How marketers can search out the upside when prices rise

Inflation is changing buyer behavior – but not every shopper responds in the same way. Microsoft data reveals the priorities and luxuries that buyers are still ready to spend on – and the tactics that can reach and engage them.

Inflation is a global challenge – but it’s a global challenge that plays out in very varied ways. Prices may be rising across categories and countries, but that doesn’t mean that every shopper responds in the same way. New data from Microsoft proves that the way consumers are adjusting their buying behavior depends very much on what type of purchase they’re thinking about. It also depends on what the experience of inflation feels like to them. In this variation can be found opportunity. Knowing which audiences to target and how their priorities are evolving is the key to continuing to find growth in an inflationary environment.

Current buying power shapes response to inflation

Although consumer confidence is in decline in general[1], people’s perceptions of whether their financial situation will worsen as a result of inflation tend to reflect their perception of their financial situation at the moment. Research from Statista[2] shows that 69% of those currently struggling expect their finances to deteriorate further. Only 25% of those currently doing well expect the same degree of impact.

Those with the greatest propensity to spend at the moment are therefore those most positive about finding ways to continue to spend going forward. These are the audiences that marketers reach through Microsoft Advertising. They are more likely to have a higher household income. They over-index on frequent travel behaviors like long and short-haul vacations, hiring cars and staying in hotels or rented accommodation. They over-index too on continued intent to buy almost every retail category, from jewelry to tech and consumer electronics, to household goods[3].

This audience profile provides a valuable window into how consumer buying behavior is changing as a result of inflation – and how advertisers can align with their priorities and intent through search and audience campaigns. The data tells a clear story of consumers’ continuing appetite for spending on different categories. Their use of search and response to brands may be evolving – but they are still searching, still responding, and still converting.

The upside in travel: searchers cut back on accommodation to keep spending on trips

Travel continues to boom with travel searches now above pre-pandemic levels, despite the threat of inflation and a global downturn. This presents a particularly powerful opportunity for search advertisers because competition for travel ads continues to lag demand – and remains below pre-pandemic levels.

When we look below the surface of the general travel trend, we can see how travellers’ budgeting and planning is evolving. There’s a continued willingness to spend on travelling to the destinations that people want, on the airlines that they want and for the length of time that they want. If a compromise has to be made then travellers are ready to cut back on lodging in order to avoid shortening their trips. Brand searches continue to represent a significant share of overall search activity, as people choose to put the trips they prioritize in the hands of brands they trust.

For travel advertisers, the continued opportunity lies in responding to intent while delivering on the inspiration and escapism that travel bookers are looking for. In-Market Audiences focus campaigns on those who have demonstrated a clear intent to book while rich Travel Ads provide visual inspiration within search results. Microsoft Audience Ads connect travellers to the brands they trust, increasing awareness 2.4x, consideration 3.5x and conversion 3.7x[4].

The upside in retail: lower prices drive clicks but mid-range and high-end prices convert

Across retail categories, consumers are searching with continued intent to buy – and a continued willingness to pay for value. Retail searches have grown across every major category and although lower-priced items drive the highest click-through rate (CTR), it’s clicks on higher-priced items that are most likely to lead to conversions. 

Shopping Campaigns will drive the greatest traffic when showcasing bargains – but the highest conversion rate is driven by items with a relatively higher price tag. In Europe, for example, the sweet spot for conversions in the home and garden category falls in the middle price range. For apparel, it’s between €300 and €700. For consumer electronics, it’s above €200 and for beauty, it’s over €240[5].

The upside in financial services: an appetite for reducing regular outgoings

Consumers’ determination to keep spending is balanced by a fast-growing appetite to take control of their regular outgoings – and this is driving opportunity in financial services. They’re actively searching for better deals on categories like insurance and mobile, and seeking opportunities to consolidate debts or reduce the interest they pay on them[6]. 

In these circumstances, generic search terms drive the majority of traffic – and repay tactics such as Dynamic Search Ads, which match campaigns to relevant user queries even when they don’t feature exact keywords. However, trusted brands continue to play a role in search behavior – particularly when it comes to insurance. Brand searches in home and car insurance are on the rise across several markets. Marketers who combine generic and branded keywords will be able to generate attention throughout buyers’ research journeys.

Across categories and countries, inflation influences buying behavior – but it certainly doesn’t put an end to buying behavior. Opportunity is very much alive for those advertisers ready to respond to an evolving situation – and align with the priorities of audiences that are still ready to spend.

Stay informed 

Follow Microsoft Advertising on LinkedIn to get the latest news and insights for Marketers. 

Sign up for the weekly Microsoft Advertising Insider newsletter to keep up with the latest insights, product news, tips, and tricks, thought leadership, customer success stories, and resources. 

Sources:

[1] Consumer Confidence Index – OECD

[2] Statista – April 8 to 14, 2022; 10,010 respondents

[3] Global Web Index – Q2 2022

[4] Microsoft Internal Data – May 2022 - Oct 2022

[5] Microsoft Internal Data – Sept 2021 - Sept 2022

[6] Microsoft Internal – Jan 2021 - Jun 2022