A glass half empty? Optimism in business

Optimism is a valuable tool for most businesses, but if the feel-good factor declines, what is the financial impact of that for brands? Liam Kay finds out.

a half full glass on milk on a white background

It is a hard time to be an optimist. We are emerging from a worldwide pandemic; facing a cost-of-living crisis driven by spiralling fuel and energy prices and higher inflation rates; the effects of human activity on the environment are increasingly becoming obvious; and war has broken out in Ukraine, leading to a knock-on effect on food and supply chains. The future is not looking so rosy.

With a few notable exceptions, businesses generally trade on optimism and goodwill in their advertising, products and brand image, whether that be a new car, house, investment tools, or simply food and drink. But is the current political and economic climate affecting that formula – and is the loss of optimism part of a longer-term trend, or an unsustainable blip?

Much of the current loss of optimism is reflected in consumer confidence figures. GfK’s Consumer Confidence Index fell to its lowest levels since its records began, in 1974, in its May edition, reaching a score of -40, one point lower than the 2008 financial crisis. Joe Staton, client strategy director at GfK, says the cost-of-living crisis is the leading cause of economic pessimism.

“My glass feels rather half empty at the moment, looking at the numbers,” he says. “I cannot find any strong tailwinds that will boost consumer confidence. The headwinds are phenomenal. Consumers are similar to markets – they trade on confidence and surety.”

Market research firm Trajectory has been running an optimism index since 2018 and has also noticed a recent collapse. The April 2022 index said 39% of us felt life had got worse during the past 50 years and would continue to decline over the next 20, compared with 37% who said the opposite.

The cost-of-living crisis is a big factor in the fall in optimism, but other factors are at play. Trust in politicians is “having an impact on optimism in a way it doesn’t normally”, explains Tom Johnson, managing director at Trajectory, as is nostalgia for an idealised past and levels of personal autonomy. Johnson adds that financial pressures, social fragmentation and declining trust in leaders are combining to create “a different consumer and citizen mindset”.

Darren Savage, chief strategy officer at Tribal, says some evidence points to the younger generations being more optimistic as they “have grown up in a much more connected and participatory culture, and they feel that, through such participation and connections, they can effect change”.

Trajectory’s optimism index also supports the idea that younger generations are more likely to be optimistic about the future than their parents.

It found that the Silent Generation, millennials and Generation Z were the least nostalgic, whereas the Baby Boomers and Generation X were most likely to feel things were getting worse.

The environment is one of the big elephants in the room when we discuss humanity’s innate optimism, or perceived lack of it. With the climate crisis likely to accelerate in the decades ahead, Savage thinks there is a disconnect – “it is so horrific, so appalling what is happening to this planet, that many people are in denial about it”.

He cites the 1973 book The Denial of Death, by Ernest Becker, as an example of this disconnect and says that brands need to help change mindsets. “The best way to predict the future is to invent it,” he adds. “I hope that some time in the future people can unify with a vision of what the future ought to look like, and it is not caught up in nationalism or nostalgia. The planet needs some genuine visionaries.”

Johnson says part of the overall problem is humans’ inability to notice gradual improvements in living standards and failure to spot incremental change. “If life expectancy increases by a few weeks every year, then we are obviously not going to notice,” he says, adding that there are good reasons why optimism is declining – namely, life is not improving at the rate it was a few decades ago. Real wages have been flat for decades, life expectancy rises are slowing and the economy is no longer growing.

“We would still make the case that life is getting better for other reasons, but, increasingly, the big things we used to point to don’t really support that any more,” adds Johnson.

A “them and us mindset” is affecting shopping habits, he says, and people are getting excited over bargains not just because of the money saved, but “because they were getting something back from ‘them’ – being big business or whoever is ‘winning’ from all of this; we, the people, are in it together, and wealthier, elitist business and vested interests are on the other side”. Companies that raise prices are running a risk, as “consumers are able to see who is on their side and who is not in that context – some of those memories will remain long after this painful period”, Johnson says.

Savage explains that businesses can be well positioned to lead an upturn in optimism, but they must examine what people need and want from brands. “Brands should always offer people, both at a symbolic level and how they deliver on a brand promise, something that improves your life in some way, shape or form,” he argues. “I think things like sustainability and good ethics from businesses are playing a much more central, critical role.

“There is an opportunity for brands to offer a more optimistic view of the world. Humans are fundamentally optimistic. When you look at things from a psychological point of view, it doesn’t matter how bad things are at the moment, everyone has a degree of optimism. It is a survival mechanism – I don’t think we could survive and stay sane unless we had an ability to believe that, at some point, things will get better and improve for us.”

This article is from the July 2022 edition of Impact magazine. 

We hope you enjoyed this article.
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