August 18, 2022
As brands are fast learning in 2022, nothing can influence consumer purchase behavior like rising prices. In Slingshot’s Summer 2022 Forecasts for travel and dining, 87% of respondents in our consumer survey said that rising travel costs would affect how they travel, and nearly half of respondents said they planned to dine out less than they did last summer due to rising food costs.
Reading between the numbers, however, you see a remarkable distinction: an everyday purchase like food has far fewer people willing to alter their behavior than a bigger ticket and less essential purchase like leisure travel.
As it turns out, we're not alone in this assessment. The Harvard Business Review has noticed the same trend occurring as a result of the latest economic downturn. In our recent article exploring the ways consumers behave during periods of inflation, we looked at how four different consumer groups tend to react to rising prices. Now let’s go a step further, to see how inflation impacts the types of products they buy—or don’t buy.
Essential Goods
Let’s start with the basics, those bread and butter purchases people are likely to keep making, inflation or not.
Of course, because a product is deeded essential doesn't mean essential product brands are in the clear. There are wide range of prices in the realm of essential goods and services, and many consumers will gladly trade brand loyalty for cheaper alternatives. Finding ways to re-package and re-position brand-name essential goods could be key to keeping customers loyal. Brand awareness is also still important, and increasing perceived value can be especially helpful in messaging, as some marketers unwisely choose to go dark during harder economic times, opening the door to gaining greater market share.
Indulgences
This category includes travel, the arts, entertainment, new clothing, appliances, and consumer electronics. In an inflationary period, consumers will commonly reduce the amount of things they choose to indulge in, so as a marketer you'll want to make sure your brand is front and center when they do decide to splurge.
Similar to essential goods, perceived value is critical. Providing deals and promotions on indulgent purchases will help lower the price barrier that some customers face. This is where the fear of missing out can play to your advantage. Focus on time-sensitive offers that consumers simply can’t pass up. That said, don't forget to emphasize quality as well. If they’re going to splurge, it will be on something they believe provides high quality for a good price.
Postponables
Postponables are any important, needed purchases that can be delayed until later. This might be repairs, personal services, dental cleanings, or even that new car. Postponables took a major hit during the COVID lockdown, only to come roaring back the following year thanks to pent-up consumer demand. The same is likely true today as inflation forces people to put off some purchases– at least for now. It’s important that brands in this category not abandon awareness efforts, as many consumers can only postpone these purchases for so long.
Expendables
Consider these products to be indulgences on steroids. Expendables are items that most people have to justify buying even under normal conditions. Think luxury goods that are the well-earned rewards for personal economic gain. It’s the sports car you’ve coveted since high school, or the diamond necklace you planned to treat yourself to for years.
So it only makes sense that they’re also the first purchases to get cut when someone's wallet takes a hit. But while expendables tend to see the largest drop in demand, that doesn’t mean marketers of these products should immediately start slashing prices; a loss of brand equity would far outstrip any short-term gains in revenue. Instead, expendables should be marketed aggressively to audiences for whom inflationary periods have the least negative impact. Rather than lower your price, raise your target audience’s household income to capture customers still buying expendables like everything is dandy. Because for them, it is.
No matter what product category the brand is in, flexibility is crucial to weathering periods of high inflation. In some cases, people will make deeper cuts the longer inflation lasts. In other cases, particularly with postponable purchases, pent-up demand will eventually win out over higher prices. Few consumers will abandon any one category all together. Instead, they will be far more likely to reduce the frequency of purchases, and make those purchases with much more thought and consideration.