Influencing behavior
As inflation continues, especially in Europe, pragmatism and frugality will stick. But shoppers will also engineer their choices to a greater extent in order to defend their principles and get back some of that emotional pay-off!
The second order of business must be to get into the shopping basket without compromise. Brands need to demonstrate a true functional and emotional advantage. The name of the game is changing the narrative from money saved to money well spent.
Key success factors are superior performance, a larger assortment covering varying needs, sensible thresholds where the price distance to private labels is not too high, and additional benefits that resonate with shoppers.
Getting into the basket, of course, hinges on advertising, but the two other highly important brand levers are effective promotions and introductions.
Nowadays, promotions are an essential tool in optimizing and engineering a restraint budget, but not for everybody: promotions can be a thrill rather than a necessity – saving money is dopamine.
So, besides the financial dimension, promotions should also be judged on the emotional pay-off they deliver. Straight price-offs give the highest level of instant gratification, especially to those who are struggling financially. Discounts that help prevent waste are also rewarding, though more so for comfortable households and in Western European countries. Similarly, other discounts such as cashbacks or extra volume, are more appealing to comfortable households.
Promotions are a key tool in converting buyers – at least short-term –, generating, on average, a weekly uplift by the factor of five. Mid-term, counting in effects such as pre- and post-purchasing, postponing, and cannibalization, about 60% is incremental to brand volume. In addition, analyzing the correlation between changes in promotion strategy and KPI performance, promotions have a significantly longer impact on penetration and pack per trip, leaving a better relative position in the form of market share. However, much of this market share is bought with a lower price, ruling out a positive total value effect.
Promotions are therefore important to defend market position and fill the leaky bucket in the short term, but beware of erosion in the longer run.
When it comes to the second lever – assortment –, we observe a strong correlation with penetration and value growth: more buyers adding incremental sales.
Assortment changes and new products are very determinant for market leaders, critical to counter private labels, and – at best – able to grow the category beyond the core. New introductions, either product innovation or product renovations, offer benefits that are superior in terms of functionality, emotional appeal, and/or responsible shopping. Broken down into five dimensions, they center around value for money, health, sustainability, convenience, and the (premium) “wow”-experience.
Currently, European shoppers are most dissatisfied with value for money. But the “wow”-experience and sustainability are also underrated.The question of what would successfully appeal to the shoppers’ sense of money well spent, could be addressed from three angles: 1– which benefits have the reach and power to influence purchases? 2 – which are most premium-worthy? and 3 – which are most likely successful in appealing to dissatisfied shoppers?
Looking into more than 60 benefits and exploring those with the highest potential reach, lowest price guarantees (67%), staying fresh longer (66%), and 100% natural (65%) rank at the top of the list. Whereas value for money aspects are nearly equal in all European regions, health aspects resonate more strongly in Central and Eastern Europe.
Looking at winning benefits for premiumization – obviously excluding value for money aspects –, ultra-fresh (23%) is most premium-worthy, followed by 100% natural (21%), professional quality, versatility and time-saving.
With regards to value for money, we took a different approach: Rather than inquiring about premiumization, we asked shoppers which benefit had the highest notion of “money well spent”. Price guarantees work well, and aspects that can be related to food waste, e.g. if products stay fresh for longer. Whereas dynamic pricing seems more influential in Western Europe, special price loyalty programs have more appeal to shoppers in Central and Eastern Europe.
While sustainability might not be top of the list, green concerns still have a fairly wide reach. Related aspects influencing buying behavior in Western Europe center around carbon neutral, seasonal offer and supporting animal welfare, whereas shoppers in Central and Eastern Europe feel more concerned about brand reputation, refill options and good use of resources. In any case it is fair to say, that the latter regions are catching up on their green conscience
Finally, we analyzed, which of five dimensions is the most differentiating and can be most closely associated with dissatisfied shoppers: it is the “wow”-experience. Premium experience can remedy dissatisfaction and here, the aspect of security is key, especially for budget-tight shoppers as they can only spend their money once: they want to be sure to make the right choice, reinforced by e. g. professional quality, certifications, and quality seals. For satisfied shoppers, the “wow”-feeling arises from more hedonistic aspects such as luxury packaging, personalization, exotic and multisensory.
