs — not just now, but next year and beyond, adjusting the picture as events play out. They must determine where reassurance is needed and understand where demand might surge. And they must be ready to respond to future unforeseen events.
Agility is key, as Nike showed when its offline business ground to a halt in China after COVID-19-related store closures. By deploying its staff to engage Chinese consumers digitally by offering at-home workouts, its online sales between December 2019 and February 2020 rose 35% year on year. Meanwhile, clothing companies Barbour, H&M Group, and even Fanatics — the producer of official Major League Baseball uniforms — were among the many organizations to swiftly switch to producing personal protective equipment amid supply shortages.
Reinvention. All organizations must redefine their role in the emerging commercial ecosystem. Brand owners must identify new opportunities as the situation evolves and explore and define how to expand core products, services, and experiences as this context emerges. They must close the gap between listening and doing to make pivoting a core business habit.
In April, Heinz pivoted in response to COVID-19 when it launched a direct-to-consumer platform to sell bundled grocery products to consumers in the U.K. Meanwhile, restaurant chains Potbelly, Panera Bread, and Subway launched grocery services for customers not just unable to eat out but facing difficulties in buying staple food products during lockdown.
Shortly before the COVID-19 pandemic, we predicted in our Fjord “Trends 2020” report that a realignment of the fundamentals of business was imminent — from how business functions and its impact on the world and society down to individual organizations’ daily interactions with the people they serve. Now, behavior changes caused by COVID-19 are accelerating this trend while also paving the way for new habits — creating an opportunity for organizations to innovate.
Thankfully, pandemics happen infrequently. But they are one form of an ongoing challenge that all organizations face: volatility. As confidence is fast becoming a new business currency, every brand owner must now optimize its ability to empathize, adapt, and reinvent. Those that do so will be best positioned to face the many challenges — and capitalize on the opportunities — that lie ahead.
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This content was originally published by MIT Sloan Management Review. Original publishers retain all rights. It appears here for a limited time before automated archiving. By MIT Sloan Management Review