Navigating the Shifting Tides: Consumer Behaviour Trends
Oct 3, 2023
Consumer behaviour has undergone a tsunami of changes in the past 2 years, moving in paradoxical directions. Consequently, the consumer products, hospitality, and retail sectors have experienced significant disruptions. A key takeaway from this period is that companies must find innovative ways to engage consumers in a fiercely competitive landscape where physical and digital experiences are converging.
Leading consumer-centric businesses now prioritize listening to consumers due to the rapidly evolving and sometimes contradictory nature of consumer sentiment and behaviour. Today’s consumers are both cost-conscious and willing to indulge, gravitating towards both established giants and emerging niche brands. Staying attuned to these shifts is challenging yet crucial for companies but swift decision-making to meet consumer expectations in this diverse landscape is paramount.
Technological advancements empower consumer-oriented companies spanning diverse sectors to harness consumer data, facilitating personalized experiences. Salesforce research reveals that 66% of consumers expect companies to understand their unique needs, with 52% anticipating personalized offers. This underscores the need to move beyond one-size-fits-all approaches and utilize data and behavioural science to discern what consumers want and when they want it.
Trading down and indulging selectively
In today’s dynamic consumer landscape, a unique trend has emerged – consumers are trading down while splurging selectively. While trading down involves making cost-conscious choices in everyday purchases, consumers seek value without compromising quality, favouring store brands and generic options over premium labels. At the same time, they’re embracing selective splurges, allocating their budget to experiences and products that align with their passions and values.
Globally, 2/3rds are trading down by opting for cheaper or private-label items. While in Europe, 84% equate branded and private-label quality, in China, consumers are increasingly price-conscious, actively pursuing discounts. McKinsey’s report reveals a paradox in U.S. consumer behavior amidst rising inflation. Despite inflation worries and job insecurity, shoppers are selectively splurging and trading down with pre-pandemic spending patterns varying in their resurgence. Meanwhile, 44% of global consumers (60% among Gen Z and millennials) intend to indulge, especially in experiential or instantly gratifying purchases like dining or travel. Regional differences link this intent to economic optimism, with 77% of Indians planning to splurge compared to just 26% of Japanese consumers.
People are redefining luxury, valuing experiences over possessions and opting for eco-friendly, ethical brands. This balanced approach allows consumers to maintain a sense of indulgence while adhering to responsible consumption. Consequently, companies need a nuanced understanding of these trends and consumer segments, as splurging in one area may lead to value-seeking in another.
Embracing brands and channels that enable shopping anywhere, anytime
Consumer spending habits have shifted significantly towards online and discount channels, signalling a crucial change in shopping preferences. The rise of omnichannel retail has transformed consumer shopping platforms, with the e-commerce market poised to reach $7.4 trillion by 2025, driven by the focus on omnichannel experiences.
Gone are the days when shopping was confined to physical stores or a single online channel. More than 60% of US and Asian consumers plan to continue using channels they tried during the COVID-19 pandemic, such as grocery delivery and social commerce.
In the current purchase journey, 75% consumers desire seamless omnichannel experiences. However, only a quarter are satisfied with the current offerings from retailers. This omnichannel shift gives consumers greater flexibility, convenience, and choice, allowing them to research products online, test them in-store, and make purchases through their preferred channel.
Retailers, in turn, benefit from this transformation by gaining deeper insights into customer behaviour and preferences, facilitating personalized marketing and improved customer retention. This mutually beneficial relationship fosters stronger brand loyalty and fuels growth in the ever-evolving retail landscape. As the retail landscape continues to evolve, embracing omnichannel strategies is no longer an option but a necessity for brands to thrive in this dynamic marketplace.
Mere online and physical store presence falls short if consumer interactions lack seamlessness. For example, shoppers now expect in-store staff to access their online purchase history for tailored recommendations and to earn loyalty points when ordering food online. Meeting these demands is essential in catering to today’s digitally savvy consumers who seek connected, personalized experiences.
Hyper-personalisation
In a digital era where it appears that nearly everyone is embracing personalization, the paramount standard is now set by hyper-personalized, varied customer experiences. Hyper-personalization in consumer behaviour is a cutting-edge approach that leverages advanced data analytics and artificial intelligence to deliver tailor-made experiences. Afterall, the more you understand your users, the better you’ll serve your users.
Unlike traditional personalization, hyper-personalization goes beyond basic demographics to understand individual preferences, behaviours, and context. It crafts unique customer journeys, curating content, products, and services in real-time. Behavioural data enables real-time delivery of tailored promotions and messaging, enhancing the brand experience and deepening consumer understanding. Moreover, this data serves a dual benefit by informing content strategy and expanding social influence for the brand.
This phenomenon is reshaping industries by enhancing customer engagement and satisfaction. By analysing vast data sets, companies can predict consumer needs and desires, allowing for highly targeted marketing campaigns, product recommendations, content creation, customer experience and others. For instance, Amazon analyses customer browsing and purchase history to provide personalized product recommendations and, Netflix utilizes hyper-personalization to recommend movies and TV shows based on a user’s viewing history. Their recommendation algorithm analyses not only what you’ve watched but also your viewing patterns and preferences.
However, hyper-personalization also raises concerns about privacy and data security. And therefore, striking the right balance between providing customized experiences and respecting personal boundaries is crucial. As consumer expectations evolve, hyper-personalization is becoming the new norm. It’s a paradigm shift that’s here to stay, offering exciting opportunities and challenges for brands and consumers alike.
Balancing the comfort of the familiar with the thrill of brand exploration
Consumers today are navigating a fascinating duality: finding comfort in familiarity while also open to trying different brands for the same/different type of product. On one hand, they seek the reliability and nostalgia associated with trusted brands, providing a sense of security in uncertain times. On the other hand, they’re increasingly open to experimenting with new products and services, driven by curiosity and the desire for novelty. This evolving consumer behavior presents a unique challenge for brands, and they must strike a delicate balance between maintaining brand loyalty by delivering consistent experiences and enticing adventurous consumers with fresh offerings. Adapting to this paradox is key to thriving in today’s dynamic marketplace.
Historically, established brands have held sway in the consumer market during periods of instability. In the US market, large brands experienced a 50% growth peak amid the pandemic. But consumers are also trying new brands: one in three consumers did so in the past 6 months. Gen Zs and millennials are especially susceptible to brand switching, as they are 5 times more likely than older generations to believe that newer brands are better or more innovative than established brands.
Today’s consumers purchase a range of products to meet specific needs, diverging from the past when one product sufficed. For instance, households no longer rely on just one milk type; they may consume cow’s milk, high-protein milk, and plant-based alternatives like oat or coconut milk. Similarly, consumers exhibit brand fluidity across items like smartphones, clothing, or coffee, forsaking strict brand allegiance. Various factors drive this behaviour, including price sensitivity, evolving tastes, diverse alternatives, and curiosity. In response, businesses in marketing and branding strive to foster brand loyalty and discourage switching. They do so by offering distinct value, nurturing emotional connections, and ensuring consistent quality and experiences to encourage repeat purchases and brand preference.
Demanding sustainability and affordability
Today’s consumers are demanding a dual focus on sustainability and affordability. They’re increasingly conscious of the environmental impact of their purchases and are actively seeking eco-friendly options. Simultaneously, they’re mindful of their budgets, expecting sustainable choices not to break the bank. Consumers increasingly favour sustainable products, with 84% considering sustainability very important in their buying choices. Yet, in times of inflation, 50% remain uncertain about paying a premium for sustainability.
From affordable EVs to budget-friendly organic foods and clothes, companies are realizing that sustainability is no longer a premium add-on but a necessity. This consumer-driven demand is reshaping markets, encouraging responsible practices, and ultimately creating a win-win scenario for both the planet and our wallets.