As consumers navigate the cost-of-living crisis, budgets are boss. When it comes to discretionary spend though, budgets are all about priorities. For an alarming proportion, even having discretionary spend is a luxury and the mass recognition of this situation has led even those with enviable spare cash to scrutinize where they spend it that bit more thoroughly.
Understandably then, this situation has led to many of our clients placing a greater emphasis on how to navigate these turbulent consumer times; what levers they can pull to make sure they stay in people’s minds (and in their baskets!). Spoiler alert, price isn’t the only answer.
What we have seen time and time again, whatever the category, whatever the context, is that discretionary spend is rarely a purely rational decision. In fact, we’d go as far as to say that building emotional connections are now, more important than ever, and becoming a commodity in this environment is dicey ground to be on.
In fact, our work with a leading food producer has shown just how deeply customers are driven by their emotions in this situation. Shoppers may have less to spend on groceries, but making room for the occasional Kinder Bueno is non-negotiable. Parents buying a branded birthday cake isn’t about avoiding a tantrum, it becomes a way to reassure loved ones that the tough times haven’t touched their homelife. Consumers are finding themselves forced to make cuts across the board, but what’s preserved is those things that deliver over and above the functional, those things that are just ‘worth it’.
And it’s not just at the supermarket where we have seen consumers paying more attention to all elements of the value equation, and it nets out in some ways you might not expect. In fact, when it comes to the experience economy, we’ve observed people actually spending more to ensure they are getting the value they want. That might be upgrading to a fancier gym because it will mean going more often (a more favourable cost per use). It might be buying a higher ticket item of clothing because it will last for longer (a more favourable cost per wear). It might even mean upgrading a flight class because the flight then becomes a key element of the holiday, rather than simply transport (a ‘longer’ trip!).
So, what does this mean for brands?
It’s tough out there for consumers right now, with the cost-of-living crisis hitting many hard. Yet our work has been unanimous: value is under greater scrutiny than ever but for customers, and for brands navigating the crisis, it isn’t simply a question of discounting; brands that offer ways to maximise experiences and drive emotional connection with their customers will be those that make the cut.