Apr 19, 2020
Since COVID-19 began sweeping across the globe, we have witnessed a once-in-a-generation shift in consumer demand. As the pandemic grows in presence and press, consumers are shifting priorities and adapting behaviors to cope with the “new normal.” Who are these consumers? How concerned are they and what are their priorities and expectations as they cope with this shock? As is often the case, there is no one answer to these questions, because different consumers are responding to COVID-19 with different worries, beliefs and behaviors.
With no clear end to the pandemic in sight, understanding these emerging consumer groups is critical. Doing so will enable your business to react with purpose rather than panic… and to plant seeds for ongoing success beyond just survival. We have partnered with Dynata to build a segmentation of pandemic response archetypes to help companies navigate this uncharted, unprecedented territory.
We have identified five distinct consumer segments that define the U.S. COVID-19 landscape, each with different levels of concern and degrees of behavioral changes. A driving undercurrent is that many consumers are seeking help from trusted brands, products and services in this trying time. Developing a strategy to respond creatively to their needs can make a brand or offering more relevant than ever; failing to do so could mean getting left behind.
So, who are they? The five pandemic response segments below are defined by how each group is affected by COVID-19, what they worry about, and how they are evolving their behavior to adapt.
Each segment presents an opportunity to connect on a more personal level, to tailor messages, optimize services and increase loyalty in a time where consumers are seeking control and comfort.
Panicked Millennials is the group that skews youngest and they are spending more on food and entertainment, and consuming information at an intensified level to make sense of the pandemic. With deep anxiety about self-isolation, they need help navigating the chaos and making sound decisions.
While stockpiling food seems to reflect heightened concerns and the new reality of sheltering in place, some of Panicked Millennials’ online shopping choices are more surprising. Aside from typical “stock up” categories like food & household supplies, some Panicked Millennials are also splurging on luxury goods and clothing. Could this be a coping mechanism for the most worried segment of consumers? Whatever is driving it, “retail therapy” seems to be most prevalent among Panicked Millennials, which has major implications for several categories and could provide important learnings for many other categories looking to win with these consumers.
Sheltering Alarmists have taken strong measures to follow guidelines and worry that people are not taking this crisis seriously enough. They are staying home and purchasing what they need to keep a distance. They need to know what steps they can take to keep their friends and families safe and healthy.
Connection Seekers are predominantly older retirees, who feel isolated as their families keep a safe distance. As a result, they are utilizing more internet, consuming more media and spending more time talking with and messaging others than ever before. They need easy-to-use digital solutions to keep in touch and would appreciate products/services that help them feel connected to a community.
Pragmatists are only moderately concerned but are still relying on health professionals’ guidance and taking some precautions; they have taken the most action to reduce discretionary spending. Confident Skeptics are the least worried and feel that the media has sensationalized the situation. They are confident in their ability to navigate the crisis and are generally going about business as usual – making the fewest changes to their ordinary behaviors in response to the pandemic.
A natural question stemming from this analysis is how long will these segments continue to respond in this way? Will their size and behavior shift? Do any of the segments provide leading indicators of what is to come?
Given the dynamic nature of COVID-19, it is likely segment sizes will shift some over time. However, underlying motivations and behaviors typically have greater staying power. Over a third – and up to half - of more concerned consumers believe the pandemic will last up to another 6 months. Another 10-20% believe it will last a year. With the potential for another 6-12 months of revenue on the line, suffice it to say it is imperative for companies to react – and quickly!
Action 1: Deeply understand pandemic consumer demand
Overall, consumer spending on food/groceries is up, with 37% of people spending more on food to prepare and consume at home now vs. pre-pandemic times. Our segment-level data shows Sheltering Alarmists have been most aggressive in stocking up on the essentials. As empty shelves in the paper goods aisle begin to get restocked, the CPG industry wrestles with the longer-term implications of this shift in buying.
While stocking up on sanitizer and staples seems obvious, there are other consumptions spikes that are more curious. Case in point….
Unfortunately, one category’s feast is another’s famine, and some industries are getting clobbered by COVID-19. How will the new normal play out for businesses built upon travel and interaction, like hotels, restaurants, airlines and live events?
When social distancing begins to ease, it will be more critical than ever to identify and build a strong bond with the high value consumer segments who will lead the rebound. Building a customer-centric strategy starts with a deep understanding of demand, and how it is evolving as a result of the pandemic. Our segmentation provides insights on demand shifts occurring as we speak that can be utilized to adjust business goals and brand targets in the near term.
Action 2: Connect with your customers – and revamp your marketing
Clearly, pre-pandemic strategies and marketing plans no longer apply. Consumer attitudes have changed drastically, and their need for comfort and connection is clear. Companies must connect deeply with their consumers to survive. Going forward every business needs to know how their consumers, especially how their most attractive target consumers are represented across these pandemic response segments.
Are your target consumers disproportionately skewing to segments that are the most worried and changing their behaviors the most, or are they relatively unconcerned and making only minor changes? The answers have significant implications for how to reach your consumers across media channels, what messaging and offers to present to them and when and where they will make purchases. Understanding how your key consumers are responding to this health crisis is the foundation for aligning your strategies and plans with new realities in order to optimize investments and results.
Action 3: Forecast your Future
While it’s true that some of the behaviors we see may outlast the virus, not all will. “Stock up” is going haywire and spending on new/different discretionary categories is growing. But for how long? The real question is how will demand evolve going forward, and how will all of this impact your business specifically?
At this point, managers need answers to critical questions, including:
Our pandemic response archetypes offer some key insights to help inform these questions. Further, a robust forecasting model leveraging our segments that is tailored to your specific consumers and brands and can be periodically updated will help reduce uncertainty while identifying the best game plan going forward.
Investing in a forecasting model can help prioritize business decisions preemptively.
The good news is that while so much is changing, one thing is constant: the critical importance of connecting the right message or product to the right consumer in the right way at the right time. As the economic pressure from the pandemic goes up, the margin for error goes down. Media plans will need to find and connect with the most valuable consumer targets for your brand. Pricing and promotion strategies will need reinvention to align with shifted expectations. It will be more important than ever to understand emerging and latent demand as the font of inspiration for innovation activities.
So much has been turned upside-down, but we believe one core principle will remain constant: leading companies that invest to understand the shifting demand of their customers will realize the greatest success in navigating these challenging times.
To read more about the Pandemic Archetypes and find out which one you are, please click here
To connect with us to discuss how you can apply these principles to your business, please click here
For more information about The Cambridge Group, please visit thecambridgegroup.com
Special thanks to Dynata for their partnership. For more information about Dynata, please click here
Chris Fosdick is a Managing Partner with The Cambridge Group. His two-decade experience spans industries and he sits on the Board of Trustees of the Advertising Research Foundation, writing & speaking regularly on Demand Strategy topics.
Jason Green is a Senior Partner with The Cambridge Group. He has 30 years of combined consulting and marketing experience working with clients across industries. He is the lead author of Optimizing Growth and is a contributing author to several other books and numerous articles on growth strategy.
Lindsey Leikhim is an Associate Partner with The Cambridge Group. She has over a decade of consulting and marketing experience with The Cambridge Group and now leads the firm's Brand and Sales Center of Excellence, directing marketing efforts and sales best practices.
Christine Wang is an Associate Partner with The Cambridge Group. She focuses on leading TCG teams in developing demand-driven profitable growth strategies for clients across consumer goods, retail and healthcare sectors.
Nicola Beaumont is a Consultant with The Cambridge Group. She played a pivotal role in the development of Pandemic Response Archetypes and associated implications.
 Data and resulting segmentation is U.S. based, with global market analysis forthcoming