Surviving the Cost-of-Living Crisis: Strategies for Businesses to Meet Heightened Customer Expectations

This article is part four of our four-part mini-series, derived from our report in partnership with Grant Thornton 'The Cut Back Economy,' which explores the impact of the cost-of-living crisis on the UK retail, leisure, and consumer sectors. Our research shows that nearly 90% of UK consumers will need to reduce their spending on non-essentials. Check out the other three parts of the series at the bottom of this page. 

2 minute read

With heightened customer expectations and reduced loyalty, businesses must understand their customers deeply and adapt their products and services accordingly. This is particularly important as the cost-of-living crisis intensifies and customers become more cost-conscious.

Loyalty Schemes - 

To build customer loyalty and retention, loyalty schemes can be effective if they offer better, more personalised rewards than traditional physical vouchers or points-based systems. Loyalty apps can also provide a seamless, digitalised shopping experience, allowing customers to unlock unique rewards and promotions, obtain product information, and choose their preferred delivery option.

Data Driven Decision Making - 

To drive value and insights from customer data, businesses must invest in data science and digital transformation. Advanced data analytics can help retailers gain a competitive advantage by providing actionable and real-time insights into how customers are responding to cost-of-living pressures. Data-driven decision making will also allow for a more agile, sophisticated pricing and promotional strategy, which will be invaluable in a cost-of-living crisis.

Competitive Pricing - 

Competitive pricing and value propositions are critical for businesses to anchor their proposition around value for money while offering relevant ranges across channels in a highly competitive market. UK retailers and leisure operators must find creative ways to limit price rises, step up promotional activity, and maintain product quality to remain competitive in the cutback economy.

A laser-like focus on pricing architecture and protecting brand image while providing choice to customers across different price points is especially important. For luxury or premium brands targeting more affluent customers, emphasizing the perceived value gap can make downtrading less appealing, for example, by communicating product or service aspects that may justify higher price points, such as superior quality, sustainability, innovation, or exclusivity.

Rethinking Supply Chains - 

Consumer facing businesses are facing challenges from cost-of-living crises, manufacturing delays, shipping backlogs, and labour shortages. To mitigate these challenges, businesses can review and improve their supply chain strategies, including diversifying suppliers, implementing cutting-edge inventory management, collaborating with logistics providers, and adopting digitalisation.

They can also use shorter, more flexible supply chains to reduce reliance on single countries or manufacturers, establish alternative supply sources for fast delivery, and invest in automated distribution centres and micro-fulfilment hubs to meet consumer expectations for speedy and cheap delivery.

Implementing the ESG Agenda - 

Retailers must prioritise ESG goals despite current cost pressures. Progressive brands are linking ESG agendas to the cost-of-living crisis by near-shoring supply chains and sourcing locally. According to our research almost half (48%) of consumers are willing to pay more for sustainable products and are increasingly mindful of responsible consumption.

Different generations have different ESG priorities, with older consumers valuing fair wages and local sourcing, and Gen Z focused on climate change and reducing carbon footprint. ESG will remain a priority for retailers and business leaders have a short window of opportunity to take the lead on issues such as CO2 emissions, fair pay, packaging, and waste.