Mental household book overflows
Financial worries in the Netherlands are growing. We recently reported on concerns about energy prices. Now we zoom in on concerns about increases in food prices. Higher energy costs did not cause cuts within other spending categories. Now what about price increases? What do people save on in the "mental household book"? You can read it in the Consumer Behavior Monitor, an initiative of VU Amsterdam and Validators.
Three quarters of Dutch people are very worried about food price increases. One way to deal with the worries is to save on groceries. 54% do this by buying more B brands. This is also reflected in the Brand Relevance in Category section of the monitor. The Dutch now pay less attention to the brand when they buy something (18%); this percentage has never been so low before. Also, only 17% of the Dutch find it important to buy a branded product. Because the crisis is now really felt in the wallet, it seems that people find "social demonstrance" - showing that you have something - less important. People are less concerned with buying fair trade products and ecological products and still prefer to grab the cheaper option on the shelf. According to the price survey of the Consumers' Association Turns out you can save a lot with that. In fact, according to the poll, consumers are half the price of buying private label alternatives instead of just A brands. In addition to reaching for B brands, half of the Dutch say they consume fewer luxury products (50%).
Noud Schartman, PhD student at VU Amsterdam and Validators: "We often mirror our own purchases against a certain reference group, the well-known "keeping up with the Joneses. But when we see in times of crisis that other people are also having a hard time, it can feel more 'permissible' for people to buy the house brand anyway, or go to another store. And not only does this social aspect come into play, we are also easier on ourselves with principles. If you always have money left over at the end of the month, it is relatively easy to buy sustainable, organic or fair trade. But when real financial choices have to be made, it's a lot harder to stick to principles that might be at the expense of yourself and your family.'
The Consumers' Association's research also shows that the prices of basic private label products vary quite a bit by supermarket. According to them, supermarket Dirk is the cheapest and is even 11% below the average price of private label products. The monitor also shows that people are saving by going to a cheaper supermarket (44%). In addition, some people save by buying more items of cheap products at once (hoarding, 39%). More than a third also report saving money by cutting back on expensive products (such as fruit).
As a marketer, how to deal with the savvy consumer
For the big (and often more expensive) brands, such as Coca-Cola, this is not an immediate disaster. Offers, the strong image of quality and habitual buying help keep market share stable. For newer, smaller brands (and mainly those that want to brand themselves as premium/high quality), it is difficult to get people to switch to their brand now. As price becomes more important, the importance of other elements diminishes. Because the crisis is now being felt mainly financially, the importance of buying an A-brand is diminishing.
But what about risk reduction, another mechanism besides social demonstrance that explains the importance of brands? A foundation of a strong brand is risk reduction; consumers choose a product because they know the quality will not disappoint. Whereas in the uncertain corona era risk reduction was actually more important, in the current polycrisis you see that the financial aspect weighs more heavily. According to the risk reduction foundation, you could argue that as a brand you should now focus precisely on emphasizing the qualities of your brand, in order to guarantee the consumer that by purchasing your brand they are making the best choice. However, it now seems that in the current crises, consumers are a lot less sensitive to this and actually go less for A-brands.
This raises a lot of questions for marketers. Should you start investing less in your brand? As a premium brand, do you suddenly have to do something with your price anyway? Which associations are and remain important in this day and age? The answers to these questions are not unequivocal. So what now becomes extra important for marketers is to measure and interpret the performance of your marketing activities. What is the goal of your actions, and do you see those goals being met? For example, it would be a shame to spend money on an expensive World Cup commercial only to find afterwards that the proposition you are communicating has become less relevant to consumers.
Marcel van Brenk, partner at EY VODW: 'These times of price increases and growing consumer distrust call more than ever for an in-depth understanding of the commercial effectiveness of campaigns. Which promotions achieve the right effect, which are actually superfluous and which have the opposite effect? The data is mostly there. The next step is not only to let loose advanced analyses to identify the real effect, but especially to intervene deeply in the commercial processes to actually let the insights prove their usefulness in practice. Certainly now marketing is a combination of art and science.'
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