There’s no getting away from the uncertainty surrounding the cost-of-living crisis. Whilst people are already feeling the effects of rising prices, it’s predicted to become even more challenging over the coming months.
The news of soaring energy prices is enough to ignite feelings of worry in the most financially savvy amongst us, but what does it mean for small businesses across the UK?
What is the cost-of-living crisis?
The cost-of-living crisis is a term used to describe the situation where the cost of everyday essentials (bills, food, etc), increases faster than household incomes. Unfortunately, this results in households having to make difficult decisions and cuts to limit their spending.
What has caused this crisis?
The main reason is inflation is rising quicker than wages. This means that incomes do not stretch as far as they used to.
Inflation measures the amount prices are rising. Inflation in the U.K rose to 9.4% in June, which is the highest it’s been in 40 years. This means that an item that cost £1 last year would cost around £1.09 this year, and if an item cost £10 last year, you’d be looking at paying £10.94 for it this year. More worryingly, experts predict that inflation in the UK will rise to more than 13% by the end of the year.
However, it’s not just inflation that’s causing the crisis, there are also the following factors that have no doubt had an effect too:
- Supply issues and shortages: This is a lingering problem from the pandemic. A reduction in shipping capacity and a drastic increase in shipping costs means it’s much harder for businesses to get hold of goods. The reduced capacity means fewer items can be shipped at once, resulting in an increase in demand. This means the price goes up as suppliers know their product is in demand and people need it.
- The energy crisis: No doubt you’re already familiar with this one. The demand for oil and gas has increased (mostly due to countries coming out of lockdowns), which has caused prices to rocket. This means that increasing prices for energy companies has led to increasing prices for consumers and businesses.
What does the cost-of-living crisis mean for businesses?
Although the media is mostly focusing on how the cost-of-living will affect individuals, there will inevitably be an unwelcome knock-on effect for businesses too.
Not only will businesses have to contend with the same soaring energy prices, but they’ll also have to negate the difficulties that come with consumers limiting their spending and looking for cheaper alternatives. As uncertainty around finances arises, consumers will look to make cuts to their spending habits. Bills and food will take priority and more people are likely to take a “make do and mend” approach.
With more than a third of consumers saying they’ve already switched to cheaper alternatives, you can relatively assume this trend is going to continue as people look to make savings as and where they can.
Businesses might also feel the strain as staff shortages and a saturated job market might result in them having to increase their spend on wages.
What steps can I take to ensure my business stays profitable?
Whilst there is no one-size-fits-all solution for weathering the cost-of-living crisis, there are some steps you can take to ensure your business is well placed to do so:
Cut down on expenses and re-evaluate outgoings
You’ll be amazed at how many non-essential costs you can accumulate, subscription-based services can add up quickly. Here are a few things to consider when trying to reduce outgoings:
- Identify any ongoing monthly subscriptions you have and cancel any that you might not deem essential.
- Ensure you’re with the cheapest provider for any subscriptions/services that you do use regularly. Now is the time to switch to a cheaper provider if you’re not.
- Review processes within your business and ensure they are as streamlined as possible, automating processes where you can.
Focus on products that consumers will have the biggest need for
As previously mentioned, people will be looking to spend less over the coming months. That’s not to say that they won’t spend at all, by identifying the products most likely to sell, you’ll be able to put more focus on promoting that item.
These items may be lower in cost, meaning they’re more likely to be bought when people have less disposable income, or they could be higher-end items that could help consumers save money in the long run.
For instance, if you were an electrical store you might focus on selling smart home devices that allow users to control some of their electrical appliances through their phones. Whilst these items are typically pricey, consumers are likely to see a reduction in their monthly costs by purchasing them.
Create incentives to encourage brand loyalty
Consumers have more options than ever before, and with brand loyalty decreasing, you’ll want to find ways to encourage customers to stay loyal to your business.
This could be the introduction of a loyalty card or the creation of an email with tailored offers that customers can sign up for.
Create a personalised experience for your customers
In addition to creating loyalty incentives, you can also improve brand loyalty by creating personalised experiences for your customers.
Whether this is through targeted email marketing, or just ensuring customers are receiving a personal in-store experience, the little touches can go a long way in making a customer feel valued and wanting to return to your business.
Whilst this is not ideal, it is likely that businesses will need to increase the prices across their offerings due to the rate that inflation is rising.
Be strategic with your marketing
It might be tempting to pause all of your marketing efforts but doing so might result in you seeing a downturn in leads and, as a result, seeing fewer sales.
Whilst consumers will likely spend less, anything they do purchase will be given much more consideration. People are less likely to make spur-of-the-moment purchases, meaning they’ll be researching products online and searching for the best deals. A good, operational marketing strategy
will ensure your business is in the running when consumers are looking for products like yours.
Keeping your marketing activity running will also give you a competitive edge. It’s likely that businesses like yours will be pausing their strategy, meaning you’ll have less competition online. This will hopefully result in more impressions and leads for your business. Likewise, if you were to pause your marketing, you’d leave the door open for competitors to pick up the lion’s share of leads.
However, there might be a point where you need to reduce your marketing costs, so rather than pause it all together, focus your attention on optimising your marketing campaigns to cut unnecessary spend.
Cost-of-living Marketing tips for businesses
1. Market to existing customers
You already have the data, so this one will require little to no budget at all. Reach out to your existing customers via email and let them know how valued they are, you could also share content and products that might compliment or enhance previous purchases. As mentioned earlier, you could also include offers that encourage purchases.
2. Review your PPC strategy
You should be doing this frequently anyway, but by regularly checking in on your PPC campaigns you can eliminate keywords that might be eating up your budget but providing no results. Here are a few tips for optimising your PPC campaigns:
- Look to add negative keywords to your paid search campaign to ensure you’re not appearing in irrelevant searches.
- Add geotargeting if your business only provides a service in particular areas.
- Revisit ad copy and ensure the messaging is still relevant, perhaps tweaking it to be more reactive to the current economic climate.
- Ensure landing pages are optimised with a clear and relevant call to action.
- Be strategic with your keyword choices. Don’t just look at the cost, consider the volume and the intent of the keyword too.
- Don’t just opt for the cheapest keywords. If your most expensive keyword is the one that is bringing in the most leads then it doesn’t make sense to cancel it as you’ll miss out on all those leads.
3. Ensure your branding is cohesive and unified across the web
Have a social profile that’s still carrying an old logo, or a website that uses a random colour palette? Now is the time to go through your social profiles, websites and online listings and ensure your logo is up-to-date and everything meets your current branding guidelines. If you don’t have a logo or any branding, you might want to work with an agency to achieve this. Having a professional, unified online presence will create brand trust amongst consumers.
4. Be consistent with your online content
If step 3 is in place, then having a consistent posting strategy will help create a good level of brand recognition. By posting good content frequently consumers will be able to see you’re both reliable and knowledgeable. They’ll also be able to immediately see that you’re still operational, which will be a reassurance if a potential customer is planning a visit to your store. Consistent posting will also ensure your branding is visible online, creating awareness of your business. If you’re not sure what to share, then a good rule of thumb is the 60/30/10 split:
- 60% you should be sharing curated 3rd party content. This can include articles that are relevant to your industry, or blog posts that might mention your business.
- 30% of the time you should be sharing 1st party content (this can be educational blog posts, tips and general brand awareness).
- 10% should be promoting your products and offers, with more of a sales focus.
5. Encourage online reviews
Another free marketing tactic is to encourage customers to leave online reviews for your business. This creates trust and will encourage those consumers in the consideration stage. Online reviews can even form part of your content strategy, you could share the reviews to your social pages to let your followers know your products provide value (although you should reach out and ask permission from the reviewer first).
What funding is available for businesses throughout the cost-of-living crisis?
There hasn’t been a great deal of funding announced for businesses so far. However, in April the government did announce the employment allowance would increase to £5,000 (it was previously set at £4,000) in an attempt to combat rising inflation.
This means that certain businesses and charities will be able to claim a bigger reduction on their secondary Class 1 National Insurance liabilities and, from the 2023 to 2024 tax year onwards, their Health and Social Care Levy liabilities too.
There is also a range of financial support available for businesses across the country. Visit the business finance and support page to see what funding and grants are currently available to you. You can filter by location/industry to make it easier.
If you’d like more advice on how you can optimise your marketing spend over the coming months then be sure to subscribe to our newsletter for more tips. We’ve also created a library of free digital marketing resources to help small businesses with their strategies.