James Pinchbeck, partner at Streets Chartered Accountants, discusses the impact of the cost-of-living crisis on your customers and what businesses need to consider.
With the rate of inflation having seemingly or hopefully peaked at a 40 year high and with Prime Minster Rishi Sunak’s announcement that he seeks to half the rate of inflation by the end of the year, we might start to feel some sense of easing in the cost of living. However, against this backdrop many households and businesses are still feeling the financial impact of the pandemic. This is aside from the fact that salaries are not keeping pace with inflation.
How then does or is the current economic situation affecting customers and consumers alike and what do businesses need to think about or consider? Whilst this may depend on the nature of your business, the broad considerations tend to be the same.
Perhaps the starting point is what we buy and why? Is it a necessity, essential through to desirable or even a luxury. Whilst we may cut back on and even forego luxuries, essentials are something we tend to continue to purchase. Though for such items, products or services, we continue to purchase we may consider or are more likely to consider alternative provision perhaps trading down or seeking lower cost alternatives. We may also look at reducing not just our rate of consumption or use, but even the frequency of our purchase.
When it comes to where or who we buy things from, whilst we may have our preferred supplier or outlet in the current climate, we are increasingly likely to at least consider the same in a quest to find comparable cheaper alternatives. This is often even despite the longevity or depth of a business relationship.
When things become financially tighter we tend to be more thorough and considered, often taking longer to make the decision to make purchases, certainly high value capital items and one-off purchases – a process which is likely to involve greater consideration and analysis before reaching or justifying the decision to purchase or not.
Who doesn’t like a good deal or offer! Incentives, promotions and offers are likely to be key for those considering making a purchase as consumers and customers seek to get better value for money.
Whilst businesses will no doubt look to adapt their marketing to respond to conditions affecting their business, perhaps one of the key areas to focus on is customer service and experience, both for existing and new customers. At a time when businesses are dealing with rising costs, supply chain shortages, even labour shortages, many will probably be experiencing a deterioration in their level of customer service and experience. Unfortunately, this comes at a time when most of us are feeling poorly served, perhaps are seeking or demanding more and as such puts in jeopardy our business relationship.
Business as normal may be the approach of some, though for most if not all there is a need to consider both the short and longer term impact of the current situation. Few of us are likely to be running our businesses or undertaking our marketing in a year’s time like we are today. Taking time out to consider not only how your business is being affected but also what you need to do differently are likely to be key to your continued success.
See this column in the February edition of East Midlands Business Link Magazine here.
