Big brands explore redundancy marketing

Fear is at an all-time high as people lose their jobs and companies cut costs. In an environment where insecurity dominates, brands are stepping up to offer “redundancy marketing” solutions.

From interest-free loans to protected subscriptions, savvy companies are trying to make consumers feel supported through the bad times in order to retain their business in the good times.

But can organisations practising “redundancy marketing” convince consumers that it is worthwhile to keep spending? Or do they risk their own brand reputations if they misjudge the mood?

Car brand Vauxhall is offering worried customers, who are unsure of their future incomes, interest-free loans and cashback deals when they buy new cars from authorised dealers. Meanwhile, telecoms business TalkTalk has unveiled a new “Emergency Plan” offering existing customers six months’ free phone and broadband if they’re facing financial hardship.

Vauxhall retail sales director Andy Dunstan explains that if companies want to encourage purchases in this volatile economy, they need to offer incentives to hard-hit customers. Short-term, it means that people spend their money; long-term, it should develop brand loyalty.

Vauxhall’s “redundancy marketing” campaign goes under the banner “You Pay, We Pay”. It offers consumers credit and a cashback payment. It is aimed at those who want a new car, but cannot necessarily afford it yet, due to redundancy or other circumstances.

Dunstan claims: “’You Pay, We Pay” is a fresh approach. With many new car buyers unsure of what the future holds, Vauxhall offers consumers – especially those in hardship – the chance to keep their money in the bank with interest, along with a 5% cashback payment, which itself would earn 3% interest at today’s rate.”

Last month, UK unemployment figures reached 1.92 million, the highest level since September 1997. Of those 1.92 million, 225,000 people were made redundant in the final three months of 2008, the highest quarterly level since the figures were first compiled in 1995.

As these figures came out, tour operator TUI announced that Thomson and First Choice are to offer “redundancy cover” on trips and flights to encourage financially uncertain holidaymakers to make early bookings for this summer.

The cover plan means the operator will fully refund bookings if customers lose their jobs and can no longer afford the holiday.

Emma Waddell, a marketing communications spokeswoman for the tour operator, says: “Consumers are increasingly worrying about the safety of their jobs and the effect this could have on their finances. They may not have booked holidays due to the uncertain circumstances, so we wanted to address this as best we could.”

While the hope is that adopting a “redundancy marketing” approach will immediately boost consumer spending on leisure activities, Waddell admits that the travel industry’s vital long-term relationships with consumers can only be built through sensitive approaches.

“We value our customers more than anything, and we need to prove this to them at every opportunity possible,” she argues. “We are only as good as our customers say we are, so it’s only right that we reach out a friendly helping hand when they are in desperate times.”

Waddell adds: “Customers want a fallback, so that should the worst happen, they can cancel bookings at short notice and not face any financial penalties. Incentives like this make people feel more confident and feel a token of friendship that they will reciprocate later.”

TalkTalk’s “emergency plan” for consumers does not bill itself as one merely related to potential redundancy. It pledges that any consumers who are unable to pay their usual service will only have to pay line rental, while retaining access to basic phone and internet services.

TalkTalk chief executive Charles Dunstone says: “We want to help our customers as much as we can because we know many face financial difficulties this year. If you’re anticipating hardship, perhaps as part of a job loss, your home phone and broadband service has never been more important in helping you get back on your feet.”

While financial services brands have suffered from a lack of consumer trust over the past few months, Barclaycard is keen to use this to its advantage by offering extra help for customers in these hard times.

Last week, it announced a cut of interest rates for those struggling with their finances and the company has committed not to contact late payers for up to two months, as long as they are actively working to sort out their financial difficulties.  

It is not just UK brands that have been catching on to the importance of redundancy marketing. In January, Hyundai North America launched the “Hyundai Assurance” programme, allowing customers to return a car within 12 months if they are unable to make their payments.

The ads appear to have been a huge success, helping Hyundai’s sales increase by 14% in January, while rival companies’ sales dropped. GM’s sales fell 49% and Honda’s fell 32%, which led to Hyundai re-running its ads during last week’s high-profile Super Bowl ad showcase.

Hyundai North America vice-president of marketing Joel Ewanick says: “This is a recession of fear and people are scared of expensive purchases when they are looking over their shoulders thinking they may lose their job.

“The idea of giving people an option to give the car back if they are struggling seemed a great way to make customers comfortable and increase our market share in an economy like this.”

But redundancy marketing schemes are not just based on intuition and savvy business sense. Fifty-four per cent of adults say they would reduce discretionary spending in a recession and 63% say they wouldn’t make a purchase if a deal isn’t available, according to research business Harris Interactive. Dan Bottle, a researcher at Harris Interactive, says: “There is intense pressure on marketers at the moment to deliver money off for consumers, especially those facing redundancy.

“It’s tempting to just focus on price. But experience shows that when the recovery comes, the long-term winners will be those brands that have used promotions strategically, as well as tactically, to build and drive sales while maintaining a friendship that keeps buyers loyal for some time to come.”

Hyundai North America’s Ewanick adds that regardless of the economic climate, brands must be able to relate to their customers in all circumstances. He points out that just because there is a recession taking place, the principles of business success remain the same as ever.

He explains: “You have to understand your customer deeply and personally. Create an offer that aligns with your brand and their needs – in all extremes, including hardship or redundancy. Do this and you will see a return on marketing investment.”


    Leave a comment