Comment by Glenn Uniacke

A global recession paired with soaring interest rates is starting to put paid to the ’Millennial Lifestyle Subsidy’ – a now-familiar trend whereby VCs subsidise startups to offer aggressively low costs in return for quick customer acquisitions.

As a challenging economy continues to bite, it seems the golden age of on-demand, urban tech discounting has come to a close. We’ve seen it already with soaring Airbnb and Uber prices, and more recently with Netflix’s controversial crackdown on account sharing. And we can bet there’s more to come.

This isn’t just a problem for scaleup land. Businesses of all sizes and forms are needing to turn their hand to making a profit. That, in turn, will often require them to push up prices. So how will this new environment impact overall business models in a world in which consumers have been groomed over time to see great value and convenience as par for the course?

Firstly, how did we get here?

Convenience-driven businesses disrupted traditional players across various industries, with companies like Deliveroo and Uber leveraging technology and big VC backing to make services more accessible and convenient for customers.

This worked well for investors, too, who essentially bankrolled expansion at all costs. The idea was to worry about market share now and actually turning a profit later – ploughing in cheap money upfront to potentially gain a stake in the next world-dominating business.

Fast forward to now, though, and it’s a different picture altogether. The reality is that the UK economy has been on the brink of recession for some time, and now that’s come to a head.

Everyman Cinema turned an ordinary cinema trip into an aspirational, luxury experience with each venue offering high quality food and beverages and comfy sofas

The Bank of England’s unprecedented move to raise interest rates for a tenth consecutive time – hitting the highest in 14 years – speaks to the extremity of the situation in which we find ourselves. And we’re not an isolated case, with countries across the globe  facing similar challenges – but the UK is the only G7 economy projected to actually shrink this year.

Amid these challenging conditions, investors and lenders are becoming increasingly cautious with their cash, bringing an end to the era of cheap funding. Gone is the heyday of businesses being free to be prolific first, profitable second – and that means showing more agility and more value, to investors and consumers alike.

Which brings us to our central question – in a context where upping prices is an almost inevitable means of survival, how can businesses enact this change in a way that’s justifiable to consumers and doesn’t compromise their core values and business plan?

The answer lies in mastering the art of the pivot. Rather than catering to everyday convenience and frivolity, now is the time for a renewed focus on creating exceptional experiences that count. In other words, one route to remaining profitable could be to evolve from a convenience-led business model into an experience-led one.

During the financial crisis, ‘breakthrough brands’ that succeeded were those that offered more than just a functional experience – instead providing something meaningfully different, and deliberately so. They focused on openness, customer care and trust; decided what made their brand authentic; and leant hard into bringing that to life and articulating it clearly.

For example, Everyman Cinema turned an ordinary cinema trip into an aspirational, luxury experience with each venue offering high quality food and beverages and comfy sofas. By taking cinema from the mundane to the prestigious, they convinced customers to part with more of their hard-earned cash, and happily.

In addition, brands should seek to build long-lasting relationships with their customers. This can be achieved through empathetic communication – recognising the needs of their customer and tailoring their interactions accordingly, rather than favouring a pushy “sell, sell, sell” approach.

Small businesses arguably have an advantage over large corporations in this aspect due to their  size, which allows for greater flexibility in responding to rapidly changing consumer demands, particularly during times of market volatility.

With the end of the Millennial Lifestyle Subsidy, small businesses are facing the reality of needing to pivot in order to avoid failure. And as we know all too well at Moneycorp, one of the most effective pivots a business can make is to prioritise customer experiences.

We have seen the efficacy of this strategy in the long-lasting relationships that we’ve maintained as a direct result of our white glove service.

Now more than ever, what truly counts is providing customers with something exceptional and showing that you care. Businesses that provide authentic differentiation, and dedicate resources to delivering value and meaning over pure convenience, will be some of the best equipped to survive the next phase.

Glenn Uniacke is Chief Commercial Officer of Moneycorp