Organizations that put their customers first tend to have an advantage over competitors. But, with the recent challenge of inflation, many organizations have not leaned on the functions closest to their customers – like marketing – to make key decisions in these volatile economic times.
The AMA and Kantar surveyed over 300 marketers to better understand how organizations have been affected by inflation. The results illustrate how companies and business leaders make tough choices, the role that marketing plays in these decisions, and the importance of having a customer-centric approach.
As high inflation rates continue to persist, many companies are grappling with increased costs and seeking ways to manage them. Overall, 92% reported that their organization has experienced cost increases in the past year, with 42% facing substantial increases.
These rising costs are forcing organizations to make difficult decisions on how to manage their expenses. While some are doing the best they can to manage costs internally, others are making choices that directly impact the customer – like increasing prices and reducing promotions.
Undoubtably, customers are feeling the impact. The broader inflationary environment has resulted in a reported decrease in customer spending over the past 6 months that marketers expect to continue over the coming months. Outlook for the next 6 months is more negative than in years past, as demonstrated by the lowest Marketer Confidence Index (116) since the middle of the COVID-19 pandemic (111 in Jan 2021).
Interestingly, the marketing function has not been an essential decision maker in the actions that organizations have taken in response to inflation – even when it comes to those that directly impact the brand and the customer, for whom this a priority issue.
In fact, 56% said that marketing only had a minor role at best in these decisions, with 19% saying it had no role at all. In these instances, it is most likely general managers, finance, or operations making the calls.
To protect both the profitability of the business and the brand, organizations must balance the actions taken in response to inflation to ensure they are not threatening the current brand and value proposition offered to customers. Those who put customers first in times of inflation may be better equipped to capture the more limited customer dollars available through alternative solutions.
With inflation expected to remain a key challenge for both organizations and customers for the next several months, marketers must ensure they are the advocate for the customer and that the impact of resulting decisions are well-understood across the organization, especially among decision makers in general management, finance and operations.
While raising prices may be unavoidable in today’s climate, there may be other creative ways organizations can reduce costs to keep profitability up – without making huge dents in customers’ wallets.
Marketers can use a customer-centric lens to provide critically important perspectives on the broader landscape, informing on:
- What ‘essentials’ are necessary to keep in place
- What competitors are doing and how decisions made will affect perception and performance
- Creative alternative solutions to mitigate the problem at hand
At a minimum, marketers need to show their organization, especially the key decision makers, what the downsides of their actions will entail, based on data and scenario-driven thinking. The future health of their brand might very well depend on it.