How will consumer behavior shift as prices climb amid inflation?
Most c-suites – in food business, and beyond – are inadvertently approaching this question with a purely rational framing, evaluating the marketplace as if every consumer decision is purely rational and based on careful consideration of the merits and drawbacks of a potential decision. After all, this is a perfect explanation as to why:
- A person orders Uber Eats from Chipotle vs. cooking at home.
- A consumer prepares fresh chicken vs. buying frozen prepared products.
- A family buys a brand that supports a certain social value or cause vs. a competitor.
Right…? Of course not.
The flaw in that purely rational assessment is further underscored by the fact that, despite rising costs over the past couple of years, elasticity models have not performed as expected. In other words, as prices went up, people did not consume less as would be conventionally anticipated.
Market research company Alpha-Diver specializes in tracking the psychology of consumer behavior, in part via their monthly Omni-Pulse measure and database. As presented in a recent exclusive webinar with The Food Institute and Wall Street analyst, Nik Modi, several human truths can empower food business leaders to thrive despite this inflationary period (to view the webinar, please consider becoming an FI member by clicking here).
The aforementioned experts said food companies need to consider the following these days:
Human Truth 1: particularly for younger consumers, the emotional impact of higher prices will matter more than the prices themselves.
The pressure, difficulty, and emotional fatigue of higher prices will “hurt more” than the actual spending of more money.
Human Truth 2: consumers most engaged with food brands – from QSR to CPG – will generally be more hindered by the emotional factors of pricing than the logistics of budget management.
The places people eat, the means by which they buy food, and the brands they favor are determined more by how it will make them feel, than by how much it will make them pay.
Human Truth 3: marketers can ease the impact of climbing prices via consumer experience.
Marketers maintain a high degree of influence over these emotional decision criteria via the experience brands provide – and without “racing to the bottom” on pure price promotions.
So as you evaluate the months ahead, think less about higher prices, and more about the resulting negative emotions they’ll create – and craft your programs based on the feels, not just the facts.
Hunter Thurman is President of Alpha-Diver, a market research firm that applies neuroscience to more deeply understand marketplace behavior. The firm’s neuroscientists and strategists work with leading brands and the Wall Street analyst community to explain, measure, and predict consumer behavior.