Inflationary pressures have forced brands and retailers to rethink everything from product portfolios to store layouts. Still, amidst the headlines of inflationary price increases, there is a risk that lower-priced products receive too much emphasis.
Kantar research shows that sustainable growth will not come from focusing on price alone for most brands. Instead, a more nuanced approach will be essential to maintaining brand positioning and market share.
Demand will continue to be an important part of brand and retailer strategies, but that demand creation must extend beyond focusing only on value opportunities for shoppers, despite feeling the pressure to do so.
A value proposition doesn’t in and of itself create demand. Brands and retailers will need to focus not just on the shifting priorities and needs of shoppers, but on providing better navigation beacons that flex with the spending landscape. The danger is that those responsible for guiding shoppers are too insular in their approach. In other words, there is a risk they aren’t nimble enough to respond to urgent drivers of change, such as interest rate adjustments by the Bank of England or further challenges around oil and gas supplies. It is moments such as these that will immediately impact consumer confidence levels and lead to instant changes in how they shop.
Kantar Worldpanel’s ongoing measurement of pressure groups, as outlined in the introduction, shows how quickly shoppers' feelings can lead to significant changes in their spending. The last year of pressure group measurement provides clear sets of leading indicators for what comes next.
It doesn’t make for pretty reading. Among households who describe themselves as “struggling”, nine out of 10 have rising concerns about the cost of groceries, only marginally behind the number of people concerned with rising energy costs (95% of people).
But more than numbers in isolation is needed. Feelings, intentions and actions need to be managed across the spending spectrum to avoid focusing too narrowly on the most obviously impacted households. Rising costs are not just a problem for the less affluent — though they are being hard hit — the increases are hitting all socioeconomic groups. Even within affluent households, everyday costs are rising, forcing them to make different buying choices. Savvy brands, retailers and advertisers are figuring this out.
In other words, jumping to conclusions without a reality check with consumers on where they fit on the scale of financial pressure could be a mistake. For example, in the absence of evidence, a likely assumption could be that the elderly might be more exposed to price hikes, particularly on energy costs. In reality, they are telling Kantar they are in better financial shape than expected. A total of 38% in the over 65s described themselves as financially comfortable compared to just 28% among the under 35s in our latest study. This group looks like a pocket of sales stability for those paying attention.
Though not always a one-for-one predictor of the future, the past should also play a part in strategies. Though the shopper, housing and geo-political landscape is different today, a review of categories from the Great Recession of 2007 and 2008 showed growth in categories including pet treats, coffee beans, and healthier biscuits. None of those would have been intuitively expected, but as costs rose, consumers shifted to small luxuries as they withdrew from spending on higher-cost items such as holidays and home appliances. But keep in mind that withheld expenditures from the years of Covid lockdown may still temper this effect.
And for smart marketers, paying attention to trip frequency will be essential. Expect this space to become even more fluid. Households went grocery shopping more than 48 times in the 12 weeks to November 27, that’s the highest frequency Kantar has recorded since April 2020. This is also, in significant part, a reflection of a gradual return to pre-COVID behaviours. Price research by shoppers will also play a more significant role in changing the range of stores they visit. Clear and competitive pricing on common and essential purchases should be made abundantly obvious to avoid shoppers switching store loyalties.
