Marketing is built on consumer insights i.e. identifying the consumer’s needs and motivations and building a relationship that results in a purchase as well as their endorsement. Hence, every marketer studies their consumer’s behaviour. Usually, small businesses learn by observing the customer or microeconomic analysis while multi-nationals also employ macroeconomics for international business. Then again, usual practices seldom yield unusual results.
Your marketing needs to utilise macroeconomics, especially in these unusual times of an unforeseen pandemic. Why?
- The macro economy does influence institutional and individual choices of consumption and investment. For example, the Government’s decision to stop all economic activities and impose a lockdown tremendously altered consumer behaviour.
- In times of economic crisis, macroeconomic indicators become a huge part of the consumer’s decision-making process. While the job market is down, and the macroeconomic indicator of employment rates is predicted to remain low or worsen, consumers will be less inclined to spend money on non-essentials for a very long time.
- Quick economic recovery relies on Government intervention. The incidence of direct and indirect taxes creates regulated markets wherein mass consumption precedes individual choices. Consumers in general, become more interested in macroeconomic metrics like inflation and price indexes. Consequently, even if the market witnesses a growing supply of customized goods and services, the value proposition is very simple and cost-conscious.
- Your business needs to market itself to the macro-audience of social media. Macroeconomics becomes a crucial input for all your marketing activities including content. More so, if you are selling legal and financial services. Your content becomes a source of information on industry and the economy which becomes an integral part of the customer’s decision-making process.
Macroeconomics and the 4C’s of Marketing:
Marketing is pivoted on 4Cs i.e. consumer, cost, convenience and communication but a crisis can make macroeconomics crucial to your strategy for each of them.
Consumer & the Consumer Leverage Ratio (CLR):
When you market your product, you offer a value proposition that can satisfy a consumer’s wants and needs. While microeconomics helps you understand the reasons that make a consumer choose you over the competition, macroeconomics helps you understand if you are valuable enough for the consumer within his/her overall budget. For example, some customers no longer find delivered food to be of any value, some do not want to travel while some customers purchased broadband services or social media accounts at a premium. In other words, the consumer’s valuation of products has changed due to changes in life, expectations and daily routines. Macroeconomic factors can convince consumers to make long term investments in distressed assets or reschedule a marriage or divorce. One such factor is the Consumer Leverage Ratio i.e. the amount of household debt, relative to the disposable income of that household. The impact of CLR is evident in consumer behaviour i.e. before the pandemic, in spite of loans and credit card debts, people were willing to spend their disposable income on a variety of products, but now they have reduced spending on anything that they deem as non-essential. On the other hand, macroeconomic experts are predicting an increase in the latent need for social security as well as income-generating assets and the active need to upgrade skills.
Cost & Purchasing Power:
A consumer doesn’t merely pay you in terms of price. The cost of acquisition of your product also includes his/her time, effort and conscious attention to experiencing your product. Macroeconomics can help you understand the cost-benefit analysis and factor the estimated changes in the cost of production, with the cost incurred by the consumer. A dependable indicator for this analysis is the Purchasing Power i.e. the power of one unit of currency to purchase a certain quantity of goods and services. For traditional and standard products, a rise in costs results in diminished purchasing power, hence the intent and ability to make a purchase, but customized goods or new value propositions can reset the equation and convince the consumer to get interested in your offering.
For example, do the benefits of value additions and eco-friendly supply outweigh the costs of higher pricing, longer waiting time and a diminished experience? What if the consumer chooses to buy discounted wines lying in a Paris cellar, instead of a luxury staycation within the UK? In other words, macroeconomics can certainly help a mid-size wine retailer discover international clients by gauging trends in their purchasing power. It can also guide you to better prospects, beyond your micro-market.
Convenience & the Supply Function:
The recent pandemic has made the supply of many products inconvenient to the consumer who may have lost the convenience of paying by cash due to policy changes. Now, a macroeconomic metric called the supply function can help you determine avenues of convenience such as availing hedged prices. Although it might sound complicated, the supply function quantifies the relationship between the supplies of a product with the factors that determine its supply. Herein:
Supply of Commodity (Sx)= f (Price of Commodity (Px), Firm Goals (FG), Price of Inputs (PI),Technology (T) ,Natural Factors (W) and Government Policy (GP))
An estimated change in supply can help you determine products that can be delivered with the help of technology or alternative inputs. Before you know it, entertaining and informational virtual sessions, cryptocurrencies and frequent flyer miles can tempt consumers to buy your products. Hence, your marketing pitch needs to spell out the convenience of online purchases and services and the seamless delivery of value to the consumer.
Communication & the Consumer Confidence Index (CCI):
Macroeconomic inputs can enhance the trustworthiness of your communication, especially the Consumer Confidence Index or CCI. This index is a measure of the optimism or pessimism of the consumer, regarding his/her financial status. Optimist consumers may not delve into macroeconomics unless they are making investments, but pessimist consumers want to know the complete picture for every decision.
Well, the coronavirus has made many consumers pessimistic and marketers have responded with educating them of the macroeconomic nature of their choices and decisions.
You are already witnessing it in all types of marketing content i.e. the inclusion of special circumstances, impact of the pandemic or the emergence of the new normal. When major brands have shifted focus from promotional advertising to content driven marketing, your business must embrace this trend too. The consumer is hungry for information under an overwhelming burden of uncertainty. He/she want the micro as well as the macro picture. While big brands may overgeneralise the micro-analysis of consumer needs based on their theoretical know-how or analytical tools, you can specify the macroeconomic perspective of your intended audience with great clarity and practical implications.
For example, when you hint at buying a distressed asset or a luxury good, its value appreciation cannot be justified without a macroeconomic analysis, but you do a very personalised impact assessment that can become a standard part of your marketing communication.
Macroeconomics and Marketing on Social Media:
Macroeconomics based marketing represents your awareness of the economy and the industry. This is crucial for educating your prospects about the complete picture, showcasing your willingness to be transparent and your risk assessment abilities. You can limit your macroeconomic discussions to a simple PESTEL study and spell out an easy-to-understand analysis of macroeconomic indicators and indexes on a professional network such as #LinkedIn. In the current economic conditions, in-depth knowledge of the macroeconomy can become the USP of your marketing efforts.
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