As Consumers Shift Spend, Brands Focus On Promotion Effectiveness

Lisa Johnston
Editor-in-Chief, CGT
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General Mills products on store shelves
General Mills hasn’t experienced this level of inflation in nearly 40 years, its leaders say.

Most consumers intend to reduce their product spending during the next three to six months, and brands are being challenged to ensure their promotions are hitting the mark.

It’s a shift that’s already started, according to new research from The NPD Group, which found that more than eight in 10 U.S consumers are planning to make changes to mitigate their product spending and have already begun making fewer purchases than a year ago. The move is expected by the firm to have a broad impact on retail, and it’s not something being lost on consumer goods companies.

General merchandise retail sales revenue is down 1% through mid-May vs. the prior-year period, though up 19% above pre-pandemic levels in 2019.

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“There is a tug-of-war between the consumer’s desire to buy what they want and the need to make concessions based on the higher prices hitting their wallets,” said Marshal Cohen, chief retail industry advisor for NPD. “And consumers aren’t just buying less stuff, they are shopping less, which means a loss of the impulse-shopping moments that are critical to retail growth.”

Consumers bought 6% fewer items at retail in the first quarter of 2022 than the same period last year. Though average selling prices for the products are up 10%, a decline in demand translated to average amount spent decreasing around 2%. A 5% drop in purchase frequency is further exacerbating the situation.

In a separate survey in February, NPD reported that 89% of consumers had noticed price increases during the past three months vs. a year ago. The top categories that consumers noticed increases included food (87%), gas (77%), dining (55%), apparel (46%), and home goods (41%).

What Consumers Want

Today’s consumers do intend to look for more promotions, according to NPD, as well as lower-priced items. They also plan to trim back on overall purchases during the next three to six months.

Just 17% said they’re not planning on making any changes to their spending behavior, while 23% said they intend to cut back. Looking for promotions was the most popular response, cited by 28% of consumers.

Consumers aged 55 or older are the most likely to be planning changes to their spending behavior, an NPD spokesperson told CGT, noting that there’s little variation between men and women, and income groups.

[See also: Coca-Cola Moving Retailers Into the Digital Age]

Nearly 70% of consumers also indicated that labor shortages have caused reactive changes to their purchases in the past six months, including visiting a different retailer or skipping the purchase entirely.

“Marketers must be well versed in all the conditions influencing their retail channel, and their target consumer, or they will risk missing growth opportunities,” Cohen said. “An appealing shopping environment, displays that make the product pop, and persuasive promotions are necessary to get more items into the basket when consumers do shop.”

This article is an excerpt from sister publication CGT. Click here for the full version. 

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