Australian consumers gear up for ‘the big squeeze’ with changing spending habits
A new whitepaper from dentsu media agency iProspect has explored the potential impact of ‘The Big Squeeze’ on Australian consumers spending habits as we return to restriction free-living in the wake of the COVID-19 pandemic.
Despite Australian’s desire to go out and do things is at an all time high, the rising pressures of rising costs, with inflation at 5.1%, and media coverage of potential economic fallout of the situation, Australians are wary of spending.
Author of the report, Sam Cousins, chief strategy officer for iProspect Australia said: “We’re being battered by rising petrol costs, inflation, the usual increases in property prices and rental vacancy issues, along with global supply chain delivery still being impacted by floods and the war in Ukraine. All of this is impacting the cost of daily staples on the average consumer’s grocery bill. In advertising we can see that demand is there, but how do we convert customers who are battling with wanting to indulge in a variety of experiences, products and services, and at the same time trying to keep a lid on their spending. This report explores that.”
iProspect research has found that spending decisions are increasingly made on personal values and beliefs, using consumer’s own value equations.
For example, when fuel prices go up, so does public transport traffic and bike and scooter use. Increased fuel prices will also see consumers choose activities that are closer to home. Moreover, increased grocery costs, consumers get more creative with meals and balance where they can pull back, with where they won’t compromise.
Some of Toluna’s predictions for consumer spending in key categories were as follows:
FMCG
We saw in the pandemic a rush to buy staples in order to retain an element of control. We may actually see consumers stockpiling staples to lock in the price before prices go up over the coming months. If you are a staple brand ensuring availability of products will be key. As consumers make concessions, brand connection and loyalty will still be important. People make fast decisions in the aisle and they aren’t always based on price so now is the time to keep brand activity strong and consistent.
Entertainment
Entertainment at home, is still what Australians prefer, but making the decision to go out for a drink/dinner or to the movies or shows will be based on many things. Occasions that are lower energy will more than likely be done locally, but larger group or special occasions that need higher energy will likely be invested in. Knowing where you sit in the positioning of occasions will help drive effective paid media spend and messaging.
Apparel
Necessary clothing is seen as recession proof, so if socks are your thing, you’re ok. Apparel is one area where Australians are leaning in more to sustainability. Textiles are now the largest filler of landfill, so expect customer value equations to weigh up the long-term effect of purchase. Anywhere you can recycle, rent or re-sell, or even biodegrade will help customers to favour your brand.
Content services
Whilst demand will still be high for all content services across both music and video content, there will definitely be an assessment about how many services each household needs. How Amazon prime has now bundled in AMC and Paramount channels has kept customers locked into their services with the perception of more content and higher value, in a similar way that Disney+ showcases Starz and Marvel to show depth. The average number of services is now 4.3, whilst we don’t expect that to go down, we may actually see standard content being switched out for gaming content and streaming.
iProspect also outlined a number of suggestions for advertisers during this period of conscious spending, recommending that advertisers keep their programs running to reap the regards after the financial crisis. Other suggestions also including to align with positivity to cut through negative messaging, enrich content strategy to engage with audiences and to keep brand advocates on board by investing in brand loyalty.
“We know from previous downturns there is always an upswing, so keeping customers engaged and loyal during this period should be an always on strategy,” Cousins said.
The findings are echoed by recent research conducted by consumer insights company Toluna, which found that the rising costs of groceries have forced Australian shoppers to make some changes to their weekly shop, including swapping out their favourite brands for generic ones, shopping around to find the best deals, and buying in bulk to save money.
The research found that 63% of Australians were changing their spending habits in light of the rising costs of living, with 80% saying they’ve been impacted by the rising cost of grocery items. Importantly, price was ranked as the most important factor for most Australian shoppers, followed by quality (68%) then health (62%), with consumers willing to compromise on their favourite brands and sustainability factors
The increased costs have also been felt in other areas including eating out (54%) and ordering takeaway (50%), buying clothes (53%) and beauty & skincare products (48%), booking holidays (52%), and buying electrical goods (49%). To mitigate spending, Toluna found that some of the things Australians would forego would include eating out (32%) and ordering takeaway (28%), followed by overseas travel (22%), spending on premium brand products (21%), going to bars & pubs (18%), and going to the cinema (17%). Consumers were least likely to forego mobile phone contracts (34%) and TV subscriptions (25%) in a bid to save money.
Many Australian consumers were also found to be planning to review their energy consumption by turning off lights, taking shorter showers and using pre-programmed and eco settings on appliances.
“As we emerge from the pandemic, the rising cost of living is now one of the biggest issues for Australians. Our research shows that Aussies are noticing price increases across a number of categories, and are changing their behaviours as way of trying to combat this,” said Sej Patel, country director, Toluna, Australia & New Zealand.
“Brand switching and shopping around to find better deals are some of the key tactics shoppers are using to save money, with price being the absolute number one factor when it comes to making grocery purchasing decisions right now. Price changes are also impacting consumers’ plans when it comes to eating out and socialising with friends, right down to being conscious about shower timings and making sure all lights are switched off.
“Understanding today’s consumer is critical, and businesses will do well to ensure that communication with customers over the coming months largely focuses on price and value for money. It’s important that businesses evolve the way they position and market themselves in a way that aligns with current consumer sentiment.”
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