The effects of COVID-19 continues to be felt around the globe and organizations will need to anticipate and prepare for the changes in their consumer's needs, behaviors and preferences. In particular, what are the long-term shifts in consumer behaviors and how can organizations transform their business to successfully adapt to these changes?
The first Consumers and the new reality executive summary is based on a consumer pulse survey data collected from 29 May to 8 June 2020. The data collected from more than 12,000 consumers, looked at their interactions with Consumer & Retail, Banking and Insurance organizations. This report examines the evolution of consumer behaviors across 12 countries, regions and territories - Australia, Brazil, Canada, China, both mainland and Hong Kong (SAR), France, Germany, Italy, Japan, Spain, UK and the US.
Key findings - all sectors
Globally, a new consumer is emerging — one that is financially constrained, more advanced in their use of digital technologies, more thoughtful and selective in their decision-making, and keen to see COVID-19 as an opportunity to reset values in the world. The changes we're seeing are likely not short term. Most consumers believe they will be living their lives very differently for the foreseeable future. Businesses will be faced with new challenges in this new reality.
Three key themes emerged across the three participating sectors:
- Attitudes shape spending: Consumers' spend is impacted by both the decrease in disposable income and the psychological impact of COVID-19. We see new segments arise, separated by their need to group products and services into categories of necessity, with spend moderated by financial attitudes. Overall four in ten are financially worse off, with another 13 percent deferring major purchases.
Organizations will need to rethink their business and operating models. The consumer's search for value for money is much more than just short-term margin dilution. It is fundamental change in purchase priorities and will be prevalent for 12 months or more.
- Digital savviness: COVID-19 has amplified the need for easy access to products and services and relevant information. The majority of customers are now comfortable using online channels, reducing physical purchase occasions and are gravitating towards touchless shopping and contactless payments. Ease, therefore, is at the heart of a digital shift, which touches all parts of society irrespective of age.
Organizations will need to invest in new digital methods of communication and payments. Organizations will have to consider releasing cash from existing channels and shifting into digital. Prioritizing digital security will be key.
- Multidimensional trust: Trust, the third key factor influencing consumers' purchase decisions, is also not a new concept. However probably for the first time, consumers have seen organizations put the well-being of their customers and their employees ahead of profit. “Acting in my best interest” is a key driver of trust. Consequently trust between a consumer and an organization has become increasingly multidimensional and contextual.
Organizations will need to review their sense of purpose and ensure it is aligned to the unique environmental and social impact that they can make. Organizations will also need to identify where they can build trust and ensure that actions that erode trust are eradicated.
Organizations must focus on digital enablement of their customer and be clear on where they need to win the customer's trust.
Consumer and Retail
Nowhere is the combined impact of the global consumer trends more noticeable than in the consumer and retail sectors. Price pressure, higher consumer expectations and safety are top concerns. The convenience that is afforded by shopping online is a key driver of increased use of digital channels, both for grocery and non-grocery purchases.
Physical retail will need to offer consumers new reasons to purchase offline. With price and convenience being key to consumers' decision making, retailers will need to develop their online and last mile logistics and delivery capability and manage the balance between home delivery and in-store product ranges.
Local shops have fostered new relationships as they care for the vulnerable and the elderly, providing welcome delivery services. Of those who will prioritize shopping locally, about 9 in 10 are willing to pay more for local products, where their spending has a noticeable impact on the local economy and where they can trust the provider.
The trend towards local products may revitalize tertiary high streets, which have seen a decline over the past years. Organizations will need to align their supply chains to the growing trend of a desire for localness. This is more than just sourcing — companies will need to be demonstrably supporting communities, new community networks and being locally relevant.
This pulse survey found value for money and personal safety are major priorities for bank consumers, alongside ease of access (including better functionality of the banks website and apps) and proactive communications with regards to the effect of COVID-19 on service offerings. Trust in the brand (45 percent) is one of the key attributes for the banking industry, with the research showing a net improvement in trust for own bank (+15 percent), with virtually all consumers saying they trust their bank at least as much as before COVID-19 (96 percent).
Established banks must work harder to compete on trust. New and digital banks should look to promote those key purchase drivers which play well to their offer (e.g. digital security, ease of use, as well as value for money).
The rise in digital usage during COVID-19 is expected to continue, requiring banks to re-assess their channel mix to ensure robust and safe omni-channel experiences.
Banks need to re-assess their channel mix: has the purpose that each channel serves changed? Can banks deflect investment from traditional channels into a more robust, consumer-centric omnichannel offering?
Consumers expect the impact of COVID-19 to last. Almost half expect that normal life will not resume for at least 6 months, especially those aged 45 and over. This likely underpins many consumers' increased need to secure against unforeseen events. A quarter of consumers have acquired and/or considering an insurance policy as a direct result of COVID-19, notably car and life.
The insurance sector should expect continuous increased activity around customer acquisition and churn. Organizations who will succeed are those who maintain consumer trust (for example, by processing claims efficiently).
While policy choice will continue to be price driven, 42 percent are looking for a more personalized product and indemnitees against future pandemics. The latter being a direct consequence of many policies not paying out due to exclusion clauses.
Trust in insurance companies appears not to have been damaged (+4 percent points net improvement in trust), however, it is clear that consumers are impacted. A third now request proactive communications on the effect of COVID-19 on the service offered and want to understand how exactly their policies have been affected and what they are covered for and what they are not.
Organizations need to be transparent about what is and isn't covered. This will be critical to support consumers in a time of lasting uncertainty.
Each of the trends identified in our study accelerated with the beginning of COVID-19. This study confirms that they are persistent both over time and geography, and that their combined impact on consumers' behaviors has stark implications for organizations.
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Global Sector Head, Consumer & Retail, KPMG International; Partner, Advisory Leadership
KPMG in France