Settling into the New Normal
CHICAGO -- The Great Recession may be over, but consumers continue to keep their spending in check despite a more positive financial outlook.
In fact, IRI’s Q2 2013 MarketPulse survey indicates that consumers have settled into the “new normal” of conservative purchase behaviors. This means CPG companies and retailers must 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,” says Susan Viamari, editor of Times & Trends for IRI. “It helped for a while, but these programs have been losing their punch during the last 12 to 18 months.
“Marketers must reexamine their strategies from start to finish with an eye toward aligning against the ‘new normal.’ ”
According to the Q2 2013 MarketPulse survey, 56% of consumers will decide on most of the products they will purchase before they even leave 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.
“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,” says Viamari. “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.”
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, and 30% will switch spending to discount or club stores, even if those stores are a 15-20 minute drive.
IRI’s Shopper Sentiment Index provides perspective in terms of price sensitivity, brand loyalty and changes in spending required to maintain a 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.
“We have been watching the millennial segment for some time now, and they have struggled more than most throughout the downturn,” says 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.”
For more information on the study, visit www.IRIworldwide.com.