The Federal Reserve, which closely monitors gauges and inflation across the country, reported that inflation grew by 6.4 percent in February compared to just a year ago, according to ABC News. Add to this the already rising costs for food, gas, and other essential goods, and American consumers are feeling the pinch in their pocketbooks.
Even when leaving out volatile inflation factors like food and energy, the inflation rate was still up 5.4 percent over the same month last year.
Despite the prevalent shortages of fuel and goods, consumer demand still ranks high. This omits the newest conflict surrounding Russia’s invasion of Ukraine, which will continue to amplify inflation with market disruptions for oil, wheat, nickel, and other goods. As a result, consumer spending isn’t booming the way that many economists thought it might. While consumer spending increased by 2.7 percent in January 2022, it only grew by 0.2 percent in February. And when adjusting for rising inflation, spending in February actually fell by 0.4 percent.
So, what does this mean for brands looking to connect with consumers? How should they present themselves in branding and marketing without feeling out of touch with the current state of the economy?
This article will dive into what inflation means for branding, marketing, and media buying, and how brands should position themselves during these challenging times to strike the right tone with consumers.
Perhaps the simplest, easiest-to-understand explanation of inflation comes from The New York Times, which shared, “Inflation is a loss of purchasing power over time: It means your dollar will not go as far tomorrow as it did today.”
One can also think about inflation as to how the price for certain goods and/or services changes from one year to the next. Two indexes track inflation, and while they are set up slightly differently, they give economists and consumers alike a decent picture of how far a dollar (or several) will go. These gauges are:
- The Consumer Price Index (CPI), measures the costs of goods that consumers buy directly.
- The Personal Consumption Expenditures Index (PCE), measures things people don’t pay for directly, like health care, where insurance and the government both pay a portion of it in one way or another.
But inflation isn’t necessarily always a bad thing. A little bit of inflation from one year to the next is considered a good thing. It means companies can adjust to an evolving economy without feeling too much pressure or financial strain.
Inflation can happen for different reasons. The first is a booming economy, where consumers have surplus funds or credit to purchase goods and services, and brands raise prices because these goods and services are in short supply. But the other reason has little to do with the economy and more to do with supply availability. For example, a shortage of oil can lead to an inflation of oil and energy prices.
Following the most brutal months of the pandemic, goods are often in short supply thanks to factory shutdowns and delays in shipping logistics. Also, it’s caused by consumers who have saved up large amounts of money from surplus checks and months spent at home instead of in stores or restaurants. Together, this makes for a recipe for the high inflation rates we’re witnessing today.
Look for Industry-Specific Opportunities
Inflation doesn’t have to be all bad news for brand positioning. Some brands are finding creative ways to use inflation as part of their advertising and branding strategies to add value and save consumers money in the process.
Take for example fast-food chain Del Taco, which recently released a radio ad with two voices discussing the high prices of cars to sell consumers on the low costs of their $2 value menu. This fits with what Marketplace shares is a common trend during times of inflation, in which fast-food companies can benefit from high inflation rates and rising grocery prices.
Without using the word “inflation” anywhere in the ad, Del Taco addresses the consumer desire to save money amidst their shock surrounding soaring prices on goods and services. As Del Taco marketing chief Tim Hackbardt shared with Marketplace, “Traditionally, inflation does favor fast-food restaurants. You get some trade from the grocery dollar to the restaurant dollar.”
When it comes to brand positioning, companies can look for ways that their brand adds value when it seems that every other brand is raising prices, in ways that are specific to their industry.
…But Focus on Emotion- and Logic-Based Storytelling, Not Cost
As The Conference Board shared, “One of the most powerful ways to maintain the perception of value is, of course, to nurture the emotional and rational story of your brand.”
In some industry sectors, consumers may be tempted to opt for store-label or private-label brands to reduce their spending. But, by sharing the emotional and rational value that your brand offers, you can start counteracting this.
This isn’t only true for products sitting on store shelves, though. It’s also applicable for business-to-business (B2B) brands, companies that offer services to consumers, and in some cases, even institutions.
Brand positioning still works, even in times of inflation. However, they must keep the context of inflation in mind and share the value that consumers and other businesses get by choosing your brand.
Marketing Dive had something to say about this concept as well. Through a period of high inflation, some brands may be tempted to remove the value and lower costs to consumers, but for some brands, this may instead be a time to add value instead of removing it.
One example comes from back in 2009 when Hyundai added value for consumers with their “Assurance” program during the recession and put a great deal of effort into sharing this program through their brand messaging. They helped car-buying customers get out of leases or car payments they could no longer afford after losing their jobs. The result was, that even as the rest of the car industry struggled for several years, Hyundai grew its business.
Sure, this specific example may not apply to every industry, service, or product. But brands can take this moment to examine their brand positioning, think creatively, and find new ways to add value for consumers who are seeking ways to stretch their paychecks.
Empathy Is Essential
Inflation isn’t happening in a vacuum. But nonetheless, consumers know that inflation is real. Brands know that inflation is affecting consumers. There’s no reason to gloss over these struggles when it comes to brand positioning.
Some feel that this means that brands will be forced to let go of their purpose-driven branding, surrounding topics like climate change and equal representation. This isn’t just happening in the U.S. The Drum reported that in the U.K., 59 percent of consumers feel as though COVID-19 has already reversed or stalled progress toward fighting climate change.
Consumers are facing increasingly uncertain times. They worry about the implications of inflation and rising costs of the essential goods they need to provide for their families. They are also concerned about the long-term implications of ignoring important issues like climate change. As The Drum pointed out, “customers will be in genuine distress and brands need to be empathetic to their concerns.”
Although, this doesn’t mean making empty promises. During hard times like periods of soaring inflation, brands must show genuine understanding and empathy. It’s not the time to be flippant and offer ill-conceived solutions or advice. “Read the public mood,” The Drum shared. It’s okay to acknowledge the impact that inflation may have on purpose-filled branding, shared continued commitments, and explain why and how your brand is staying the course.
This provides consistency and peace of mind to uneasy consumers. What’s more, brands that use purpose-driven messaging like making an environmentally-friendly choice or supporting charitable giving should continue to share this story; that purpose is the very reason to “pay more” or to choose one brand over another.
Develop an Intentional Strategy
In times of uncertainty, it’s essential to examine brand positioning to ensure it matches consumer mood and demand. But this is easier said than done. At MBI, we’re here to help. Offering decades of combined experience, industry connections, and invaluable insights, we’ll provide guidance to navigate the changes and make the right media purchasing decisions to connect with consumers and help you extend the power of your marketing budget. After all, inflation isn’t a one-way street. We know you’re feeling it too.
High inflation rates may be here to stay for a while. Economists expect that it could last well into next year—or even longer. You deserve a media buying strategy that’s not just designed to get your business through, but to thrive.
To learn more about how we can help you strike the right tone by picking the right media channels and opportunities, contact our team of media experts today.