One lesson from the crunch of 2022 was that when budgets get tighter, consumer behaviour changes fast and brands need to be fleet of foot to retain or grow their customer base.
When money gets tight, people switch where that money goes. They trade down, shop around and make decisions based on value rather than habit or preference.
Research from PwC found that 60% of consumers switched from a brand they were previously loyal to because of cost considerations in 2025 alone. And that was before the current energy shock had fully fed through.
The brands most exposed are those competing in categories where switching is easy and the perceived difference between providers is low. But even brands with strong reputations are not immune. In a squeezed market, value wins and brands that can offer it, in the right way at the right moment have the opportunity to hold or gain ground quickly.
While price cuts are the obvious lever to win or retain consumers, they're also the most expensive and the hardest to reverse.
We surveyed consumers during the last major cost of living crisis and what that research told us was that incentives and reward can be just as powerful as price in driving acquisition, and considerably more flexible. When offered an incentive, consumers are more likely to switch brands, more likely to trial something new and significantly more likely to recommend to others.
Crucially, incentives don't just attract the most price-sensitive customers. They attract customers who want to feel that a brand values them and these are a very different and considerably more loyal, segment to acquire.
That research also surfaced something that surprised us: consumers don't only want reward for themselves.
Nearly a third said the ability to share reward with friends and family mattered to them. Around a quarter said they'd value the option to give to good causes. In a period of financial pressure, reward that extends beyond the individual - that feels generous rather than purely transactional - carries disproportionate weight.
Based on our learning from past cost-of-living squeezed, here are five things brands can do now.
Retention is always cheaper than acquisition. In a churning market it's even more valuable because the customers most likely to leave are often the ones your competitors are most actively targeting.
A timely reward that acknowledges loyalty, not just at renewal time but at meaningful points in the customer relationship, creates a reason to stay that pure price cannot easily replicate.
Referrals are the most cost-effective lead generation available to any brand.
Customers acquired through referral tend to be better qualified, more likely to convert and more loyal over time. Incentivising your existing customers to bring new ones in is particularly powerful in a value-seeking market. People share things that make them look good to their friends and family, and a genuinely useful reward is exactly that.
As consumers become more selective about where they spend, the moment they do come to market matters more. A well-designed new customer incentive — relevant, flexible and easy to redeem — can be the difference between winning that customer and losing them to a competitor offering something similar.
Flexibility matters here more than headline value. A reward that people can spend where they choose will consistently outperform a higher-value reward tied to a single retailer.
The brands that performed well during the last cost of living peak were often the ones that understood their customers weren't just individuals managing their own budgets. They were parents, partners, carers and community members managing shared ones.
Reward that can be shared with family, or directed towards a cause a customer cares about, taps into something deeper than financial incentive. It connects to values. And in a market where consumers increasingly want to spend with brands who care, that's a meaningful differentiator.
The brands that gain most in a volatile market are the ones that can respond fastest. This means matching or getting ahead of competitor activity before customers make decisions. For this you need fulfilment infrastructure in place you can trust to deploy digital reward at short notice, at scale, with the reporting visibility to know what's working in real time.
Speed of response is itself a competitive advantage.
The last time energy and food prices moved this sharply, brands that had incentive programmes in place gained customers from those that didn't. Those that waited until the pressure peaked found themselves reacting rather than leading.
This means that the window for brands to plan and act is now. Thinking through and testing campaigns and propositions that will get traction in the market before the market gets harder will ensure you are in a stronger position when it matters most.
