In this edition of Profitability Unleashed, we spoke with Lauren Fernandes, NIQ's Global Director of Thought Leadership, to discuss the era of the disrupted consumer, emerging shopping behaviors, and how these trends are impacting retail media overall.
Consumer behavior is rapidly evolving, and businesses need to get ahead of these changes to stay relevant. Inflation, cost of living, and financial insecurity have all led to consumers becoming more cautious in their spending. Lauren details how brands should respond in 2023.
Watch the entire Profitability Unleashed interview here:
"I think there's a lot to unpack because a lot has happened in the last few years. If I had to lead with the obvious, inflation is one factor that we just simply can't ignore. In particular, I think the compounding effect of inflation is something that we really have to take into account because there's this snowballing that's happening. One trend we highlight in our report is the impact of cost of living and how those have been rising. And so even though inflation growth is decelerating, in many cases, prices themselves haven't actually yet come down. And so, over the last few years, things are really becoming exponentially more expensive. And so, this is kind of that catalyst of increasing cautiousness we can definitely expect. And you know, kind of related within that, we see a rise in things like omni-shopping across retail channels, as consumers are really trying to seek that value across a wide gamut of outlets. And so, you know, another thing we also have to take into account, then is that prevalence of the recessionary mindset. So really two big trends that we can, you know, keep an eye on and hopefully monitor throughout the year.
"First, of course, related to that intense scrutiny we just talked about is the kind of cutbacks on discretionary spending that we expect. So, everything from holidays to gym memberships, especially out-of-home activities, you know, these are the types of things that are likely to feel the brunt of consumer cutbacks this year. But another thing I found really interesting and telling was the future focus on items that consumers say they plan to either maintain or spend more on even. And so, some of these things like paying off debt, focusing on savings and investments, and even a lot of consumers saying they want to spend more on education, I think really speaks to a sentiment for survival, if you will. So, there are many ways consumers are really focused on not just cutting costs but finding a path to a stronger, more stable, and perhaps more prosperous tomorrow. What is setting that spending tone for the year? I think it's expected when the results show that financial and job security were at the forefront of consumers' minds. I think, interestingly, mental and physical wellness were right next to that at the top of priorities right now. So, there's this trifecta that's formed between financial, mental, and physical health that's really driving consumer intentions. And I think, within that, there's one thing we can't forget, that our financial health is often what feeds our ability to kind of service the rest of our lives. And so, I think that's the perspective we have to take here, that there's this blanket of financial focus that is paramount right now. But right within that is our mental and physical health that are tied as top priorities today."
"We definitely need to anticipate higher levels of scrutiny on consumer spending. Consumers are going to be looking to justify the necessity or the benefit of every purchase. And so, I think there needs to be utmost clarity on the value added by your brand to their lives. In our analysis of saving strategies by consumers, we can see different preferences coming to the forefront that I think brands can use as a guide moving forward. We see things like loyalty points being preferred over remaining inherently brand loyal. We see discount stores or buying in bulk, these are some of the strategies that are prevailing right now over things like downgrading or going down to a smaller pack size in order to save. These types of insights are showing us how consumers are seeking tangible value from what they're buying. They want to see and feel the difference of savings right in their pocket, so to speak."
"I think with that mindset, there's even more we have to consider. Brands need to be aware of and capitalize on some of the unique positions of our market today. And I think CPG is positioned very uniquely. We were talking about the broader swath of categories a little bit earlier, things like savings and investments versus discretionary spending. Through our research, we learned that consumer packaged goods are positioned quite well in the minds of consumers right now. We have a great segmentation of the economic divide that we use in this research, and one of the things that stood out to me is that across those different groups, all of them say they plan to spend more on CPG in the year ahead. So, brands really need to hone in on why they matter and think about the role of maybe something like small luxuries. That could be a huge opportunity because consumers might not feel they can splurge on bigger ticket items in today's environment. But snackable affordable moments of indulgence, especially when they're feeling so pressured, that's a huge runway for certain CPG products to scale as affordable pleasures in tough times."
For more great insights on brand profitability, follow NIQ and Lauren Fernandes on LinkedIn, read about Pacvue's partnership with NIQ here, and contact us to discover how to activate profitability strategies during any economic climate.
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