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How are economic factors affecting customer perceptions of good value?

Over the past year, our Shopper Thoughts panel has helped us understand how some of the biggest issues of the day are influencing the behaviours of grocery customers. From the cost of living crisis and the resultant impact on mental wellbeing, through to the use of artificial intelligence (AI) in retail marketing, we’ve been able to see how some of the emerging megatrends are manifesting in the minds of thousands of shoppers.

This time around, and building on that earlier look at the impact of rising prices, we wanted to explore the issue of value perception. One year ago, 50% of British shoppers told us that the state of their personal finances was weak, and 98% that grocery prices had risen over the past 12 months. That left us to ponder the subsequent impact on value perception – and specifically, what value actually means in this harsh economic climate.

Before we dive into this latest round of Shopper Thoughts, one brief note on the relevance of these results to our international readers. While Shopper Thoughts is exclusive to the UK and Ireland – meaning that the insights below are drawn specifically from shoppers in those territories – many of our findings are reflective of trends that we’ve seen across our international research programme, the Retailer Preference Index (RPI).

While that’s no guarantee that sentiment in other countries will be identical to that which we see here, it does at least indicate that perceptions of value are relatively uniform.

 

Pricing is only part of value consideration

 

Base pricing is an obvious – and logical – starting point when looking to define value. Perhaps unsurprisingly, cost does emerge as the primary factor here, with 83% of respondents citing affordable prices as an indicator of good value. One respondent summarised overall sentiment stating that they focused on “not necessarily the cheapest or biggest,” but “something I can afford within my price range and… as good as I can achieve.”

While cost might be the current priority, though, any assumptions that pricing has become shoppers’ sole concern would be wide of the mark. Instead, a complex mix of factors continues to influence their view of what constitutes good value.

Testament to this is the fact that quality places a very close second in shoppers’ priorities, named by over two-thirds of respondents (71%). Open answers again tell more of the story here, particularly the fact that quality can offset higher prices – but only to a point. As one respondent put it, “I will pay a bit more for organic vegetables, fruit, and good quality meat… provided it is not double the price of the regular items.”

Interestingly, both price and quality seem to be considered on a continuum. Value could mean “a product that is a modest price compared with a similar item… the previous week," stressed one shopper. It could also mean longevity, with another calling out “quality so it lasts well, tastes good… and doesn't get wasted”. Time is clearly a critical factor, providing a context for prices at the moment of purchase and helping to measure a product’s usefulness.

After price and quality come rewards and loyalty schemes. Just over half of respondents (51%) indicated that these benefits support the concept of value, testament to the fact that customers do still have a longer-term view. While they might focus heavily on what they see at the shelf, they also consider wider issues like offers, points, and coupons to be part of the equation too.

 

Supporting factors can be used effectively

 

In summary, good value is mainly seen as a combination of price and quality, with rewards and loyalty programmes helping to underpin that overarching proposition. Below that primary architecture, though, three other factors also have an impact on perceptions.

Two of those are focused specifically on experience. Over a third of shoppers (34%) named quality of service as a factor, for instance, with checkout and delivery seen as key touchpoints. One-fifth (20%) pointed to speed and the ease with which they could shop. Finally, 16% suggested that initiatives for the community and environment were a factor that helped to shape their overall appreciation of value.

While these considerations might rank lower in consumers’ minds, they continue to serve as useful levers on which retailers can pull – something that should not be underestimated given continuing economic uncertainties.

 

Creating a value-driving proposition

 

As helpful as it might be, understanding how shoppers gauge value doesn’t necessarily make it any easier to create a proposition that delivers on those expectations. Doing so effectively requires an ability to balance a set of complex, interlinking issues that stretch from the fundamentals of price through to wider questions of environmental and social impact.

That said, and despite the intricacies of that task, certain value-enhancing tactics can be applied almost universally – by both retailers and suppliers alike.

  • Engage with your customers

    At the heart of everything is understanding the needs of your own customers, and what value means to them. The results above are a useful barometer, but are no substitute for deep insight into your own customer base.

  • Communicate value at every turn

    Whether it relates to your overall proposition or individual products, value needs to be communicated clearly and repeatedly. New products, re-formulations and packaging changes are included here.

  • Personalise where possible

    For retailers, a personalised experience can help customers to feel better connected and more appreciated. For brands, tailored products and packaging can encourage loyalty and help to reinforce value.

  • Introduce exclusive benefits

    Unique offers can add value to current offerings, and attract new customers as well. This could be in the form of partnership programmes (for retailers) or via exclusive deals or incentives (for brands).

  • Improve the customer experience

    While retailers should focus on optimising their omnichannel strategy in order to encourage fast and easy shopping experiences, brands can participate through additive retail media opportunities like sponsored recommendations.

 

If you want to find out more Get in touch.

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