WHU General

People Will Not Spend Their Money So Easily Anymore

Professor Martin Fassnacht shows how COVID-19 changes the relationship between B2C businesses and customers.

Short-time work, recession, contact restrictions - if not already, the Corona crisis will soon leave its marks in the wallets of many citizens. The tendency to consume is declining in general due to the restrictions in everyday life. But what does that mean for the consumer goods industry, retailers and travel industry? And how will the crisis affect customers purchase behavior? Professor Dr. Martin Fassnacht, Chair of Strategy and Marketing at WHU - Otto Beisheim School of Management, adresses these questions and also provides answers to which market segments will fare better during the crisis and which will have to come up with something new.

“Especially large companies should now have a close look at their brand portfolio and focus on the cheaper brands. This is not the time where customers are looking for premium brand products,” says Professor Fassnacht. In his opinion, now it is far more important for producers of consumer goods to strengthen their brands in the low and medium price segment. Due to the current economic uncertainties, many customers have a less pronounced tendency to invest their money in expensive products. In addition, the scholar assumes that the premium segment of companies will be hit a lot harder than the low or medium price segments. Companies that are therefore able to focus on alternatives to the premium class products within the corporation will avoid a slump in sales easier. “However, there are strong indications that not all brands will make it through the recession,” says Professor Fassnacht.

The change of customer behavior also depends on the market segment. For example, contact restrictions mean that fewer products designed for outward appearance, such as clothing or make-up, are sold. However, groceries or products that serve one’s own supply and hygiene remain indispensable. And even though tourism is currently one of the areas affected most by the economic downturn and may therefore present chances for bargains, Professor Fassnacht assumes that in the medium term the prices for traveling will rise above pre-crisis levels to compensate for the current losses.

In order to successfully survive the economic downturn some companies will have to adapt their business model. According to Martin Fassnacht, the increasing importance of contactless ordering and payment should not be underestimated. Click & Collect is a possibility in this regard, which is already exercised by large online retail companies. Moreover, addressing the customer is particularly important in times of crisis. Omnichannel communications is the keyword: after all, businesses should not only try to address (potential) customers in new, innovative ways, but also be able to maintain permanent communication on different channels.   

Professor Dr. Martin Fassnacht presented his summarized results as part of the WHU online course series "Business in a post-corona world". If you missed this online course, you are welcome to enjoy the recorded version.