Changing consumer priorities
As prices rise and budgets tighten, consumers are more inclined to seek out more cost-effective options, which often means abandoning favourite brands in pursuit of better value.
One report found that 42% of consumers now seek sales or shop clearance, 40 per cent adhere to a budget, 28% buy less overall and 25% prefer bulk stores or warehouse retailers.
In pursuit of cheaper alternatives, consumers become more open to trying private-label or store-brand products, discounted brands and generic or unbranded options. These alternatives provide shoppers with a practical way to cope with rising prices, allowing them to manage their expenses while maintaining a satisfactory level of product quality.
Inflation also leads to changes in spending habits in a phenomenon known as consumption smoothing. This often involves delaying the purchase of durable goods, prioritizing the purchase of necessities and opting for store-brand products.
In essence, consumers shift their priorities toward cost management, which in turn reduces their loyalty to specific brands. Food companies need to adapt to these changing consumer needs by recognizing affordability and value take precedence in an inflationary market.
What can retailers do?
The shift away from brand loyalty can pose challenges for business owners and retailers who depend on consumer spending. Aside from the most obvious solution to the issue _ lowering prices _ there are other things retailers can do to win back customers.
First, retailers can use dynamic pricing, allowing them to adjust prices based on factors like supply and demand, inventory and competition. This approach enables them to offer competitive prices and discounts while also minimizing food waste.
Second, retailers can also introduce loyalty programs that go beyond conventional point-based systems. By using personalized data from consumers, retailers can tailor rewards and incentives to match individual shopping habits, experiences and preferences. Retailers can also collaborate with other businesses and incorporate gamification elements to further enhance loyalty.
Lastly, retailers should consider using a value-oriented marketing approach to elevate consumer experiences. Retailers should communicate the value of their products, emphasizing quality, nutritional benefits and unique features to justify their price points.
Simultaneously, investing in exceptional customer experience, both in-store and online, can foster strong emotional connections between retailers and consumers. When consumers feel valued by brands, they are more likely to stay committed to that brand's products. By assuring customers of their commitment to value, retailers can play a crucial role in guiding consumers through these challenging times.
The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.
Authors: Seung Hwan (Mark) Lee, Professor and Associate Dean of Engagement & Inclusion, Ted Rogers School of Management, Toronto Metropolitan University and Omar H. Fares, Lecturer in the Ted Rogers School of Retail Management, Toronto Metropolitan University