In today's economic climate, it's imperative that manufacturers
and retailers find ways to build consumer loyalty and deliver value by touting
benefits such as convenient locations, reward programs and at-home consumption
in order to keep the flow of customers coming into stores and making purchases,
according to a new report by Nielsen.
Agencies also need to keep all this in mind when developing
campaigns for chains and their merchandise.
"Financial headwinds are the new normal, and U.S. consumers are
feeling the effect across the board," writes Todd Hale, senior VP, consumer and
shopper insights at Nielsen. "Whether it's spiking food and gas prices, surging
energy bills, mounting health care costs, higher payroll taxes or all of the
above, rising costs of living are putting the squeeze on everyone's wallets."
The Nielsen data was collected from March 14 through May 6 of
this year and included 27,896 respondents.
Hale says the first thing marketers need to do is gain a
solid understanding about how people are fighting to face their economic
challenges, and to then tailor their marketing strategies to help consumers
navigate the economy.
The Nielsen report finds that while payroll taxes were a
major issue earlier this year, currently, less than a quarter of households
(23%) say they've been affected by the payroll tax hike.
The area where most consumers say they feel the highest
negative impact is in rising food prices; 64% of the households surveyed in the
Nielsen report call that the biggest drain on their income. Next—and mentioned
by 58% of households—is rising gas prices, followed by rising utility and
energy costs (40%) and rising health care costs (30%).
The report also finds, not surprisingly, that lower income
households, those with a median income of $25,000 or less, are having a harder
time coping with rising costs than the upper end of the economic spectrum,
translating to households with median incomes of more than $200,000 per year.
The gap is understandably significant: 71% of households
with median incomes of $25,000 or less say they have been impacted in the way
they shop by rising food prices, while only 32% of households with incomes
above $200,000 said that.
Concerning rising gas prices, 65% of the lower income
households said it has impacted them, compared to 34% of the higher income
households. In terms of rising utility costs, it's 47% impacted for the lower
income households and 17% for the upper income households. Rising health care
costs have negatively impacted 32% of the lower income households compared to
17% of upper income households.
"Ultimately, increased costs of living lead to tighter
budgets and decreased consumer spending," Hale writes. "So in the face of
rising expenses, many consumers are taking action. Four out of five households
say they're reducing shopping trips and conserving gas when gas prices rise,
and nearly two-thirds of consumers seek deals as food prices rise. Buying fewer
unnecessary things is a common tactic for coping with financial headwinds, and
consumers can take this approach across most categories, gas being the main
exception."
Coping Actions
Here are some of the actions consumers are taking and the
percentage of households that are taking them, according to the Nielsen survey.
- For coping with rising food prices: 66% seek out deals, and
66% are buying fewer items that aren't needed.
- For coping with rising gas prices: 80% are reducing trips and conserving gas;
63% do more things at home.
- For coping with rising health care costs: 61% choose less expensive
alternatives.
The report points out that because of shifts in the colder,
snowier portion of the year, several discretionary categories are experiencing significant
declines in year-to-date sales that are not the result of economic conditions.
They include film and cameras and lawn and garden merchandise.
Here are the percentages of decline in sales for myriad
categories through mid-May, according to Nielsen Scantrack: film and cameras,
-28%; lawn and garden, -24%; juices/drinks, -9%; gum, -7%; computer
electronics, -5%; office/school supplies, -3%; baby needs, -3%; grooming aids,
-2%; soft drinks, -2%; ready-to-serve prepared foods, -2%.
"Retailers and manufacturers serving consumers feeling the
pain from financial headwinds can either sit on the sidelines and feel the pain
too, or takes steps that align with consumer coping strategies and minimize the
impact on their sales," Hale writes.
But, he adds, "Companies serving consumers
feeling less pain shouldn't sit idly by either. There are always ways to
maximize marketplace success by closely examining the consumer base and
addressing what matters most."
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