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Never waste a good crisis. Dealing with the impact of crisis situations on consumer behaviour and firm performance

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Don’t let a good crisis go to waste

By examining the impact that large-scale crises have on consumer behaviour and business performance, EU-funded researchers have created a blueprint for responding to – and thriving in – such crises.

Society

In school one is always taught to learn from one’s mistakes. And why shouldn’t this hold true when that mistake is a business, industry or even a global economic crisis? This is exactly the thinking of EU-funded researchers with the CONCRISIS project, who believe one should never let a good crisis go to waste. The project examined the impact large-scale crises or turbulence have on both consumer behaviour and business performance. Consisting of two stages, first, researchers looked at consumer reactions to business-specific service-performance crises. This in turn was followed by a second study that looked at the impact business advertising and pricing actions have on consumer behaviour throughout the year. ‘As to this second part, our research was guided by two key questions,’ says Project Coordinator Dr Maarten Gijsenberg. ‘Do consumers react equally to advertising and price decreases and increases and, based on this, what should firms do given tight budgets? Second, given these reduced spending levels, how can firms communicate the value of innovation in order to make a product more successful?’ The objective of both studies was to identify how businesses can best respond to such crises or turbulence in order to identify opportunities for growth, both in the short and long run. Long lasting effects According to the first study, service crises can have long-lasting detrimental effects on businesses. ‘Such crises will lead to clear drops in consumer satisfaction with a business, which will last over time,’ says Gijsenberg. ‘Equally sized improvements, however, have only a small effect that are not permanent and tend to dissipate over time.’ Knowing this, CONCRISIS recommends that businesses try to be as consistent as possible with their customer service and do their utmost to avoid any major disruptions to their service. Furthermore, when a crisis does hit, a business cannot expect to reach pre-crisis service levels without sustained better performance. ‘Just improving once is not enough, and may even backfire, resulting in lower consumer satisfaction,’ says Gijsenberg. ‘Instead, what we found is that sustained improvements in service performance result in sustained higher levels of customer satisfaction.’ Ups and downs The results from the second study showed that consumer reactions to a business’ advertising and pricing actions are not constant over the course of a year. Instead, they depend on intra-year cycles characterised by periods of high demand followed by periods of low demand. Although businesses do adjust their advertising and pricing over a year, these adjustments are not usually in-line with changes in consumer demand. ‘As consumers are more advertising-sensitive in periods of high demand, brand-focused strategies that communicate the distinct features and advantages of the product over a competitor’s product will be the most effective during such periods,’ says Gijsenberg. ‘In periods of low demand, consumers tend to care more about price than brand, and a business should adjust their strategies accordingly.’ Practical guidelines With this insight in hand, businesses now have clear and practical guidelines on how to deal with – and even benefit from – different types of crises by means of investments in marketing and innovation. ‘The CONCRISIS findings are and will continue to be highly relevant to businesses in improving their long-term success, health and viability,’ concludes Gijsenberg. ‘It helps ensure their role in the creation of value for society and overall welfare through, for example, sustained job creation.’

Keywords

CONCRISIS, economic crisis, business planning, business strategy, consumer behaviour, advertising

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