‘Value-conscious’ consumers may not necessarily buy on price
By our News Team | 2021
While the world’s consumers do want value in these difficult times, that doesn’t mean they buy the lowest-cost item, study finds.
You might assume that the world is awash in frugal buyers. Why wouldn’t it be? With most of the global economy struggling to recover from the Covid-19 crisis, one would expect households to be tightening their budgets.
Indeed, says the Boston Consulting Group (BCG) in the major markets it has studied, in rich and poor nations alike, anywhere from 70% to 90% of consumers identify themselves as ‘value conscious’.
But how thrifty are consumers when faced with an actual buying decision? In particular, how attentive are they to the price tag? And are they always likely to go for the cheapest option, or only under certain circumstances?
To answer these questions, BCG’s Centre for Customer Insights interviewed 40 000 consumers around the world to learn more about what drives their choices at the time of purchase in different markets and categories.
‘Value consciousness’ not main preference
Among the key findings: it could be a serious mistake for marketers to base global pricing strategies on the assumption that ‘value consciousness’ is an overarching preference among consumers.
Indeed, when the researchers asked consumers about their most recent purchase in a wide range of consumer goods and services, a surprisingly small portion actually selected the lowest-priced item.
“We found hardly any correlation between ‘value consciousness’ – in other words, a preference for lower price as an attitude – and consumers’ actual purchasing behaviour. And this was true across virtually every market and demographic group,” the research team said.
Several other valuable insights from research
BCG’s research produced several other valuable insights, including:
- The proportion of price-sensitive consumers varies widely from one market and product category to the next.
- In emerging markets, the proportion of price-sensitive consumers isn’t necessarily higher than in wealthy markets.
- The context in which a product is purchased is one of the most powerful drivers of price sensitivity.
These findings imply that brands shouldn’t define pricing strategies based only on stated consumer mindsets, such as value consciousness. Another key takeaway is that brands need a much more nuanced understanding of how purchasing decisions are made in different markets and categories, as opposed to applying a global strategy.
Consumers trading down in some categories
“As consumers continue to trade down in many product categories in the face of challenging economic times, pricing will figure prominently in the strategic discussions of marketers,” BCG states.
“As our research has shown, however, it is critical that brands gain a nuanced understanding of the motivations that drive price-sensitive purchases in specific markets, categories, and circumstances. Such knowledge can be the key to winning in a market – by being both price competitive and profitable.”
The African-based research for the study was conducted in Nigeria and South Africa. Other emerging markets included Indonesia, India, Mexico and Saudi Arabia.
Yes, rewards programs do open the door to cashbacks – but consumers still have to walk through it.