The following was previously published in an earlier edition of Marketing Insider.
Inflationary doomsday prophecies abound, and big brands are rightly worried about the dreaded trade-down effect: the tipping point where consumers opt for a competitive store brand to save pennies on the dollar.
But understanding the deeper consumer reaction to inflationary pricing reveals the factors at play and can arm marketers with tools to sit out the pricing race to the bottom.
The bad news
Premium brands will likely lose consumers whose core criterion is saving, as their brains are wired to make rational decisions. Let them go and refocus your energies.
However, what brands fear is not as cut-and-dried for subconsciously oriented mindsets. For these shoppers, trading down comes at a cost BEYOND price, in the form of emotional barriers that hinder their behavior.
Let’s examine what drives them, and how to reach them in market:
Brands create experiences. For consumers who react emotionally, go-to brands represent safety, comfort, and familiarity. These individuals want experiences that match what they already know will be worthwhile.
Picture it. They’re in a store or shopping online, reaching for their favorite breakfast cereal (soft drink, salty snack, or laundry detergent), when they notice the price has increased.
Are they immediately calculating the amount they’ll save? Are they making a snap decision to be rational? Not likely.
This is because a price-driven tradedown comes with an even larger hidden price tag.
Subconsciously, these factors are weighed:
We often rely on emotions to make decision-making easier. So, let consumers know that your brand will continue to be their best choice to create the experience they’re accustomed to.
Taking measures to ensure that your brand fits their “curated” space is key because once this consumer adopts a brand, they’re unlikely to switch. Foster relationships to keep them in the fold and ensure that this comfort / trust / familiarity has value.
It’s the INDIVIDUAL, not the brand.Inflationary pressures create negative emotions: worry, fear, fatigue. This thrusts shoppers into an instinctual mindset, following gut instinct and doing what feels good.
Premium brands represent status. Individuals with this mindset want to win. Trusted brands help them feel like winners.
Subconsciously, these questions are asked:
What will this brand communicate about ME? / How will this affect my social status?
Will this switch be difficult? (How much effort will this take?)
Will this give me the “win" I crave, and help me feel better?
Confirmation bias teaches that people focus on evidence that fits existing beliefs. Because consumers make many decisions on instinct, brands can relieve cognitive dissonance by confirming that choosing their product was the best choice.
Treat these individuals like royalty. They believe they deserve the best, and your brand can continue to provide it. Differentiate with ways to keep them winning via rewards, and exclusive memberships.Let the subconscious lead the way. As prices rise, understanding the subconscious factors at play gives marketers the tools to keep consumers coming back and future-proofing purchase behavior.