Consumer Behavior Monitor: To buy those cute pants, people first eat out the fridge

Now that concerns about energy prices are melting away like snow in the (spring) sun, it’s important to understand the complexities of consumer behavior. In this article, we explore two intriguing aspects of consumer behavior: the subtle game of mental accounting and the influence of prospect theory. Both are highlighted in the Consumer Behavior Monitor, an initiative of VU Amsterdam and Validators. This article delves deeper into the strategies consumers use to balance their budgets without losing the joy of a summer purchase.

The Mystery of Consumer Logic

Consumers remain very concerned about rising prices in general (25%, up 4% from week 18) and about rising food prices (30%). Young people, in particular, are very concerned about rising prices (36%). Older adults are more likely to be concerned about the war in Ukraine (37%), but there are also concerns about price increases among older adults (15%). To protect themselves against price increases, consumers have adopted all sorts of new habits in recent weeks. This is also evident from the quotes played back in the voice module of the monitor:

“I do a lot of things differently—I have a different way of life. The way I shop for groceries, for example. By that I mean I pay very close attention to prices, go through all the flyers, and bike from supermarket to supermarket to get the best deals possible. I used to be able to buy clothes easily, but now I really have to put things off. I have to think carefully about how I spend my money.” – respondent.

And suddenly, spending on fashion items such as clothing and shoes has risen sharply (46%, up 10% from week 16). It remains a strange paradox in the world of consumers: prices are rising and the cost of living is increasing, causing consumers to worry, yet at the same time, consumers are suddenly spending more money on fashion. How can these seemingly contradictory behaviors be explained?

The Art of Bookkeeping Without Numbers

Consumers have developed a sophisticated way to manage their finances without getting lost in complex spreadsheets and budget planning. Instead, consumers take a different approach, also known as “mental accounting” or “the mental household budget.” In this approach, they justify spending on one item (often a bit more expensive) by saving on another (often a bit cheaper). The survey shows that consumers are offsetting the extra spending on fashion in recent weeks by going to the supermarket less often (85%, down 4% from week 16). Consumers are also reviewing their grocery lists and deciding to cut back a bit. Instead of “stockpiling” heavily (39%, -12% compared to week 18), they’re taking a step back and making use of what they already have at home (24%, +8% compared to week 18). Consumers are thus justifying the purchase of a pair of jeans by “stockpiling” less at the supermarket or by eating up leftovers from the fridge sooner. That way, consumers can offset the cost of those fantastic jeans and still feel like financial geniuses. And perhaps the fact that vacation pay was deposited this month also made a difference.

Young people's worries don't just melt away like snow in the sun

But it’s not just through mental creative accounting that consumers justify buying a nice pair of jeans to themselves during financially difficult times. Prospect theory also plays an important role here. This theory posits that consumers are loss-averse and tend to avoid risks and losses. But this theory also states that when consumers feel they have less to lose, they are more inclined to take risks. And that’s what the sun can do for a person—it gives them the feeling that there’s less to lose. Add to that the fact that concerns about energy prices have decreased (58%, -5% compared to week 18), and you have a fertile combination that encourages “smart” consumer decisions. These favorable conditions mean that consumers are more inclined to refresh their wardrobes (46%, +10% compared to week 16).

But does this apply to everyone? As mentioned earlier in this article, young people in particular are concerned about rising prices. Young people are therefore less susceptible to the recent sunny weather and have kept their spending on fashion and clothing at a stable level. So young people’s concerns aren’t simply melting away like snow in the sun. The 35–54 and 55+ age groups, however, do show increases in spending on clothing and fashion (up 4% compared to week 18 and up 12% compared to week 18, respectively). It is no coincidence that these older adults are less concerned about price increases in general.

Young people are price-conscious, so choose your price carefully.

So what does this mean? Today’s young people are growing up in an era where information is easily accessible. They are accustomed to price comparison sites, online reviews, and social media where experiences are shared. As a result, they are well-informed and price-conscious. They want value for their money and the best deal. This means that companies looking to attract young people must offer competitive prices and be transparent about the value they provide. Offers, discounts, and special promotions can also be effective in capturing young people’s attention.

Older adults are less price-sensitive, often have more experience with products, and have built trust in certain brands over the years. They tend to be brand-loyal and are less likely to switch. This means that companies targeting older consumers must invest in maintaining brand loyalty through quality, service, and upholding a positive reputation. Marketing campaigns should focus on building trust and emphasizing the experience.

This article also appeared on MarketingTribune.

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