An unavoidable part of the current news-cycle is the cost-of-living crisis. With inflation at its highest rate in almost 30 years, consumers are feeling the hit to their pockets, and shopper confidence has been reduced to a level lower now than at any time in the previous decade. Unsurprisingly, this is already impacting spending habits, with 65% of us actively reducing our spend on luxuries such as takeaways, and 74% being more cautious of the cost of our household food waste.
The harsh reality for British consumers is that the pound in their pocket is considerably less powerful than it was even a year ago.
Brands are reacting to this shift too, Asda have responded to a petition from campaigner Jack Monroe by increasing the national availability of their budget ranges. Aldi have created a portal to clue up their shoppers on effective bargain hunting.
Whilst communicating value will of course be important this year, we won’t lose our taste for luxury overnight. The lipstick effect highlights that even during times of economic hardship, the demand for premium may transform but crucially, it persists. Combine this with the legacy of pent-up demand for live, human experiences during Covid and the key to proving value for money will be show me, rather than tell me.
This trend is evidenced that less people are cutting down eating at restaurants compared with 2021 (-13 percentage points), a contrast to the stark decline in takeaways. What this tells us is that, whilst the food may be effectively the same, whether at a restaurant or dropped at your front door, we continue to crave the positive emotional experiences and human interactions of the restaurant setting to justify the additional spend.
The last decade has seen spend on experiences consistently outstrip spending on products and this hierarchy of importance will not be waylaid by increasing costs. Thus, consumers look set to continue spending on gigs, festivals and immersive experiences, even if this means downgrading on the quality of essentials.
So, what does this mean for brands?
It results in a potent mix of consumers starved of experiences, searching for a justification to spend on memorable moments, but with a rational desire to tighten their belts and compromise elsewhere.
This tension point will be exacerbated by the world re-opening post Covid-19. With consumers missing out on so much, there is ample opportunity to bring new and unique experiences to the fore that we have missed out on over the previous two years.
Instead of wating for consumers to identify our brand as worth the cost, we need to be helping immerse them in our world and providing experiences that simply can’t be matched by bargain-hunting. In short, brands need to start proving their value in memorable and exciting ways or risk being seen as compromisable and drawn into a price-war. Leisure spend is not disappearing, even in times of high inflation and it’s going to be a case of show, not tell, for brands throughout 2022.