Consumer Confidence February
Whilst the improvement in overall index seen in the last few months may have stalled, the underlying optimism for personal finances remains unchanged with a value of 0 which is 18 points higher than this time last year.
Our Client Strategy Director, Pardeep Heer outlines changes in consumer behaviour, market trends and how to navigate your brands marketing through an uncertain economic climate.
What's happening?
The UK is technically in recession…
The Office of National Statistics confirmed on 15th Feb that the UK’s economy shrank over the second half of 2023. The fall in economic output was much steeper than most economists had predicted.
Wage growth, however, is still outpacing inflation on the whole. This has also been heavily influenced by how much money individuals have left in their account at the end of the month, and he savings index continues to rise month-on-month.
…but consumer sentiment is holding up
Despite the slowing economy consumer confidence is up from mid-2023 levels.
Looking beyond the macroeconomic data, most people are getting by. 28% of consumers say their finances are healthy and 44% say they're at least doing OK.
This headline data hides significant variation across different demographic groups, of course: 21% of people who have a household income of less than ￡15,500 are either struggling or are already in financial trouble, compared to just 2% of people earning at least ￡50,000.
Echoes of the financial crisis
Brits are already in a recessionary mindset, and savvy shopping habits are deeply engrained.
The large majority of consumers are still changing their behaviour in response to rising prices.
34% are shopping more at low-cost retailers, while 32% are shifting to private label products and 43% are being more careful about spending on luxuries.
The changes are even more pronounced among people who have been hardest hit by the crisis. For example, 67% of people who are struggling to make ends meet say they're reducing energy use at home.
Economists talk about 'the paradox of thrift': the tendency for consumers to cut spending just as the economy needs a boost.
Mintel's data shows that consumers are cautious. 50% of people added to their savings in the last three months, while spending on big-ticket categories like domestic appliances and cars remains subdued.
However, responses also confirm that there is room for discretionary spend, whether that's new clothes, a meal out or a trip abroad.
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What does it mean?
The conversation around how to communicate price of a brand to consumers, continues to be the key route to driving business success within the current climate.
Kantar recently released a thought piece, highlighting key points on how this can be done.
During the pandemic, there was plenty of money in the economy, partly due to the government programs and people’s excess saving during the period. Demand trumped supply, but supply struggled to keep up in most sectors due to chain shortages. This meant prices and inflation skyrocketed. Meaning brands could charge more while selling less.
Now savings are vanishing, inflation subsiding, and disposable income has taken a hit.
Premier Inn attained new and repeat customers in 2023, driven by their ‘rest easy’ campaign with 90K newly installed Silentnight beds across the network. The lesson is to aspire to gold standard, deliver on promises, in good and bad times. This signals to customers that you have no intention of removing value from your value proposition.
Beyond a sales message, highlight the value messages to drive conversion.
Recent media effectiveness studies by Kantar, highlight that digital advertising plays a greater role in building brand differentiation (your standout point Vs your competitors, the reasons to buy).
Why is Brand Difference important (also known as Meaningful Difference in the Kantar model) – it has the biggest influence on your pricing power:
??For some brands, demand drops less (vs competitors) when price changes. These lucky brands have Pricing Power.?
??Salience (aka mental availability) doesn’t move the needle of a brand’s Pricing Power.
??Meaningful Difference accounts for 94% of a brand’s Pricing Power.
Video and social platforms play a key role within digital advertising, in building a brands pricing power. Creative messaging plays an equally important role, as the channel it’s deployed on to drive this success.
Need help navigating the current economic climate? Speak to our team of experts today [email protected]