2024: the year of shopping around

Inflation will continue to be a feature of the economy in 2024, and pricing will play a crucial role in how marketers respond to consumer behaviour.

Why inflation matters

When prices are rising, consumers spend more time shopping around – comparing products and checking prices. The effects are significant: since 2021, when inflation was not the issue it is today, the proportion of people changing what and where they buy, trying a new product or retailer, has almost doubled to 47%. That’s according to Dr Grace Kite of Magic Numbers, speaking at the EffWorks Global conference in London.

As a result, pricing becomes a crucial element of marketing and having a pre-existing strong brand can greatly help in reducing any decline in sales volumes when prices inevitably have to rise.

Takeaways 

• Strong brands, supported by advertising, are less sensitive to price increases. For a 1% increase in sales price, FMCG brands with an annual adpsend of less than £1.5m saw a 1.8% decline in volume sales, found a Magic Numbers analysis of the Advertising Research Community database. Those spending over £3m, meanwhile, saw volumes decline only 1.2%.
• There are opportunities for smaller businesses and challenger brands during inflationary times. An effective media mix for them will typically prioritise activation using paid search and social, rather than brand-building on TV. 
• How brands respond on pricing will depend on the category, whether that’s essential or just nice-to-have. “If you’re in a scrap with your competitors in a necessity category, it’s one you can win by getting relative price straight and getting advertising working,” Kite advised.
• The more discretionary the purchase, the more likely it is to be halted. “If you’re in an optional category, it could be that a third of your demand during inflationary periods is just gone,” said Kite. “You have to act like you’re in a recession because your category is in a recession.” That means not going dark.
• In such cases, maintaining share of voice should pay dividends when demand returns, but marketers will need to calculate whether the cost of doing that – since media is not currently cheap – justifies having a bigger slice of a potentially smaller pie.

BEC

[Image: Magic Numbers]