This blog will discuss the Cost-of-Living crisis and Price Sensitivity and explore current consumer attitudes, trends, and behaviors during this time. Consumers are having to adjust their shopping habits to make their money go further; however, they want to minimize change and not compromise on areas like health and indulgence.
Price sensitivity varies from person to person, goods and services; some items are deemed worthy of costing a premium, and others are not. There is less sensitivity present when the product of service is seen as prestigious, exclusive, or of high quality. Price is subjective. Expensive can be perceived as good quality or out of price range. The low cost could be perceived as affordable or make consumers apprehensive about the quality of the product.
Price is the benchmark for value and initiates consumers’ perceptions on whether they will purchase a product or not. It should be noted cheaper price is not always considered a good thing. Besides from cost, consumers evaluate their needs states through health, indulgence, and convenience. The more a product aligns with the needs states of consumers, the more willing they will be to pay a premium.
However, if a product suddenly costs more than similar alternatives, consumers are more likely to have higher price sensitivity. Every day essential living costs such as energy and food are rising much faster than average incomes, and the least affluent are being hit the hardest. Savvy shopping has become an art form with consumers focusing on good value for money. Consumers are still willing to trade up when they are happy with the quality and value of a product.
Consumers and their Finances
Global consumers believe the country they currently live is in recession. With 48% of consumers saying this was the case even if the country is not in recession.
This will be defined by the inability of people to get good jobs once they graduate, unemployment rates rising, businesses going bankrupt, an inflated housing market, people living in substandard living conditions, the rising rate of utility bills, and other living costs (groceries, petrol, etc.). These are all indicators that signpost a recession in the eyes of the consumer, irrespective of the country’s GDP.
With rising living costs, utility bills, and other personal expenses continuing to increase, consumers feel there is a lack of stability and certainty. This leads to recessionary style behaviors and consumers becoming more vigilant to price sensitivity.
48% of consumers displayed uncertainty in the state of the global economic outlook in the upcoming year. Recessionary style habits and behavior are a consequence of consumers feeling uncertainty in the economy and their own financial stability. Almost a third of consumers believe they do not have sufficient financial savings, and a further 28% were unsure.
Consumers’ Concerns in the Cost-of-Living Crisis
52% of consumers are confident with their job security in the next twelve months; despite consumers feeling the country they live in is experiencing recessionary characteristics, the global majority feel confident in their job security. However, 27% of consumers admitted they were unconfident in their job security. With industry giants and other businesses cutting jobs to reduce costs. 59% of consumers displayed a lack of confidence in whether they had adequate financial savings; in this case, consumers will want to cut back on spending and adopt recessionary style shopping habits, especially as they feel less financially prepared for uncertainty or sudden change of circumstances.
Consumers are engaging in recessionary style behaviors, and affordable products are important, especially during these uncertain times. 42% of consumers believed the prices of food and drink have risen over the last twelve months, again reflecting why recessionary style characteristics are being adopted by consumers in their day-to-day life.
47% of consumers believe their food and drink shopping is expensive or very expensive. So, affordability is important for consumers during uncertain times as a form of reassurance. With consumers taking greater lengths to be more financially prepared and cost-effective, 62% said they prepare a shopping list as a form of budgeting when asked how they prepare for a grocery shop; two in five consumers said they set a budget for when they spend.
Recessionary Style Habits and Behaviors
More than a third of consumers decide if there are any non-essential products they can go without, such as snacks or confectionery. Though consumers could be swayed whilst shopping as indulgence is a remaining need-state that consumers do not wish to compromise on.
Almost three in five consumers switched from their usual retailer to one that is associated with cheaper prices. Consumers aim to make budget cuts, with their main priority being to satisfy their need-states whilst getting the best value for money.
Consumers are more likely to shop around for the best deals and less likely to be brand and retailer loyal. The taboo previously associated with reduced products is a thing of the past as consumers step into a new age of innovative saving and bargain-hunting, with thrifting becoming an admirable skill, which makes for better living, with affordability being a key influencer to consumers purchasing habits.
Snacks and ‘non-essentials’ were the most popular products consumers were looking to reduce spending on, followed by alcoholic drinks. This emphasizes the shift in consumer attitudes toward their health. In wake of the pandemic, consumers have placed greater emphasis on their general health and well-being, and this has influenced changes in their diets and lifestyles. Consumers plan to take greater advantage of promotional offerings in the next twelve months, and this was the most likely response.
Consumers will be more attracted to promotional offerings, discounts, and other money-saving tactics; whilst also trying to make sure they do not make too much of a compromise from the things they enjoy.
For this reason, consumers will become less brand and retailer loyal and more influenced by factors such as taste, price, and claims. Though we are in a cost-of-living crisis, it is important to note consumer perceptions based on these influencing factors.
Consumers are adopting ‘recessionary style’ habits, taking a debit-credit approach toward their finances and spending. Despite this, with savings in areas like foodservices, consumers look to compensate with premium food and drink products. Consumers will quickly evaluate whether their needs states will be satisfied, and fulfillment of product attributes will impact whether consumers are willing to pay a premium.
Health, wellness, price, and convenience are all influencing factors that determine the value of a product for consumers. The more a product satisfies these need states, the more premium it is perceived to be.
And to wrap up, it is important products focus on quality, taste, and claims, as the performance of a product is what consumers will be most attentive to. Affordability shouldn’t come at a cost to one’s health. so affordable, good-quality products will be of particular interest to health and money-conscious consumers during these uncertain times.