Inflationary doomsday prophecies abound and big brands, particularly in CPG, are rightly worried about the strongly forecasted and deeply dreaded “trade-down” — i.e., the tipping point where consumers will alter their behavior and opt for a competitive store-brand to save pennies-on-the-dollar of their hard-earned cash.
A case in point is Sharon Terlep’s recent WSJ article studying P&G’s effort to combat the dreaded trade-down via a holistic ad campaign featuring Vanilla Ice and Stone-Cold Steve Austin. When A-level brands like Tide start defending “brands” vs. promoting “their brands” it’s clearly a different level of defensive marketing strategy.
However, understanding the deeper consumer reaction to inflationary pricing — beyond dollars and cents — reveals the true factors at play and arms marketers with some unexpected tools to sit-out the pricing race-to-the-bottom to which many brands will succumb.
First, the Bad News
Face the facts. So-called premium brands will likely lose with consumers whose core criterion is saving dollars and cents, as their brains are wired to make rational, fact-based (aka system 2) decisions. It’s simply “what’s available at the lowest price” that matters most. These individuals WILL likely trade down — just let them go and refocus your energies.
But Wait, There’s More
However, what brands fear as inevitable isn’t as cut-and-dried for the more system 1/subconsciously-oriented mindsets. And our database shows that the majority of U.S. consumers are responding to inflation with a more emotional response. For these shoppers, trading down comes at a cost BEYOND actual price, in the form of emotional barriers that hinder their behavior far more than price-per-ounce and the like.
This more nuanced response within their day-to-day decision making offers routes to help brands thrive as they maintain margins while helping consumers avoid the “costs” that truly hinder their everyday behaviors.
Let’s examine what drives and hinders them, and how we can reach them in market.
Brands Create Experiences
For consumers reacting with emotion, they perceive the marketplace with an experiential mindset; their go-to brands represent safety, comfort and familiarity. These individuals want to have experiences that “match” (via their memories) what they already know will be worthwhile. They want to explore, but that exploration’s purpose is to continuously build a curated collection of products and services, and adopt as their own.
Picture it: They’re in a store or shopping online … reaching for their favorite breakfast cereal (or soft drink, salty snack, or laundry detergent) … when they notice what many of us are noticing acutely: the price has gone up — sometimes a little, sometimes a lot.
Are they immediately looking up-down-left-and-right to find the comparable, less-expensive brand? Calculating the exact amount they’ll save? Are they making that snap decision to be rational, to do what “makes sense”? Not likely.
This is because a price-driven trade-down comes with an even larger hidden price tag. Subconsciously, here are the actual factors being weighed:
- What experience will the alternate brand give me? (Think the five senses.)
- How will it compare to what I’m used to using? (The tried, true, familiar.)
- Will I be disappointed? Will the decision be a mistake? (Regret avoidance.)
We often rely on our emotions to make decisions (instead of rationally thinking things through). As my psychologist teammate, Bethany Merillat, explains, the Affect Forecasting heuristic of changeable outcomes teaches us that we’re bad at forecasting how a purchase will impact our future happiness. Therefore, let consumers know that your brand will continue to be the best choice to create the experience they’ve grown accustomed to and internalized.
Taking measures to ensure that your brand makes it to their “curated” space is key because once this consumer adopts a brand, it’s unlikely they’ll give it up. Foster the relationship and keep them in the fold to ensure that this comfort/trust/familiarity has value. Differentiate your brand via sensory details, as even the slightest difference is disruptive.
It’s About the INDIVIDUAL, Not the Brand
Inflationary pressure creates negative emotions — worry, fear, etc. It also creates fatigue; we get tired of having to THINK about prices, money, the future, etc. This thrusts shoppers into a more instinctual mindset, following gut instinct and simply doing what feels good in the moment.
With this in mind, premium brands represent status and a bit of self-care. Individuals with this mindset want to win (and they hate to lose). Trusted name brands help them to maintain that status and continue to feel the win.
So, same scenario: they’re shopping for their go-to breakfast cereal … the price is higher — yes, definitely higher …
Subconsciously, these are the questions being asked:
- What will this brand communicate about ME? How will this affect my social status? (I want to remain at the top.)
- Will this switch be difficult? (How much effort will this take on my part?)
- Will this still give me the “win” I crave and help me feel better? (This is high stakes.)
Confirmation bias teaches us that people focus on evidence that fits within their existing beliefs. And because consumers will make their decision in-the-moment based on gut instinct, brands can relieve any cognitive dissonance — i.e., post-purchase uncertainty — by confirming that their purchase was the best choice and satisfies their need for ease and status.
Treat these individuals like royalty and show them respect. They believe they deserve the best, and your brand is the one to continue to provide it. Differentiate via ways to keep them winning via rewards, LTOs and exclusive memberships.
Let the Subconscious Lead the Way
As prices continue to rise, understanding the subconscious factors at play gives marketers the tools to keep their customers coming back again and again, thereby cementing their choices and future-proofing their purchase behavior.
Julie Maines is director of data empathy at Alpha-Diver, the market research and consulting firm that applies neuroscience to more deeply understand marketplace behavior.
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