You all know the headlines from 2022: Whilst employment rates are at a record high and we’re not predicted to enter another recession, inflation also hit a record high and consumer confidence hit a record low.
How have brands & retailers traversed the challenging economic landscape so far?
Unsurprisingly, the majority have supercharged their value strategies with many offering initiatives like price freezes or price matching, introducing or extending value ranges or loyalty schemes, and even offering free children's meals as a way to entice shoppers into their store.
Many ramped up initiatives to give back to those in need. Whilst this was probably a theme in the last recession, it is likely to have become a bigger focus as Covid placed a heightened importance on CSR in the minds of consumers.
Many provided inspiration to their customers on how to manage the cost-of-living crisis beyond promotions. Sainsbury’s ‘feed your family for a fiver’ helped them win in the 2008 recession, but this year they launched a pop-up walk in freezer which aimed to educate customers on how to freeze their food to reduce food wastage and ultimately save money.
Looking forward: How will consumers and shoppers be thinking, feeling and behaving as we enter 2023?
Whilst this is highly dependent on things like age, gender, and income, below are four overarching insights that came out of our research when speaking to 100+ real shoppers across all demographics.
1. They will continue to adopt more extreme cost saving behaviours Even in relatively low-cost categories like Groceries, shoppers will go to great lengths to save every penny they can by shopping around to find the best price. ‘Food and drink prices’ was the 2nd top concern for 2023 among consumers we surveyed (just behind energy prices). 43% expect to cut back spending on food & drink groceries in the next 6 months, with 24% doing so ‘significantly’. 32% expect to buy more groceries on promotion, 34% will trade down to products that cost less, whilst 21% will stop buying certain products altogether!
Recommendation: When on promotion (which is inevitable!), make it work harder by being smarter.
Firstly, don’t always jump to the deepest discount. Our PlanApps data shows that mid-sized offers (from 10% to 20%) are the most effective. It also shows that calling out price on your media provides better results, whilst layering on additional competition message performs even better - with item prizes delivering 3x higher ROI than experiences or money.
2. But many will be looking for value beyond low prices Whilst cost-saving things like ‘product is on sale’ and ‘free delivery / returns’ came out as most important when making purchases over the next 6 months, value-added things like ‘product is long lasting’, ‘product is from a brand I already know and like’, ‘product is high quality / premium’ and ‘product has positive reviews’ came out next. Things like ‘brand is socially responsible’, ‘product is environmentally friendly’ and ‘I agree with the brands political stance’ came out towards the bottom, showing a strong self-preservation mentality.
Recommendation: When off promotion, consider other ways to communicate ‘value’ to consumers
We all know customer perceived value = perceived benefits – perceived costs. As costs rise, therefore, you need to make your perceived benefits (specifically ‘what’s in it for me’ benefits) even clearer to maintain the same value in the customer’s mind. For example, in the 2008 recession M&S found that people were dining out less but still wanted special occasion meals. They knew they couldn’t compete on price vs the likes of Tesco, but they could compete on quality. Their Dine in for £10 promotion was an integral part of the company’s strong food performance as it reframed their competitors in the minds of their shoppers from other supermarkets to restaurants and takeaways.
3. They will spend more time in the ‘consideration’ phase of their journey
The shopping journey will become stretched, with shoppers being much more planned and less spontaneous across all categories. When it comes to groceries, 28% will try harder to stick to a strict budget over the next 6 months, 37% will shop with a shopping list more often, and 16% will spend more time researching the right product before purchasing.
Recommendation: Start engaging consumers earlier to ensure your retailer is the store of choice / your brand and product is firmly on the shopping list.
At home channels will be key here, with 40% saying they will spend more time at home and 46% visiting the shops less frequently. For example, they’ll also be spending more time using social media (22%) and watching streaming services (23%).
4. They will rely on brands & retailers to navigate the crisis 24% of consumers we surveyed said ads in store will be most likely to influence their purchases over the next 6 months. It has therefore never been more important to keep the customer at the heart of every decision and continue a dialogue with them, with the point of consideration and buying (including physical and virtual stores) playing a crucial role in this.
Recommendation: With nearly a third of marketers expecting 2023 marketing budgets to be lower than last years, investing in retail media can help make every £1 work harder and go further.
Firstly, in a fragmented media landscape where the shopper journey is more complicated than ever, the only consistent touchpoint is the point of purchase (wherever that might be today!). Secondly, in a cookieless world, 1st party retailer data will become an even more important part of brands ability to target their media across more channels than ever in the ‘funnel’. Lastly, it is robustly measurable and can provide closed loop reporting.