ReUnited Kingdoms #5: Living with uncertainty
From adapting to the challenges of the present, to worrying about the future
As the Covid-19 outbreak started to spread, behaviours amongst consumers, brands, employers, governments changed. We highlighted these changing behaviours in our “Pivoting in Crisis” content series. More recently, though, the emphasis has shifted, as lockdown restrictions start to ease, as businesses take their first tentative steps towards reopening and as we collectively start to think about the future.
Our second content series, “ReUnited Kingdoms”, has been exploring various aspects of life beyond lockdown, looking particularly at how we can all play our part in creating the future. In this the fifth edition of the series, we look in more depth at the difficulty of thinking about the future when there is so much about the future that is clouded by uncertainty.
Uncertainty over health outcomes
At time of writing (May 27th), the health news is more encouraging, with Coronavirus deaths falling to six-week low (link). Fingers crossed it seems like we may now be nearing the end of this phase of the outbreak in the UK. Over recent weeks, the PM has spoken directly (though perhaps it is also fair to say, confusingly) to the nation with details of how the lockdown should be eased (link).
However, this is not to suggest that we can breathe a huge sigh of relief and get back to “normal”. Considerable uncertainty still exists concerning the long-term resolution of the Covid-19 outbreak:
While work on a vaccine is proceeding rapidly on many fronts simultaneously (link), views on the likely creation of a single or, more likely multiple, successful candidates, let alone their validation, production and distribution are hazy to say the least (link).
Treatments & Mitigations
Development and deployment of treatments and mitigations including antivirals (such as Remdesivir) or immune system boosters (from companies such as Regeneron or Vir Biotechnology), with some already in or through their human testing phases (link).
While herd immunity has been criticised as a strategy for dealing with the outbreak, the theory is that as the virus makes its way through the population, the greater the numbers of people that come through the illness the stronger the overall resilience of the society will be. Even here, though, there is debate. Some suggest that citizens (or travellers) will carry immunity passports (link) while others question whether infection even confers immunity or how long that immunity might last (link).
With at least these three routes to individual and societal protection to be considered, there are clearly a number of potential short-, medium- and longer-term outcomes, based on different combinations of these factors. Each set of circumstances will create a subtly different outcome, for health practitioners, for governments, for corporations and for individuals and as we are, as yet, unclear on if and when each situation will evolve, it is no surprise that we feel collective uncertainty about our health futures.
Uncertainty over economic outcomes
Uncertain health outcomes, uncertain trading conditions, uncertain regulations, both locally and globally and uncertain political responses mean a very uncertain economic outlook.
This may seem surprising: most commentators are, after all, united in their expectations of a profound economic downturn (link). Consumers, too, have picked up the messaging. Almost three quarters expect that Britain’s economy will be in depression (19%) or recession (52%) within a year (link). With large numbers of people laid off, placed in furlough or in reduced circumstances, the future will clearly be challenging for all of us.
What is not clear is just how dire it will be, how long it will last, and how quickly we will recover. In situations like this, where conditions are uncertain and fast-changing, but businesses need to make plans, scenario-based thinking (where a number of possible outcomes are identified, and plans are put in place for each combination of circumstances) becomes more appropriate than outright forecasting. Among others, Dutch multinational banking and financial services corporation ING Group have released four alternative scenarios for the health and economic outlook (link), as follows:
Scenario 1: The base case
- Full lockdowns end by summer, global travel remains restrictive and home-working stays in place but testing and contact tracing enable better management of a second winter spike
- The UK and the Eurozone return to growth by Q3 2020 in a U-shaped recovery
Scenario 2: Winter lockdowns return
- Full lockdowns end by summer but come back in winter 2020, global travel remains restrictive and home-working stays in place
- The UK and the Eurozone return to growth by Q3 2020 but there may be a contraction in Q4 before a second return to growth in Q1 2021
Scenario 3: The ‘best’ case
- Full lockdowns end by summer, global travel and working practices return to near normal
- The UK and the Eurozone return to growth by Q3 2020 in a V-shaped recovery
Scenario 4: The ‘worst’ case
- Lockdowns remain until year end, global travel remains restrictive and home-working stays in place but testing slow to roll out, vaccine still unavailable and immunity found to be short-lived
- The UK and the Eurozone don’t return to growth until Q1 2021
Living with uncertainty
There is no debating (or escaping) the recognition that we are living in “unprecedented times”, sailing through “uncharted territory”. Uncertainty is known to be a major barrier to spending, growth, forward planning, investment and innovation – for consumers, corporations and the markets (link).
However, uncertainty is not new for British consumers. Over the past few years, the Brexit saga, the increasingly loud climate change debate, fears over job loss to automation, and a variety of other factors have created a climate of uncertainty.
It is clearly in the interests of brands to help consumers overcome the inertia and caution that are natural responses to economic uncertainty but the precise tactics that will work best will vary from sector to sector, and from one consumer to another. You might consider some or all of the following:
Dealing with postponement or deferral
While many put life’s big decisions (marriage, children, property) on hold during lockdown, there are signs that this may be starting to change, although analysts worry that the upturn, e.g. in the housing market may be short-lived (link). Brands operating in the world of high-ticket, life-altering purchases may need to shift their efforts from “closing the sale” to building a relationship that will gradually lead to a sale, if possible, seeking to turn that relationship into some form of financial transaction (e.g. membership fees, down payments, etc) that will lead to an eventual purchase.
Encourage buying ahead
Not surprisingly the travel industry, which has been almost totally shutdown by Covid, is looking to encourage people to think ahead by booking future travel, further in advance than they usually might. A recent campaign created by TMW Unlimited for Travelzoo that encouraged Brits to “dream, book and save now, and then travel later and promotes how Travelzoo is working with partners to provide deals with increased flexibility for travel” is a good example of what can work well (link).
With businesses worried about incoming cash flow the last thing they want is for cash already banked to be returned to consumers who are prevented from using their purchase. From very early on in the outbreak, travel, accommodation and visitor attraction providers recognised the need to park the money they had taken in, offering guests the chance to postpone rather than cancel their booking, even if it had not previously been their policy to do so.
Provide protection against change in circumstances
Brands looking to convince consumers to buy into high-ticket items or long-lasting financial commitments such as mortgages or payment plans might consider adding inbuilt payments insurance cover into their propositions to account for redundancy, furlough or other changes in circumstances that permanently or temporarily prevent repayments. Kia Canada’s job-loss protection is one such example (link).
Encourage taking a long-term view
As in the classic “the value of investments can go up as well as down”, there is a great deal of value in communication with consumers that helps them to recognise the benefits of thinking long-term. For savings and investment products, or for very long-term financial commitments (such as loans or mortgages), companies should look to share financial models (perhaps using a variety of scenarios as outlined above) proving to them that their long-term goals will still be achievable.
Incentivise subscription models
More and more retail brands, particularly D2C online brands, are switching on to the benefits of subscription models. From the consumer point of view these services can offer multiple benefits: surprise curation, low prices, automatic replenishment of consumables, and others. For the business, the benefits of a reliable income stream and a long-term relationship with customers should be obvious. As more and more consumers become used to subscriptions for media such as Netflix and Spotify, it should become easier to convince them of the benefits of adopting this same kind of relationship in other parts of their lives too and this seems particularly appropriate in the current climate.
As well as pragmatic tweaks to product and service feature sets, brands also need to be very active in providing reassurance, guarantees, and full operational transparency to consumers at this time.
It will take all of us to get the economy moving again
It is in everyone’s best interests that the economy gets moving again as quickly as possible once we emerge from our lockdown cocoons. Actually, we’ve seen this kind of thing before. Our American cousins, for example, have long believed it is the collective responsibility of everyone to get the economy moving, and that consumers must do their part, even positioning such activity as a “patriotic duty” (link). While we are not suggesting for one minute that such an approach would work as well here, it is possible that empathetic bonding messages such as Asda’s “We’re all in this together” (link) will continue to work, even as we strive to co-create our shared future.
This article was written by our Head of Trends, Nick Chiarelli