Podcast | Tracking customer behaviour in inflationary times
Adrian Newson (00:02): Hello and welcome to our next episode of the dunnhumby Customer First podcast. In today’s episode, we’re going to explore how shopper behavior is changing as inflation bias in many countries around the world, using some of the latest information from our dunnhumby Consumer Pulse. My name is Adrian Newson, head of Customer Strategy and Insight at dunnhumby. And today, I’m delighted to be joined with our senior consumer psychologist, Dr. Feroud Seeparsand, who’s an expert in consumer behavior and will help us to understand some of the latest results. Welcome, Feroud.
Feroud Seeparsand (00:41): Hi, Adrian. It’s a pleasure to be here today.
The history of the Consumer Pulse
Adrian Newson (00:43): Let’s just start with a little bit of history into the Consumer Pulse and I’ll start and then I’ll ask for you to jump in. The Consumer Pulse has provided us with a wealth of insight on how customers’ attitudes and actions have changed since the start of 2020. So, Feroud, and you are way closer to this than I am in terms of the study and what we see in that, so if you can tell us a little bit more about the history and what we have today.
Feroud Seeparsand (01:09): Sure, I can do that. So yes, the Consumer Pulses started in March 2020. Since then, we have nine waves of research. This particular wave of research ended in the early part of September. We have a number of different regions that we cover, including Latin America, North America, APAC, and EMEA. We do stretch right across the EMEA region in this wave, so we do include, say, South Africa and United Arab Emirates. So we’re going into Africa and Middle East as well as covering Western Central and the Nordics of the EMEA region too, so we’re going right across. That totals up to 25 different markets and we have just under 10,000 respondents across those regions.
(01:53): As I said earlier, the Consumer Pulses really started off with COVID and trying to understand how COVID was impacting shopper thoughts and behaviours out there. One of the legacy measures of the Consumer Pulses is something that we call the worry index. The worry index is an aggregate measure, trying to understand just how worried consumers are out there. At the very beginning of COVID, this worry index was sitting above 30%. So above 30% of consumers were generally scared or worried about COVID. Right now, that has dropped down to 6%. So COVID is really no longer the focus for consumers out there right now.
The cost of living crisis is at the centre stage
Adrian Newson (02:32): Sure. But obviously, still top of mind that things aren’t back to normal, and we know a lot of the reasons for that. So coming into that, the financial worries that people have been dealing with for quite a while, it’s not a new thing, and we’ve seen it in previous studies, but what are we seeing in the latest study?
Feroud Seeparsand (02:49): Yeah, so the cost of living crisis is at the centre stage, it’s at the top of mind for consumers out there, and that’s really not surprising. So when we ask consumers, do you recognize food prices have increased? Nine in 10, specifically 93% of consumers said, “Yes, food prices have increased out there.” That’s in a backdrop where the economy is seen as increasingly weak, as well as personal finances are also increasingly weak out there. So 75% of respondents found that the economy was weaker compared to 57% for their personal finances. I like to try and find a bit of optimism wherever I can in these bleak times, so it would seem as if, when looking at the economy, the economy is relatively weaker than the personal finances. So maybe a hint of a bit of breathing room for consumers out there.
Adrian Newson (03:38): So that sort of pressure to understand what’s driving that price perception has to be top of mind. And I don’t think it’s as straightforward as what we’ve seen before, and not that it’s always been that easy, but it just becomes even more complicated with the ever changing landscape, and the worst thing of this for now.
Feroud Seeparsand (03:55): So one of the things that we do within the Consumer Pulses is, rather than just look at the actual food inflation, we compare that to the perception of food inflation. And when we compare those two variables together, we find that the perception of food inflation is double the amount of the actual food inflation. So that gives us an indication of just how concerned consumers are feeling out there. Again, I just want to kind of hint at a note of optimism. When we did ask the same questions back in February of this year, we found that the difference between perceived food inflation was three and a half times that of actual food inflation. So the distance between perceived food inflation and actual food inflation is actually starting to narrow. I might be in danger of stretching the data beyond what it’s saying, but that might imply that consumers are maybe overcoming the initial shock factor of inflation or are learning to live with inflation. So that’s just a couple of important points that I wanted to say about the cost of living crisis out there.
Adrian Newson (04:55): And this financial burden must have implications on how customers are behaving, what value seeking strategies have they told us about and what are we seeing about how those are changing?
Feroud Seeparsand (05:06): Yeah, so what’s interesting about value seeking strategies is that they’re not all increasing, some may actually be decreasing. So let me talk about that a little bit more. It’s quite similar to what we saw in the Great Recession perhaps, where we saw that there were an increasing number of consumers searching online for best sales, that’s jumped from 35% in last September to 45% in this September. Likewise, people are increasing using coupons on products that they buy regularly. That’s also increased by 10% compared to last September. However, other value seeking strategies are actually decreasing. For example, consumers are buying less into larger sized packs. In other words, consumers are looking at the short-term, not the long-term, and they’re doing whatever they can to decrease their expenditures right here and right now.
Adrian Newson (05:53): Sure. And I’m sure people are using a combination of those value seeking strategies as well. So it’s not just, one customer is using one strategy, they’re using a combination of different things. So it’s going to be interesting to see how that pans out.
The impact on long-term trends
(06:06): So as we’ve talked about the financial burden, I’m just curious about how that’s starting to impact the long-term trends that we’ve been seeing. Health and sustainability are always top of mind for retailers and brands of how much we should be leaning into those. Have you seen those areas or other areas being impacted by what we are living with today?
Feroud Seeparsand (06:31): Yes, we are seeing those areas being impacted. So because of the cost of living crisis, it would seem that health and sustainability are not at the same level of importance that they were at the beginning of this crisis. And also, price has become a barrier for health and sustainability. So that’s something to bear in mind for both retailers and CPGs.
(06:52): There is just one point I’d like to add, which is, and again this kind of makes reference to the Great Recession as well, we saw, back then and in this data now, that consumers are spending less time in restaurants and spending more time cooking from scratch at home. So even though people are saying they are less concerned with health, they may inadvertently become healthier nevertheless. This is also another opportunity for retailers to provide food and drinks for consumers and recipes that they may be able to recreate that restaurant-like experience in the comfort of their own homes. So there is opportunity even in areas like health and sustainability, despite there being a relatively lesser concern at this point in time. I think it’s important for retailers and CPGs to maintain their interest in health and sustainability, because these are long-term trends and they’re not going anywhere, anytime soon.
Time to treat yourself?
Adrian Newson (07:45): One area that I’m increasingly thinking about is really the emotional wellbeing of customers and how this is changing over time, how they start to establish or try to understand how to operate, how to change, what they need to do to help manage their household budgets and cope through this time. And not only are they dealing with that household budget crunch, they’re coming out of a two to three year period of restriction where they had loss of control, almost wanting to have a bit of freedom and make sure that they get that control back, and almost like a pandemic hangover, and that’s probably going to be impacting the results that we’re seeing somewhat. And we quite often look at the customers that are looking just for savings or the activities that customers could be doing to look at savings. But increasingly, I’m curious about, are we seeing how people are trying to treat themselves in this period of time?
Feroud Seeparsand (08:42): Yeah, so consumers have been through a horrid sequence of events, you can talk of COVID, you can talk of panic buying, now inflation and the threat of recession, and the sequence of rather horrid events out there does seem to be translating into consumers wanting to treat themselves, as you rightly put it. So in the survey, we found that somewhere between one in four to one in two customers want to treat themselves and their families. So I think this is an opportunity for retailers to try and provide products to consumers, to give consumers a sense of wellbeing, if nothing else.
(09:19): When I look at the academic literature out there, some academics are pointing out how certain effects, like the lipstick effect that occurred in the Great Recession, you may also see something like that in this upcoming recession. So just to mention, the lipstick effect was pointing out how sales of cosmetics actually increased during the Great Recession when most perhaps expected them to decrease, and something like that could occur in multiple categories going forward.
(09:47): So for example, if consumers are going to be spending more time at home, maybe retailers and CPGs should be providing consumers with products that can alleviate their stresses and strains and provide them with things to do at home. Now, this could be something along the lines of video games or crafting or gardening. It doesn’t need to just relate to food and drink either, it could relate to say personal care, personal care products, think of bath bombs and the like. So I think there are opportunities, in these otherwise bleak times, that retailers and CPGs can make use of.
Adrian Newson (10:24): Yeah, and I can only imagine this area of wellbeing, making sure that we understand how consumers are feeling as they enter into the customer experience, whether that’s online or in store, and probably more so in store, of how they want to feel, welcomed, and actually just a place that they can feel safe and they can their family budgeting in a way that they don’t feel embarrassed that they have to do different activities that you’ve been talking around, that actually is a safe place to shop. And just thinking more about how we take care of their wellbeing.
Feroud Seeparsand (10:56): That’s right.
Adrian Newson (10:57): So I think, just to bring this to a close is, thinking historically about trends is a good way to start. But I think what we are increasingly looking at is the layers of different impacts that customers are facing into, and actually, customers probably don’t really know how to react because they are quite unusual times. It just brings even more importance to really watching, learning, and listening to customers and really trying to help us make the right decisions based on what we’re hearing and what customers are telling us and making sure we do that on a fairly regular basis.
(11:32): Is there anything else in your mind, Feroud, that you want to give to the audience before we leave them?
Feroud Seeparsand (11:37): I think it’s important for retailers and CPGs to constantly talk with their customers, and they need to constantly gauge what’s going through their minds and heads. And that simply speaks out that we need to constantly do some form of market research with them.
Adrian Newson (11:52): Well, thank you, Feroud. I always enjoy our discussions. And thanks to everyone for listening. I hope you found this discussion useful, whether you’re a retailer or a brand, just learning on understanding how to navigate these inflationary times. We’d love to hear your thoughts on the subject. So feel free to contact myself or Feroud at dunnhumby.com. And join us again soon for our next Consumer First podcast.
(12:18): Remember, you can access all of our podcasts on a variety of subjects impacting retailers and consumer brands at Customer First Radio on Spotify or on our dunnhumby.com website.
(12:29): Thanks very much. Goodbye.