What you need to know:

• The perfect storm of the pandemic, inflation and rising interest rates has created a new ecology of “essentials” – including oncediscretionary purchases that Australians can no longer live without.
• Netflix and other streaming services are now considered an essential utility, with 90 per cent of household decision makers preparing to sacrifice other spend in order to retain subscriptions.
• 78 per cent of Australians will continue to spend on wellbeing, though it has significantly expanded beyond health and fitness to “being well”, incorporating things like work/life balance and striving to feel good.
• Understanding the cultural shifts – and their influence on how Australians choose what they can and can’t live without – provides brands with the opportunity to recalibrate their marketing approach through the lens of “improving customers’ lives in an age of uncertainty”.

As we move into a year with a heightened level of uncertainty, brands have to really think about auditioning for their place in a consumer’s catalogue of “essentials”.

This is not going to be a year where one size fits all. There are going to be winners and losers. And that's not to discount the very real pressures that households are feeling. But one of the really important jobs to be done for brands is to end up on the right side of the fence – where they are deemed to be essential, rather than optional, before the crunch.

The Growth D_Stillery partnered with Verve Australia for Essentials D_Stilled to illuminate a textured picture of how Australians of all generations are spending right now, the motivators behind their spending and how it will change as cost-of-living pressures mount. To see what was going on below the surface we used social media data from Verve’s Ignite AI, qualitative interviews and a quantitative survey of more than 2,000 Australians – the results of which were then triangulated with linked consumer transaction data to identify discrepancies between claimed spend and actual spending behaviours.

What did we see? Apart from the fact that consumers are not great mental accountants – they underestimated their spend in six of eight categories – we also learned there’s no one frame of reference, or shared criteria, for what Australians are deeming “essential”. Long gone are the historical categorisations of “discretionary” and “non-discretionary” categories. It’s now much more nuanced than that. There is, however, a great deal of connective tissue in the way we are evaluating our choices.

We were able to identify four key cultural shifts that were playing a much larger role in how Australians were choosing what they deemed to be “essential”, and from that, route guidance for brands to better communicate their value in a way that aligns with heightened customer needs at a time when emotional connection is key.
I'm a firm believer that this year offers a unique opportunity for brands to reintroduce themselves to their customers – and more optimistically, introduce themselves to some they may not have been able to reach in the past. Since 2020, we’ve witnessed one of the largest behavioural shifts in recent history. A by-product of this is that brand loyalty has been destabilised and consumers are pursuing alternative brands and products more than ever before, for reasons of choice or necessity.

Hearts and minds are up for grabs, so it is going to force brands and industries to get much closer to their audiences. To go back to basics. New customers may be hiding in plain sight; people who are not traditionally your heartland audience, but are in the market and are open to having a conversation. In a year where substitution will be rampant, you may be surprised by who you’re now appealing to.

But to connect with them, you need to start by knowing them. Understanding the things they can’t live without and the emotional triggers that are driving these purchases.

The brands that are walking alongside their customers clearly articulating “This is the problem we’re solving”, “This is the pain we’re relieving” or “This is the gain we’re creating” will likely come out on top. There’s a real opportunity for brands to create much more enduring brand salience if they nail that message. There is a raft of empirical evidence that shows the gains you make in times of downturn will have transcendent benefits when the economy does restart, and will continue to bear fruit further and further downstream.

When I was speaking to Jaimes Leggett, founding partner of Today the Brave, for our Growth D_Stillery vodcast series, he said something that resonated: “The opportunity this year is to be brave – but brave is not bravado. Brave is measured. It’s delivered. It’s considered, it’s substantiated but it’s bold. Others might look at you and go, ‘Crikey, that was a big call’. But if, within your business, it's been a deliberate and staged and managed process, then I think you’re going to win.”

The alternative? Do nothing and the risk is that when the music stops – and it will – your brand will be disproportionately impacted and will likely lose market share to those who were willing to be brave.

The Trends
The Essentials D_Stilled report unpacks four cultural shifts – agnostic of industry or category – that offer brands the antidote to irrelevance in the new “ecology of essentials”.

Ride The New Wave Of Wellbeing
Post-pandemic, wellbeing is the number one priority for Australians across all generations and incomes. But it’s not just about gyms and supplement brands, rather it’s how consumers are measuring the positive ripple effect that a purchase will have on their mental and physical wellbeing and how they fundamentally calibrate their lives. From the time they spend with their children to their work/life balance – even the clothes they wear – consumers are measuring the wellbeing benefits of every purchase in a relentless pursuit of being well and feeling good. The idea of wellbeing has moved from being something that was potentially extrinsic to being intrinsic.

Embrace Escapism
Brands should recognise the opportunity they provide to consumers to switch off and step away from the day-to-day pressures of the current economic climate. Streaming services have become an escapism essential, with nine [1] in 10 TV subscribers saying they’ll hold onto their subs despite the rising cost of living. The re-categorisation of Netflix as a utility came out strongly, but there are many different manifestations of “escapism” across the generations and there are some big – and surprising – opportunities for brands to start positioning their value proposition as an “escapist” experience.

Maximise Micro Moments
In 2023, many consumers are looking for small indulgences in the form of “micro-moments”; smaller discretionary purchases that brighten day-to-day life. A “lipstick effect” is the exemplar here; people are prioritising things like beauty treatments. About 88 per cent of Australians will continue to spend on going out, and 90 per cent will continue to spend on treats and snacks.

Leverage Shared Experience
While 48 per cent of Gen Z are still likely to spend on travel, 82 per cent of households with children intend to get away domestically in the next 12 months. A key motivator? The sense of connection that comes with shared experiences. Much of the data shows that people are prioritising spending in a social context and social facilitation. Interpersonal relationships were fundamentally impacted through the pandemic and what people are looking for now is to create shared experiences to rebuild or galvanise or form the new interpersonal connections that they're hungry for. And they’re willing to spend to make this happen.
 

Click here to download the Essentials D_Stilled report and find out how these four key cultural shifts manifest across generations, their impact and the opportunities they offer for marketers and brands in the months ahead.