14 minute read 24 Aug 2020
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Future Consumer Index: five new consumer segments that will shape demand beyond the COVID-19 pandemic

Authors
Ahmed Reda

EY MENA Consumer and Technology, Media & Entertainment and Telecommunications (TMT) Sector Leader

Leader in the Consumer and TMT industry, focused on advising clients in the digital age. Father of three angels. Passionate about supporting future leaders. Enjoys travel.

Ravi Kapoor

EY MENA Consumer Products & Retail Consulting Leader

Problem solver. Focus on the human aspect of change to enable empathetic transformation programs in organizations. Team creator. Model railroader. Spiritualist.

14 minute read 24 Aug 2020

By identifying and analyzing the five new consumer segments, the Index shows how to understand the changed MENA consumer beyond the COVID-19 pandemic.

In brief
  • 69% of consumers still expect their lives to change significantly in the future
  • Health and affordability will dominate beyond the COVID-19 pandemic, but alignment with consumer’s purpose remains critical
  • Leaders who anticipate the future consumer’s needs can reshape their organizations through some key implications

The COVID-19 pandemic is by no means over, but companies and consumers around MENA are at least over its initial shock. People are trying to adapt to it, and daily life is slowly settling into a different kind of routine.

Attention is turning now to what the world might be like once this pandemic is behind us. What kind of consumer needs and values will companies be trying to serve then? Leaders with an answer to that question will be in a better position to reframe the future and transform successfully. That’s why the focus of this edition of the EY Future Consumer Index is on the consumer beyond the COVID-19 pandemic.

Companies can’t forecast with certainty what consumers will be doing 18 months or more from now. And, the COVID-19 pandemic will continue to affect individual countries in GCC in different ways. But the Index suggests that people are expecting to see further deep changes in their lives. On a human level, people have been through a remarkably similar experience; the changes they anticipate are remarkably similar too.

Long-term expectations

69%

believe that the way they live their lives will significantly change in the long term

Some of these changes will be imposed on the consumer. Many people will have to adapt to the long-term impact of this global pandemic: there will be a deep recession; persistent concerns about poor health and further outbreaks; greater regulation; and a loss of privacy, for example. Others will be voluntary. The consumer was evolving fast before the pandemic, and the Index suggests that process will now accelerate. For example, many people who had been slow to adopt online grocery shopping have tried it and found that they liked it.

Likewise, from the start of the pandemic, 84% of consumers declared that they have changed the products they buy with a greater focus on value for money, and an increased commitment to consume locally made products. Many consumer segments are adopting such values for the first time.

As a result of these two forces of change – the imposed and the voluntary – consumers say that they will adopt new habits, preferences and attitudes in the future. What they will expect from the products, brands and companies that want to win their custom will change fast. This will have a pivotal impact on consumption patterns and consumer identities over the next few years. The challenge for leaders is to anticipate which changes will stick and try to shape how the consumer will evolve.

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Chapter 1

Consumers are coping with the impacts, but are cautious and anxious about the future

As they look to the future beyond the COVID-19 pandemic, consumers have very different views on what will be normal for them

One of the many things that organizations and individuals have learned from the shared experience of the pandemic is how resourceful and adaptable they can be. While 78% of MENA consumers say that the way they live has changed significantly in recent months due to the COVID-19 pandemic, 59% feel that they are coping well with its impact.

MENA consumers plan to “stay frugal” and “keep cutting” their spending (far more than the global consumers), with only 9% planning to “get back to normal” — versus 40% globally. While we have seen a general ease of restrictions across major markets, consumers are still uncomfortable going back to their pre-COVID pandemic activities and believe that they will remain uncomfortable for the coming months. For instance, only 26% of MENA consumers are comfortable going to a mall.  

Around 69% of consumers still expect their lives to change significantly in the long-term. And, the kind of changes they want to make is profound: 68% say that their values have changed, and they look at life differently. This will have significant implications for what and how they consume.

Heightened concerns around health, hygiene, value for money and waste are characteristics of the anxious consumer. We expect these concerns to ease as time passes and organizations take the kind of actions needed to help the consumer feel safe. However, it’s clear from this latest edition of the Index that pandemic anxiety will have a lasting impact. Compared with the previous edition, we see a significant shift away from the “Staying frugal” segment into, in particular, the “Cautiously extravagant” segment (14% in May 2020 versus 24% in June 2020) who are more willing to spend on specific products and are generally more optimistic.

The Index has identified five new consumer segments beyond the COVID-19 pandemic that bring this transformation to life. We explore each of them in the next chapter.

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Chapter 2

Five segments describe the consumer beyond the COVID-19 pandemic

The experience of living through this pandemic is reshaping consumers with new needs, deeper values and higher expectations

The Index explores five new segments of consumers that organizations will need to engage beyond the COVID-19 pandemic. Each segment reflects the different ways people expect to be living their lives, how they will make choices, and what really matters to them.

Two of these segments highlight the way that many consumers will focus on living within their means and looking after their health, and the health of their families (“Health first” and “Affordability first”). The two other segments point to the way some consumers will make their environmental and social concerns central to their lives (“Society first” and “Planet first”). And the final one identifies the consumers who will focus on living in the moment and getting the most from every experience (“Experience first”). These segments are built on the future scenarios we modeled in FutureConsumer.Now and in collaboration with futurists and industry leaders.

Health first (29% of MENA consumers)

This is the biggest of the future segments. The priority of consumers in this segment is to protect their health and the health of their family, and that will guide the choices they make. They will prefer brands and products they trust to be safe and will minimize unnecessary risks as much as they can. For example, they would rather shop online than in a store, because that feels safer.

“Health first” consumers are the most likely to be living with their family. They are slightly pessimistic about how long it will be before “normal” life resumes and are the most likely to think the way they live their lives will change in the long-term as a result of the pandemic. While 74% of the consumers say that the pandemic has changed their values and the way they look at life, 82% of the consumers say that they will make healthier choices in the products they purchase.

Understandably, many consumers are focused on health risks. Retailers and other operators of communal spaces will need to work in a sustained way to make consumers feel safe. How can they demonstrate the health of their products and the safety of their spaces? What scope is there to bundle trusted brands and offer them directly to the consumer?

Sentiments of consumers in the "Health first" segment

Sentiments of consumers in the Health first segment

bubble graph health first segment

Affordability first (25% of MENA consumers)

The priority of consumers in this segment is to live within their means. They avoid buying things they don’t really need. And when they do have to make a purchase, they are keen to look for the best deals.

The “Affordability first” consumer is likely to be older than the consumers in other segments and to be living alone. They are the most pessimistic about how long it will take their country to recover and for financial stability to return. They are the least educated consumer segment and are more likely to be in low-income jobs that pay by the hour.

They don’t much care about what brands they buy, just that a product delivers what they need. They will likely trade down unless companies can convince them that their products are superior. How can your products or brands successfully differentiate beyond price? How will you meet the expectations of these consumers at a price they are willing to pay?

Sentiments of consumers in the "Affordability first" segment

Sentiments of consumers in the Health first segment

bubble graph affordability first segment

Society first (20% of MENA consumers)

In this segment, 20% of consumers believe that everyone should work together for the greater good. They pay more attention to the social impact of what they purchase and consume. They buy from organizations that are honest and transparent about what they do. But they don’t take that on trust: they want proof that a business or brand is genuinely putting the needs of society and the community on par with profits. They want to act in ways that benefit society, such as sharing personal data to help stop the spread of disease.

The “Society first” consumer is predominantly an urban professional; this segment has the highest share of people with graduate or doctoral degrees. Many of them feel that they are in a better financial situation as a result of the pandemic because there is less to spend money on.

This consumer demands brands that have a clear purpose that aligns with their values; they reject those that don’t. How will you embed a differentiated purpose at the heart of your transformation? How do you ensure that your portfolio of products, services and brands is rooted in a consistent set of values?

Sentiments of consumers in the "Society first" segment

Sentiments of consumers in the Health first segment

bubble graph society first segment

Planet first (17% of MENA consumers)

Around 71% of consumers in this segment will pay more attention to the social impact of their consumption choices. They will generally seek out brands that align with their beliefs and people who share their values. They are the most likely to change the products they buy. They would pay a premium for high-quality, ethically sourced sustainable goods and are most likely to support local or independent domestic brands (52% report they will shop more local in the long term).

“Planet first” consumers are determined to cut waste and reduce their environmental footprint, so they buy local goods from local shops. If that means they have less choice about what they buy, that’s a cost they are willing to pay to do the right thing for future generations. “Planet first” consumers do not skew to a particular demographic cohort; they are spread across all age and income groups.

Sustainability has been a growing topic in recent years. The Index shows that it remains high on the consumer’s expectations, even if other values (health and affordability) are likely to be front of mind in the near-term. How will you create transparency that will build consumer trust? To what extent are both you and your value chain partners able to deliver the sustainability that the “Planet first” consumer expects?

Sentiments of consumers in the "Planet first" segment

Sentiments of consumers in the Health first segment

bubble graph planet first segment

Experience first (9% of MENA consumers)

The smallest of the future consumer segments is the one we call “Experience first.” This represents 9% of consumers who are intent on living for the moment. They are always looking for experiences that help them get the most from life. They like to try new brands, products and services, especially those that feel personalized. And they choose brands that enable them to signal their values and their sense of purpose.

The “Experience first” segment consists of consumers who are least anxious about their health, finances and are pursuing normal activities such as going to a mall or eating in a restaurant. They are less worried about the impact of the pandemic and less interested in changing the way they live. More than half of them are Millennials or Generation Z.

This consumer is constantly changing what, when and how they want to experience things. How will you tailor your engagement to the “Experience first” shopper in the micro-moment? How will you innovate to keep your brand relevant to a consumer who is always looking for something new?

Sentiments of consumers in the "Experience first" segment

Sentiments of consumers in the Health first segment

bubble graph experience first segment
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Chapter 3

Actions to prioritize now

Leaders need to ensure that their organizations have the portfolio, brand experience and transparency that consumers will trust

Many organizations have responded to this pandemic with a degree of speed and innovation they probably wouldn’t have thought possible a few months ago. Faced with the unimaginable, they have achieved the extraordinary.

Now, they need to protect and grow that sense of agile responsiveness. As we move beyond the COVID-19 pandemic, the ability to plan in the face of uncertainty, resource project flexibly, and execute at speed will be critical. There are three priorities we want to highlight in this bulletin:

1. Reshape your portfolio so that it’s relevant to the future consumer

The Index suggests the ways in which the consumer will change. Now is the time to make sure you have products, services and experiences that feel relevant to their future needs and values. In some cases, that will require M&A activity to dispose of brands that don’t fit and to bring in those that strengthen your offer (we’re already seeing cash-rich companies snapping up distressed players). In other cases, it will mean refreshing and reimagining what you have already. So, each offer has a compelling proposition and a relevant brand narrative.

Implication: As a recessionary mindset will inevitability drive portfolio towards efficiency and price, companies will need to make trade spends work smarter. Companies must ensure that appropriate investments are made for current and future growth, actively leveraging the price and promotion levers to drive incremental demand.

2. Provide digital customer journeys that reflect the way consumers will behave

The COVID-19 pandemic is accelerating the consumer’s digital adoption faster than all expectations. Beyond the COVID-19 pandemic, brand engagement will be different from the norm today. The brands consumers choose, where they consume them, how they purchase them – everything is in flux. But consumers will still expect brands to give them a seamless experience. The challenge is to create digital customer journeys that feel relevant and engaging to the consumer at each step, from acquisition to conversion to loyalty. An “outside-in” assessment that starts with what the experience is like for the consumer will identify points of friction and opportunities to replace physical touchpoints with digital ones. This will help to prioritize the technology and ecosystem investments that add the most value to the consumer.

Sentiments of consumers in the Health first segment

Implication: The accelerated uptake on digital channels driven by the physical restrictions imposed on stores and consumers movements is here to stay. Through big data and data analytics, companies can listen and understand the shifts in consumers’ expectations and, in turn, shape “now and next” consumer engagements platforms and loyalty schemes. As markets move to more omnichannel and direct-to-home delivery-based models, retailers need to reimagine operations and embrace digital to meet consumers’ demand for rapid fulfillment.

3. Create the transparency that will be needed to secure consumer trust

The experience of the pandemic has made consumers more mindful about what they buy and how. Some are thinking again about the social and environmental impact of their choices. They want to know where and how products are made and sourced and about the real cost of what they buy. Others value health more than ever or want value for money without compromising quality. Investors and other stakeholders have become much more interested in whether a company’s behavior lives up to its promises, and how well it communicates this to the consumer. In all these areas, vague assurances won’t be enough.

Sentiments of consumers in the Health first segment

Implication: Organizations will need to invest in supply chain and data capabilities to provide transparency and traceability in a way people can trust. This, combined with the investment required to serve the rapid fulfillment expectation of the omnichannel and direct-to-home delivery models will put further pressure on optimizing supply costs.

The way forward

Over time, we expect concerns around health and household to ease as people, communities and economies recover, but they won’t go away entirely.

Organizations will need to work out how to serve a more health-conscious and value-conscious consumer. But there will also be consumers who demand purposeful brands that reflect their environmental and social values. And, there will be consumers who simply want to enjoy each moment that life offers.

Many organizations believe that they already have the right portfolio, marketing and supply chain. However, in our experience, few are resilient enough to deliver against these heightened expectations. Efficiency is important, but it must be balanced against the need to keep developing the capabilities that will deliver growth. Now is an opportunity to actively shape a successful future, not just to protect what worked in the past.

Sentiments of consumers in the Health first segment

  • Methodology

    We surveyed 1018 consumers across the UAE and Saudi Arabia during the week of 8 June 2020. The survey questionnaire covered current behaviors, sentiment and intent.

Summary

Consumers across the globe have adapted to live in this unprecedented situation. Nonetheless, this new edition of the EY Future Consumer Index shows that most of them are still foreseeing significant changes in their lives and remain uncomfortable about going back to their pre-COVID-19 activities and spending. Some changes will be imposed on them while others will be an active choice. Together, they will have a pivotal impact on consumption patterns and consumer identities for years to come. Here we identify five new consumer segments that will shape demand beyond the COVID-19 pandemic and some key implications that leaders should prioritize now.

About this article

Authors
Ahmed Reda

EY MENA Consumer and Technology, Media & Entertainment and Telecommunications (TMT) Sector Leader

Leader in the Consumer and TMT industry, focused on advising clients in the digital age. Father of three angels. Passionate about supporting future leaders. Enjoys travel.

Ravi Kapoor

EY MENA Consumer Products & Retail Consulting Leader

Problem solver. Focus on the human aspect of change to enable empathetic transformation programs in organizations. Team creator. Model railroader. Spiritualist.