To maintain customer loyalty in an inflationary world, start with honesty

In times of inflation and economic uncertainty, customer expectations of brands increase. Brands that acknowledge inflation’s effects on business show vulnerability, which, when perceived as genuine, can build customer loyalty.

i2c chief marketing officer at Christine Alemany explains what is influencing customer trust in brands in today's inflationary economic landscape

Building trust with customers is challenging. Today’s wealth disparities, coupled with the rise of inflation in the past few years, make trust-building even harder. According to new research by Catalyst, there has been an 8 per cent rise since 2022 in consumers blaming corporate greed for the state of inflation. However, this phenomenon is nuanced, as the inflationary trend also reflects broader economic shifts during the pandemic when existing corporate power influenced pricing amid disrupted supply chains and changed consumer demands.

What is affecting customer trust today?

In the post-pandemic inflationary period, consumer sentiment shifted. These shifts occur based on uncontrollable factors, such as industry and economic conditions, and direct factors such as product category, brand reputation and previous customer experiences and expectations.

Communication, transparency and credibility are vital. With so many fast-paced changes happening in our financial landscape – and supply chains that respond to political tensions – brands that proactively communicate, even and especially about negative changes, will build trust. Consumer trust is closely linked to existing reputation, too; brands that have consistently delivered quality services are likely to fare better during inflationary periods. Although the annual inflation rate in the US has slightly decreased to 3.1 per cent, businesses should still address these concerns by adapting strategies and maintaining transparent communication as inflation continues to affect consumer spending and supply chain costs.

Meanwhile, consumers have not stopped caring about value. Price sensitivity has also increased with inflation. As the cost of goods rises, people exercise more scrutiny with their purchases, turning to practices like comparison shopping – meticulously comparing prices for the same or similar products across different stores or online platforms – to ensure they get the best possible value. Additionally, they are turning to budgeting more rigorously to manage their expenses.

This leaves an opening for brands that enhance value through increased innovation, added benefits or elevated quality. The brands that do this benefit from the perception of offering fairer prices and are more likely to gain trust.

How can brands build trust with customers during times of inflation?

Brands can (and should) navigate inflationary changes in ways that maintain and even build trust with their customers, but it is important to know how to explain price increases due to inflation and delays. Here are five strategies that will not break the bank and could even increase profitability this year:

1. If you have to increase pricing, tell customers why

Honest communication can save your brand reputation. Use clear and direct messaging to tell customers the reasons behind price adjustments and explain the impact of inflation on the business. If you like, you can also educate customers about the broader economic factors contributing to inflation, helping them understand the context and the need for adjustments.

Acknowledging inflation and prioritising building trust with customers creates a solid foundation for revenue growth. How? By fostering customer loyalty, you encourage repeat purchases and positive word of mouth, set your brand apart and expand your competitive advantage, increase customer lifetime value and enhance your overall brand perception in the eyes of both loyal and potential customers. This is borne out by research; data from PwC has shown that 91 per cent of business executives equate trust-building with profitability.

2. Practice value-oriented marketing

Understanding your target audience, developing a strong brand identity and incorporating relevant personalisation are powerful marketing strategies, especially now. Emphasise the benefits customers receive from your products and highlight unique selling points to showcase how you still offer a worthwhile investment despite price adjustments.

It is common for companies to cut marketing budgets during recessions, but we can learn a lot from the classic tale of Post and Kellogg’s during the Great Depression. The two cereal companies were the top ready-to-eat cereals at a time when many Americans were still not too sold on the idea. When the US entered recession, Post did as many companies do and pulled back on marketing spend. This conservative approach is often a necessary strategy to maintain stability and longevity, a testament to Post’s enduring presence in the market today. In stark contrast, Kellogg’s invested in radio advertising to spread the news of its new cereal, Rice Krispies. Its profits rose 30 per cent, and it remains a top brand today.

3. Offer customer-centric pricing strategies

Tailoring pricing strategies to customer segments based on the needs and price sensitivities that data such as purchase data reveal could be especially impactful. Consider offering flexible pricing options, such as instalment plans or subscription-based models, to ease the financial burden on customers while maintaining revenue streams. You could also implement price guarantees or refund policies to give customers much-needed reassurance to overcome feelings of risk.

You can also try something totally different. Take Allstate, the auto insurance company, for example. In a quest to find better pricing, Allstate created the Drivewise program to help lower pricing for good drivers. Program participants allowed telemetric technology to track their driving habits, giving Allstate more accurate data to adjust premiums and even offer customers personalised feedback on how to lower their premiums.

4. Enhance your customer support and communication

Prioritise excellent customer support and promptly address customer inquiries, concerns and complaints – especially those related to pricing and inflation. Train customer service teams to provide empathetic and informative responses by ensuring they have the knowledge to explain pricing changes and address customer dissatisfaction effectively.

5. Prioritise long-term relationships

Build trust with customers at the most difficult times, and you will secure it when things calm down. You can nurture customer relationships by demonstrating a genuine commitment to their needs and satisfaction. Personalise communication and customise offers to make customers feel valued and appreciated. Continuously and thoughtfully engage with customers through targeted campaigns to deepen their emotional connection with the brand.

During difficult financial times, it is important to identify your at-risk customers by using indicators such as abandoned shopping carts, purchase frequency, customer engagement levels and customer feedback surveys, and brainstorm ways to help them. For instance, Untappd, a geosocial platform for beer enthusiasts, identified its most at-risk customers as restaurants and bars that closed due to pandemic lockdowns. The company implemented a “pause program” that allowed users to pause their subscriptions until they reopened. Not only did the pause create a streamlined way for users to resume their subscriptions, but it also built trust with customers during a challenging time.

It is possible to get through this rough inflationary period with transparency and authenticity. Lead with your values. Consumers are desperately in need of a port in the storm. Be that trusted place for them, and you will earn their loyalty through uncertain times to come.

Christine Alemany is chief marketing officer at i2c.
Copyright 2024 Harvard Business Review / Distributed by NYTimes Syndicate.