The role of Digital in the Cost of Living Crisis
Waveform Insight is a new research consultancy established to help tech, media and digital-first brands understand and meet the needs of their users.
In September 2022 we conducted fresh research including a survey of 2,000 people in the UK, supported by audience interviews, to uncover the risks and opportunities for online brands as the cost-of-living crisis intensifies.
Digitalisation was accelerated during the 20-22 pandemic because online brands were able to better adapt to, and address the fast-shifting needs of consumers than the alternatives.
But what role can digital-first brands play in the cost-of-living crisis? Will they flounder or leap forwards again?
Read on to find out what we discovered and what it means for brands looking to support consumers in the months ahead…
Introduction
The first lockdown in 2020 initiated a huge wave of digital-first innovation that helped keep consumers, and brands, afloat in uncertain times. But as the nation has ricocheted from crisis to crisis, and with the outlook for 2023 looking uncertain, can digital-first brands come to the rescue yet again?
Whilst rapid digital transformation has brought benefits to people and businesses alike, there is now a tightening of consumer spend which has created exposure for brands hoping for a return to ‘normality’. The brands that succeed are those that adapt their offer to address consumers who are increasingly feeling the pinch.
We set out to understand the attitudes to digital brands and services, as well as the changing online behaviours and needs of consumers in late 2022. All to help brands understand how digital-first strategies should be framed in the months ahead to give consumers the support they require in increasingly tough times.
This report covers…
01
Consumer confidence in free-fall
02
Reliance on digital brands is growing
Digital brands and sectors opportunities
03
Digital brands facing disruption
04
What digital support do consumers want most?
05
Consumer confidence in free-fall
01
All across society consumers are battening down the hatches and putting off spending in the expectation of a rough year ahead. But it is the young and in particular young families who expect to be hit hardest…
In short, and of very little surprise to anyone, consumer confidence is shot. Most people expect to have to make drastic changes to their lifestyles over the coming year.
Consumers feel their leisure spend will have to be reined in and are anticipating the need to decrease their outgoings on essentials like food, clothing and travel. Most of us are braced for a fall in living standards and accept that to get by it is essential to become savvier with how our money is spent.
The lowering of overall spend is an inescapable threat to all areas of the economy. And the scrutiny of direct debits is an especial risk for digital entertainment services. However, the disruption presents an opportunity to move quickly to remove friction from the lives of consumers.
Attitudes toward personal expenditure
66%
AGREE
I am going to have to reduce my spend on leisure and entertainment in the next year
57%
AGREE
I am going to have to reduce my spend on essentials in the next year
39%
AGREE
I have cancelled direct debits and subscriptions because I am worried about increasing costs
“I got an energy deal to last until July 2023 before the big price rises with Martin Lewis saying that they were going to rocket. Martin Lewis should be knighted.”
“It feels insane that a Netflix subscription has suddenly become a luxury. What a really sad state of affairs. This country is truly [redacted]”
“I am moving out of London. Most of my public sector friends have already left this year so that they can keep their heads above water and get on with their lives.”
“I’m tightening my belt, paying down debts and holding off on any unnecessary spending. The massive bills that are landing aren’t going to pay themselves so it has to come from somewhere. People are crazy if they’re not even thinking about it…”
Reliance on digital brands is growing
02
Yet again, a crisis this decade has created new pain points for consumers and accelerated a shift in attitudes and behaviours on how best to live our lives.
Young or old, most people feel online is the best place to make their money go further. Digital brands stand to benefit if these expectations are met.
A third of consumers report that the cost-of-living-crisis has encouraged them to shop online, rather than in-stores, more often. Unsurprising given most adults feel digital channels make it easier to get more for their money.
The challenge for digital brands is how to live up to these lofty expectations at a time when inflation is putting their own costs and margins under pressure. The upside is potentially huge, if they can meet or exceed these expectations when consumers most need support, they are likely to be repaid with consumer loyalty beyond this particular crisis.
“Didn’t go out to save some money, did some online shopping instead 👌”
“On social media I can interact with people in the same situation. Hints tips and laughter. Laughter being the most important in these times.”
34%
Agree:
High inflation and the cost of living crisis has made me more likely to shop online
Agree:
Buying online is the best way to find deals and make my money go further
56%
Agree:
I would be more likely to choose a brand that is helping consumers with the cost of living crisis
58%
“I have had to cancel home improvements and forget about holidays. Christmas parties are off too as I can’t justify spending all that money on food. Nobody knows how bad this winter can get.”
Digital brands and sectors opportunities
03
Consumers will turn to digital services that are known for helping consumers get the best value and generate savings and income
Consumers are utilising online services to get great deals and seek out additional value
Online brands are helping consumers get more for their money in a plethora of ways: vouchers and discounts (GroupOn), loyalty and reward benefits (Asda Rewards), comparing and finding the best prices (USwitch), advice from peers and experts (the ubiquitous Martin Lewis), and cashing in unnecessary items via marketplaces (eBay, Depop).
These are the digital behaviours which have increased most in the last 12 months and look set to become even more important. They are helping consumers beat back inflation and offset price rises through savvy shopping, socialisation of the best advice and DIY eCommerce.
“I follow the people on Instagram that give me money-saving tips”
“Pricespy helped me compare prices on a replacement fridge I needed urgently”
What are consumers more likely to be doing online?
% Past users more likely to be doing this now vs. 12 months ago
AGREE: Online special offers and sales are much more important to me than they were
“Uni days has helped me as I’m a student and includes discounts off everyday items”
Digital brands facing disruption
04
Following the pandemic, turning to digital brands has become more ingrained as a way people can get help to do more with less. But some digital sectors, that have ridden this wave, are at risk from slowing consumer spend…
Consumers are re-evaluating whether some of the conveniences and comforts offered by apps and services deliver sufficient value when their finances are stretched. Are some becoming luxuries?
Subscription entertainment services are coming under scrutiny with many considering cutting back on the number of services – expect the average of two or three services to become one or two. Equally, consumers are cutting back on online impulse purchases and the use of easy-access credit. And finally, ride-hailing like Uber, food delivery orders from the likes of Deliveroo and investment platforms are likely to see demand fall in the short term.
Whilst all age groups are cutting back in these areas, it is younger consumers and those with young families who are feeling the bite the most, who will be more likely to cut back on these luxuries.
“The first thing to go will be Netflix, Amazon and NOW... ”
“I have finally learnt how to cook, so my takeaways have turned into fakeaways”
What are consumers less likely to be doing online?
% of Past users less likely to be doing this now vs. 12 months ago
Digital support consumers want most
05
Digital-first brands will be more important than ever to struggling consumers. Loyalty can be built through value, reward and shock-free experiences.
Digital-brands are again in the best position to benefit from shifting consumer needs.
Whilst unwanted change is inescapable, consumers will warm to brands that help them avoid more disruption and hardship. As such the support they seek from digital-first brands typically revolves around removing friction from purchases or service commitments.
Other than with gas and electricity consumers can shop around, comparisons app such as uSwitch ensure it is a buyer’s market and consequently there is a strong expectation for loyalty to be rewarded. And there is a clear appetite for frictionless online shopping and price comparison to become more embedded in the way we shop.
Consumers also expect more flexibility to customise services to meet their needs, a trend we are seeing play out in the video games space with tiered memberships for Playstation and Xbox users and in the video-on-demand space with payment plans stratified to meet differing budgets and needs.
Digital support consumers are most interested in
% rating each as one of their top 5 most useful forms of digital support
“By removing the £10 cashback on their reward card, Lidl have just blown up the main reason we shopped there. ”
“Nectar points have allowed me to save which has made a real difference these last few months”
About Waveform Insight
Aligned to the needs of digital-first, tech and media brands, Waveform Insight provides forward-thinking research and insight services to fuel creativity, optimise strategy and enhance customer experience.
Waveform delivers research projects with a focus on actionable outcomes - the ‘so what’ and ‘what next’ that help create value for customers and enable brands and services to grow.
We uncover the answers and insight needed to strengthen digital products, services and content in line with audience needs and market potential