Keeping up with the latest crisis: Consumer confidence and pricing sensitivity

Two years into the pandemic, the world is faced with another crisis – and the shake in consumer confidence could be felt across all markets. As the gas prices reach record highs, so do the concerns about the cost of daily lives. The long lines at the supermarkets at the start of the pandemic were replaced by queues at the gas stations across the world. The surge in consumer confidence was evident. So what is the first step brands should take to stay on top of this new global complex environment?

Every crisis has unique qualities

All the new pressures of this crisis have led to similar challenges brands had to make two years ago – shortages, supply chain issues, and consequently, prioritization of product distribution. Due to this, brands had to make complex decisions in terms of trimming their portfolio, reducing pack sizes and counts, or shifting pricing at the same time.

Relying on past data is simply not an option now when pricing sensitivity is fluctuating and consumer confidence is unstable. Although previous experiences with different recession periods showed us the various consumer reactions across categories – it is brands’ reactions that are also changing the market landscape.

Shifting pricing and sensitivity

One of the go-to ways brands have been navigating crisis is by adjusting their pricing strategies due to production and raw material costs. But the biggest question lies in how does this impact consumer behavior? We’ve seen reports of prices doubling up across all industries, and consumers were spending more on groceries and items than the previous year until inflation – but now are mostly resorting to cost-saving measures and new purchase behavior. And our latest study showed that when 1/3 of products prices increase – price sensitive shoppers drop out and the value share decreases.

In the current climate of uncertainty, even loyal consumers can seek more cost-effective options. So, prices shouldn’t be the only thing that changes – rethinking the approach to promotions and marketing is a necessary step brands must take to ensure consumer trust.

Volume and size changes

Under the inflationary pressure, another strategy manufacturers and brands are opt for is reducing pack sizes and product volumes. Because the price of production of individual SKUs increased, downsizing products and distributing lower volume standards is a safe bet for brands – but this can be risky in the long run. However, our comprehensive study uncovered that there are two situations when it makes sense.

An effective way to de-risk the impact of both volume and price changes on shopper behavior is to understand how to feel consumers’ pulse in the right context and showcase the brand’s value beyond price.

Behavioral methods such as virtual stores offer precise insights into a realistic model of consumer behavior. In order to get a better understanding of the current buying behavior, EyeSee tested 4 different product categories in various shopping scenarios – including price and volume changes.

‍