As reports of the plunging consumer confidence continue to emerge in the developing global situation and inflation becomes a challenge across the world – the critical question for marketers and businesses is: what will be the impact on shoppers’ behavior? In a comprehensive study, our team took a closer look at the shifting sentiment in new circumstances using a tech-driven approach leveraging virtual shopping.

This is part two of a three-part series on global inflation and its impact on consumer confidence – check out part one and get the full report!

How did we approach this complex question?

The first wave of this study focused on the US market – but stay tuned for EU results! In order to gain an in-depth insight into consumer confidence, the study included two separate samples. One group was exposed to virtual shopping exercises, while the other sample completed a conjoint exercise – both followed by the same survey aimed to identify new patterns of behavior and understand shoppers’ perspectives on the current situation.

When the prices change, consumers behave differently

As inflation brings on new challenges for both businesses and consumers, many brands across industries are faced with pressures to change parts of their businesses in order to combat the effects of the uncertain economic environment. One such strategy is increasing their prices – but this comes with certain risks. For instance, if just some brands increase their costs and it is possible for shoppers to compare the price tags on the shelf, we’ve seen that the most price-sensitive ones walk away from the shelf. However, when the whole category increases the prices, comparison shopping makes the differences in pricing less obvious, so consumer behavior remains consistent. Another factor to keep in mind is how frequently a product is bought – and the changes across these categories are not to be amiss.

Low frequency category: Body wash and dish detergent

A noticeable trend for the low-frequency category is that shoppers tend to opt for a smaller package within the same brand. So, when deciding on a body wash and dishwashing detergent, they do stick with a brand they already trust but choose smaller volume packs. On top of this, the findings uncovered that the most significant drop in demand for this category was exactly with the bigger packages from the best-selling brands.

What is important to remember here is when the best-selling brands are the ones taking the price increase, they stand to see the impact the most – but here the good news is that pack size can still play a role in consumer decision-making. 

High frequency category: Bacon and Chips

What happens when  the prices increase for the products that get purchased more frequently? We have noticed a general switch towards alternatives and exploration of different brands​ that didn’t change the costs. So, when talking about chips, most shoppers are quick to jump to a different brand altogether – and since there is a great variety of these products, they’re easily replaced. Therefore, price increase leads to a significant drop in brands’ penetration when 1/3 of the brands increase

Another reason for the change in consumer behavior might be that the prices are more aligned across the category, so the price increase is easily noticed (3.99 or 3.59 as the standard price).

Interestingly, the bacon category didn’t see ANY changes – there was no sensitivity to price increases, no switching between brands and the best-sellers remained the best, and some performed even better when the prices jumped.

Volume changes are risky business

So, if the price increases, shoppers tend to go for the smaller packs. But, does this mean that brands should decrease the sizes of their products? Well, this tactic can be risky in the long run since consumers might feel tricked if not properly communicated. 

But there are 2 scenarios where it could be done – if all the brands in a category align and decrease the volumes at the same time OR there is such variation across the category that it’s really not possible to compare the different sizes easily. Overall, volume decreases are another strategy brands could leverage to tackle times of crisis, but keep in mind that consumers become more sensitive to any changes during these periods, so decreasing the volumes without transparent communication could lead to frustration.

Shoppers would rather skip buying than go for Private Label

Even when high inflationary pressures do not affect the everyday life of consumers, the biggest challenge brands have to deal with is remaining competitive – especially with the growing penetration of private label brands. With the appealing prices combined with the on-par quality of shopper-favorite products, private label packs have been making their way into consumer carts more and more over the last years.

Now, in the changed global setting with higher price points, it would be expected that consumers would gravitate even more towards PL brands that are friendlier to their wallets. However, as mentioned above, shoppers actually prefer to stick to the brand they already use rather than trying to find alternatives and switching to a completely new private label product. 

This is particularly true for the low frequency category – since consumers buy these less regularly and the tested products were for personal care, it makes sense that they want to continue to buy the ones they trust and know perform well. More good news for brands is that the findings showed that sales for the private labels actually stay consistent throughout different price increase scenarios – meaning there is no migration of shoppers!

If you want to hear how experts at Kraft Heinz are navigating the crisis, make sure you check out the entire webinar:

Co-written by Vinay Rao, New Business Development Director, APAC at EyeSee. 

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.

Why do consumers opt to buy some products more than others – especially in the arena of sustainable alternatives? The truth is that the demand is there – 86% of consumers are open to trying more eco-friendly products! So, why don’t brands venture out and build more alternatives that satisfy that green consumer need?

In the final installment of the study on sustainable products, we focused on how different sustainable product categories perform on the shelf – and what it means for brands that are in the process of developing sustainable products.

Here are the previous parts of this comprehensive study:

Part 1: The green horizon: An intro to the green buyer and how to measure eco behavior
Part 2: Walk your talk: Strategies for choosing your sustainable product claims wisely
Part 3: Social media impact: How much does social media content impact actual shopping?
Part 4: Virtual shopping: Why some categories are leaders in change, and how to become one

Here’s a digest of the study set-up – The study included a curated selection of tested stimuli in replicated Facebook timelines with a scrollable feed, where in-context performance of all the posts tackling plastic pollution was tracked – and followed by standalone exposure. As explained in the previous installment, a mix of eye tracking and facial coding uncovered emotional engagement and visibility of social media content. This part was then followed by a virtual shopping task, where four different product categories were exposed to the respondents (energy bars, shower gel, toothbrushes, and toothpaste). There were six testing cells in total, with two control ones in which the respondents did not have exposure to the social media timelines but only completed a Virtual shopping exercise – to compare the effect of content tackling this very topic.  

Personal care products impact the whole eco-category

The purchases in the personal care category (toothbrush and toothpaste) were by far the most influenced by eco-aware advertising. Shoppers exposed to the scientific social media posts were considering and buying more ECO toothbrush products compared to the mass media, celebrity-endorsed and posts from the control cell 1.​ The respondents from both control cells were buying more regular, non-eco products than cells exposed to the scientific posts – indicating that when consumers don’t see their potential impact on the environment, they are not going to take action.

Interestingly, the personal care category is the only one in which not only the package is sustainable – but also the product itself. And on top of this, the packages of these products were clearly distinctive from regular products in terms of shapes, materials, design, making it easy for shoppers to spot them on the shelves. However, even though the virtual shopping task in control cell 1 featured shelf stickers that should make it easier for consumers to identify eco-products in the store, there are no significant differences in the findings compared to control cell 2, which had none. But this is where both retailers and brands can make all the difference in terms of creating, testing and optimizing in-store materials to help guide the shoppers in the green direction!

Another important note is that the toothbrush category had the smallest differences between the average price of ECO vs regular products – which is in line with the findings that the majority of people (50%) would purchase sustainable products if they were the same prices as their regular products. The bottom line is that if brands want to make a real impact, ‘sustainable’ should not become a synonym for premium and that the prices need to remain competitive and accessible to all consumers.

Consumers want different options to choose from

Aside from being friendly to the environment and the wallet, the tested ECO toothpaste products also included some established brands. We’ve seen that over 27% of shoppers stated they would buy more eco-products if they were from well-known brands, but still, many brands become sustainable players only when the demand for greener alternatives is high. So, while it makes sense to play it safe, it is undeniable that the need for these types of products will only continue to rise as consumers become more and more aware of the green consumerism impact.

Being brave and bold in developing new products can have a much higher impact if you are a big brand – and these innovations can reinvent entire categories. However, always keep the customer experience in the center of the product: how can you improve it as you make it more sustainable? Explore new products and categories, and if there are no current sustainable solutions in your category – there is a plethora of space for innovation.

So, how to become a leader of the ‘green’ impact? Here’s a handy checklist of our experts’ recommendations:

Ready to launch a winning sustainable product? Reach out to us at [email protected]!