When the UK voted to leave the European Union on 23rd June 2016, no-one quite understood what was going to happen moving forward. Although things are little clearer more than two years on, businesses and consumers still have a looming cloud over the post-Brexit scenario, whether the UK’s economy will take a big hit, slow decline, or no effect at all. Leavers believe there will be minimal impact on the economy upon divorce, remainers believe the complete opposite. Additionally, the price of goods & services, cost of living and the state of the NHS are all concerning factors to the future of the UK after the big split.
The critical questions to consider with only months left until we leave are; what does this mean for the future of marketing in the UK? How will it affect the way we buy and consume our essentials and luxuries? Will we have enough in our pockets to afford luxuries at all? The exploration of potential consumer buying habits and confidence levels will determine what strategies marketers will need to have prepared and ready for March 29th 2019. The transition period is likely to come into effect, meaning we will still operate under EU rules & regulations. Therefore, it is crucial for businesses to have a contingency plan and strategies in place if the entire Brexit deal collapses within the last two months of negotiations; providing they haven’t already struck a deal before the end of 2018 (let’s hope).
Deal, or no Deal?
A no-deal scenario for the UK leaving the EU is a scary thought for everyone. Let’s face it. Businesses and consumers will feel the biggest hit; with the UK potentially facing tariffs of 90% on EU goods. Trading under World Trade Organisation terms equates to “an average tariff of 4%, which is about £4.5 billion to £6 billion-worth of increased costs per year on our exports”. To elaborate on the consequences of a no deal scenario, the leading problems most likely to happen are:
- A fall in the value of the pound, which means sourcing international promotional material will be increasingly expensive. However, those exporting from the UK may find some opportunities in this, acting as a stepping stone to growing outside of the UK – that is if the expected taxes don’t restrict this all together.
- Uncertainty of approximately 2,550 EU workers within the design and creative industries, tightening the supply of creative accessibility and the pockets of those looking to pay for creative work.
- Cause chaos around cross-border services, i.e. financial services, aviation, broadcasting, professional and legal services, including neighbouring industries that work closely with these services. Fast forward to October 2018; this event is very unlikely to happen, but a lot of outlined effects are still very real. Nevertheless, if the Conservatives want to be out of power for the next 30 years, a no deal Brexit won’t be an option. Recently it has been reported that Brexit talks are 95% complete in terms of securing an agreement. That doesn’t mean that the no deal scenario is completely ruled out, though. The intricacies of a deal with the EU are tenfold; which is why it’s currently difficult to predict such an outcome.
Changes in Consumer Behaviour and Confidence
Until the vote, we thought we understood the consumer. Endless models on consumer buying behaviour and analysing confidence levels have assisted us to accurately build profiles and strategic campaigns effectively. Mark Haviland of Rakuten Marketing EVP Global Development, stated that “Marketers must work hard to understand their customers better if they are to engage customers in this unsettled market”. A report by Rakuten on the changes in consumer buying habits after Brexit suggested the following:
- UK consumers may favour goods made or sourced in the UK after Brexit.
- Foreign-produced premium goods such as handbags, casual apparel and formal clothing brands likely to be affected from a loss of trust by 41% (handbags), 39.3% (casual apparel), and 37.8% (formal clothing).
- 56.3% of consumers may not prefer to pay more for online delivery in the event of an increase in premium brands
Although there will be a change in consumer buying habits, brands can utilise these results to curate new strategies and campaigns to benefit from. For example, brands with a ‘home-grown’ ethos, can capitalise on the change in UK consumerism towards goods made or sourced in the UK after Brexit. A focus on a campaign appealing to this audience could be a feasible option if your brand didn’t already have a ‘home-grown’ ethos.
Living costs and rising inflation are significant factors in consumer confidence. If living costs rise, confidence in personal finances go down, consumers feel the squeeze in their pockets, meaning they are less likely to spend on luxuries and focus more on essentials. The rippling effect of consumer change limits the way marketing delivers effective results for companies, so it’s vital that consumer confidence remains at safe levels. Thankfully, the hot weather from August 2018 helped boost consumer confidence levels but remained in negative figures at -7. However, the further we go into negotiations without a secure deal by Christmas could ignite a decrease in consumer confidence as the worry of Brexit will catch up as an underlying concern for people, alongside rising inflation.
The Impact on Marketing Strategy
To adapt to a constantly evolving situation, marketers need to align their future strategies and predict all possible outcomes of Brexit before Q1 2019 hits. Brexit has resulted in a pragmatic approach from marketers that requires intensive thought and decision-making on how companies can still maintain consumers and generate new leads after March 2019.
The interesting conundrum of the impact on marketing strategy is the effect on marketing budgets post-Brexit. The IPA (Institute for Practitioners of Advertising) suggested that UK marketing budgets have been growing at its slowest rate since 2015, notably in Q3 of 2018. It is no coincidence that it’s a concern for businesses; uncertainty surrounding Brexit has caused careful consideration of financial planning and it comes with no surprise that marketing budgets are amongst those affected, with 80% of companies freezing or reduced budgets (69% and 11%). Despite that, the chances of a deal is more likely than a no deal, so there is optimism within the marketing world to invest more into budgets to expand internationally, for those that haven’t yet explored export strategies.It is evident that marketing strategies will need to change after Brexit because we don’t know the exact details of how it’s going to change buying habits, only predictions. What we can take-away from these predictions, however, is that it’s going to take more than a ‘wait and see’ approach to Brexit, which is no longer an option only months away from the final decision of departure.
So how can Businesses Market to These Changes?
For brands, it’s less complicated now than ever to market your products outside of your home turf. What lies underneath the big data umbrella is accurate demographic segmentation and personalisation right at your fingertips. The integration of digital (social media, digital display, Out-of-Home advertising) within marketing has revolutionised the way we impact people’s lives. A significant marketing trend for businesses come Q1 2019 is to focus on an export strategy post-Brexit as the price and confidence in the pound continue to stagnate at a low level. The idea that SMEs are taking shots at exporting goods outside of Europe to drive export growth is something few and far between but is happening with succession. A CIM (Chartered Institute of Marketing) report produced in May 2018 suggested that 70% of SMEs, already exporting goods, is set to increase 3% in the next three years. Look into building campaigns that sell the international accessibility of English products and services. An export strategy is essential to thrive in times of uncertainty, especially when the pound is at a weak point because prospectively, imports will be more expensive and it financially makes more sense to focus on export growth.
Economic pressures due to a potential hard Brexit could entail more expensive imports, meaning businesses will need to develop their ‘home-grown’ ethos to justify their price, or even undercut the more expensive imports. This approach will mean a re-evaluation of your pricing strategy and as a business, the responsibility and its margins are down to you. So what is the focus? Great service for value. This is no new concept in the customer-centric marketing world, but in times of uncertainty, consumers need to feel like they are getting substantial value for money. Businesses need to adapt to this mindset during the rise of inflation. The weakened currency has pushed up import costs, so it is crucial that consumers are aware that prices are inevitably going to rise after Brexit. As inflation increases, the marketing department is fully responsible for pricing strategy; so getting your pricing strategy right to get your business through financial uncertainty from Brexit is so important to retain and grow your customer base.