Consumers Settling Into New Normal

customer-serviceIRI MarketPulse Survey finds budgeting has become a way of life for consumers.

The “Great Recession” officially ended in 2009, but budgeting is still on the menu for consumers even though they have a sunnier outlook on the economy and their personal finances. In fact, results from Information Resources Inc.’s (IRI) Q2 2013 MarketPulse survey indicate that consumers have settled into the “new normal” of conservative purchase behaviors and attitudes, so consumer packaged goods (CPG) marketers must keep their finger on the economic pulse and find innovative ways to entice consumers to loosen their purse strings.

“Soon after the recession began, CPG marketers began notching up promotional activity as a means of retaining shoppers and basket size,” said Susan Viamari, editor of Times & Trends, IRI. “It helped for a while, but these programs have been losing their punch during the last 12-18 months. Marketers must re-examine their strategies from start to finish with an eye toward aligning against the ‘new normal,’ where products are aligned against the most pressing needs of its ‘most important consumers,’ everyday pricing provides value yet still supports the bottom line, and promotions are used to address short-term, tactical opportunities.”

According to the Q2 2013 MarketPulse survey, 56% of consumers will decide on most of the products they will purchase before they step foot out of their homes, versus 59% in Q2 2011. While 58% of consumers say coupons and 76% say brand experience are important, today’s shoppers are very in tune with price.

In fact, the survey also uncovered that 52% of shoppers choose the store in which they will shop, because it offers lower prices on items they need. To find the lowest prices, shoppers are embracing a variety of tools, such as:

     65% use prices advertised in retailers’ weekly grocery circular to compare prices

    56% compare prices across area retailers to identify lowest prices

    26% use prices on retailer websites to compare prices

And, not all purchase decisions are made at the kitchen table. The following store-based marketing tactics still influence the final brand decision:

    Shopper loyalty card discount  48%

    In-store circular    44%

    Signs/displays in store     28%

    In-store kiosk  10%    

    In-store touch screen digital display     4%

“You really can’t advertise early enough or often enough,” added Viamari. “The key to winning with consumers is to not only begin the conversation before they enter the store, but also to continue the discussion up to and even after the moment of purchase. So, use those traditional tools, such as signs and circulars, but enhance them with new approaches, such as highly targeted loyalty programs, sampling kiosks, etc.”

Inflating Gas Prices May Stir the Pot
Just as economic conditions seem to be settling somewhat, trends are showing the possibility of change once again. This time, the culprit is gas prices. Unfortunately, fluctuating gas prices are also the “new normal,” and if prices continue to increase, it may influence shopping patterns quite strongly.

According to the Q2 2013 MarketPulse survey, if gas prices increase by 50 cents, 44% of consumers say they are likely to cut spending on groceries.

In addition:

    57% will make fewer, larger trips

    52% will switch spending to stores that are closer to home

    30% will switch spending to discount or club stores, even if those stores are a 15-20 minute drive

“In general, households dedicate a sizable portion of their income to fueling their vehicles,” observed Viamari.  “And, with budgets already tight, an increase of 50 cents per gallon will quickly add to the squeeze. Marketers must be on the watch constantly for ripples spurred by rising gas prices, so that they adjust their assortments, pricing strategies and promotional programs quickly and accordingly.”

IRI Shopper Sentiment Index Surges Ahead

IRI’s Shopper Sentiment Index provides deep insight into how the economy is impacting consumers and changing how they approach grocery shopping. The index provides perspective in terms of price sensitivity, brand loyalty and changes in spending required to maintain desired lifestyles. With a benchmark score of 100 based on Q1 2011 information, a Shopper Sentiment Index score of more than 100 reflects consumers that are less price driven, more loyal to favorite brands and better equipped to maintain their desired lifestyle without changes.

The latest index for Q2 2013 is 106, which is an increase from 103 in Q1 2013. This also is the highest point, since the inception of the Shopper Sentiment Index in 2011.

Interestingly, this jump is led by millennial shoppers, who have been hit particularly hard by the economic downturn and have struggled to find financial health and stability. Among this group, the Shopper Sentiment Index has remained consistent at approximately 85, since Q1 2012. In Q2 2013, the index jumped to 94 as a result of the following positive personal financial trends:

     28% feel their financial situation has improved during the past year, versus 20% of those aged 25-54 and 16% of those aged 55-plus

    42% expect their financial position to improve it the coming year, versus 26% of those aged 35-54 and 17% of those aged 55-plus

“We have been watching the millennial segment for some time now, and they have struggled more than most throughout the downturn,” added Viamari. “The recent uptick during the past couple of months may or may not signify a changing tide, so we’ll certainly be monitoring this group closely in the days and months ahead.”

 

 

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