One of the many effects of the cost of living crisis is that shoppers are paying closer attention to the items they place in their shopping baskets.
What do I really need? Will a cheaper alternative do? Will I use it all or will some go to waste? Maybe I will try that other brand.
A lot of buying decisions that shoppers have made on autopilot for many years, often without a moment’s thought, are now being considered and analysed in a far more logical way. Long established habits and routines are being disrupted.
In terms of shopper psychology, we’re seeing a shift in emphasis away from what Daniel Kahneman described as system one thinking – the fast, impulsive and often irrational decisions – towards system two thinking – the calculated, rational and more time-consuming decisions.
As a result, shoppers are adjusting their perceptions of what offers good value, are broadening their consideration sets, are becoming more risk averse and are increasingly prioritising objective product benefits.
There are many strategies that brands can and should employ in response, from the prioritisation of mental and physical availability and a relentless focus on value framing to creating associations with relevant occasions and moments that are important to shoppers. Access to high quality shopper insight is crucial.
The role of promotions
A particular priority for Savvy’s insight and planning team over recent months has been promotions and the important role they must play in helping brands appeal to shifting shopper behaviour.
In terms of promotional appeal, our analysis already shows a clear shift towards no or lower risk mechanics (e.g. FGWP and higher chances to win lower value prizes) much as we did during the consumer downturn between 2012-2013. We have also found in our research growing appeal for cash or cash equivalent prize pools. Unsurprisingly, ‘chance to win a year’s free energy’ is the most appealing prize to shoppers at present.
Outright appeal is not enough on its own, however. More so than ever promotions need to be relevant to the brand, the product and category – seeking to improve value perceptions and brand equity, rather than entering a race to the bottom through crude price promotions. Consideration of events and usage occasions is critical here, as is really understanding what aspects of a brand story or product benefits really strike a chord with shoppers.
Of course, relevance can be improved greatly through skilful use of targeted and personalised promotions, for example by employing targeted social posts and retailers’ digital loyalty schemes to reach the right shoppers with the right message.
Another conclusion worth highlighting from Savvy’s recent promotional research is that ‘money back guarantee’ emerges as one of the most effective and suitable promotion mechanics during the current economic climate. Whilst not the most glamourous or creative, take a moment to consider their benefits: they combat risk aversity by definition; they reinforce product benefits, quality or performance through the confidence presented by the brand; and they can be very simple and cost effective to execute. Our Shopper Panel research finds that 47% of shoppers, when considering two brands they have not tried before, would be more likely to purchase the product offering a MBG. There are few, if any, promotions that are that influential.
Final thoughts
There are choppy waters ahead and few brands will be immune for the consequences of the cost of living crisis. Shopper behaviour has shifted from a long period of relative stability to a period of disruption and change as people adapt to the evolving economic landscape. In time, over the next 6-12 months or so, we expect behaviours will settle as shoppers establish new habits and routines.
During the current window of flux and behavioural change, brands need to be clear in their positioning and promotional strategies, ensuring they remain relevant, revisiting their shopper insight, and being clear about what really drives choice in their categories at the moment of truth.
In response to the cost of living crisis, Savvy’s insight and planning team has identified four category defence strategies and a number of supporting activation platforms that we are using to help our clients navigate these difficult times. If you want to learn more about this or our broader shopper insight, please get in touch.