The current economic crisis caused by coronavirus is the third in a decade in Russia. All these crises, despite various roots, have the common problem of outstanding debts and rising prices that follow an increase in the Dollar and Euro. People usually face job losses, reduced salaries and bonuses at the onset of crises. In the future, the contribution of these factors decreases, but steadily throughout the 10 years of measurement, most consumers will notice price increases.
Each crisis is usually seen by brands and consumers as an unpleasant force majeure that must be overcome with great effort and patience – followed by “new normal”. The duration of the medium-term economic cycle is 8-12 years. The cycle begins with a crisis (recession), passes through depression and recovery, then concludes with a rise. Considering that the average life expectancy in Russia is now over 70 years, so the average Russian adult in their lifetime will live through at least five economic cycles (and, therefore, crises). 1 The conclusion is based on “The New Reality” economic monitoring by Ipsos, which has been carried out in Russia since 2008 among the population of 18-45 year-old, cities 1mln+ (since 2020, the age brackets have been expanded to 18-60) In fact, our life today is a series of short breaks between the economic collapses. Therefore, we need to look at crises as a systemic phenomenon.
Learning effect of crises
Repeated regularly, crises have a huge learning effect. It works on the principle of training of conditioned reflexes “stimulus-reactionreinforcement”: The shock occurs with a crisis, a person reacts and sees the result of his actions. If this is a positive result, the action is reinforced, and the experience is remembered. So new habits are formed. With each new crisis, consumers receive a reinforcement of experience and patterns of behavior that were useful and helped. When we look at the long-term data, we see that a complete return to the “consumer of the previous normal” does not occur. Some consumers, hardest hit by the crisis, do not return to pre-crisis behaviour patterns and emerge from the crisis “with a new version of oneself”.
And if our modern life is a move in short dashes “from crisis to crisis”, then it is important for brands to understand the mechanism of how crises train consumers, capture these lessons and take them into account in their development strategies.
We can define at least five repetitive lessons
- Spend wisely
- The value of health
- Use new technologies
By understanding the mechanics of training consumers by crises, a business has the opportunity to look further ahead and secure greater sustainability in the long run.