Across the UK, very few households have not been affected by recent increases to the cost of living. Whether we’re filling our tanks at BP, nipping to Iceland for essentials, or popping into Greggs for breakfast, our eyes are popping at increasing prices.
Consumers are well accustomed to inflation – often humorously described using the humble Freddo, which now costs two and a half times its turn of the century price – but rarely does it touch all categories. In February, inflation rose again to 6.2%, its highest level since the early 1990s. Yet, this still pre-dates the increasing of the energy price cap, and the impact of the ongoing war in Ukraine on global supply chains is yet to be fully felt.
So, how will this impact consumer behaviour, and what can brands do to manage backlash?
Naturally, in times of financial pressure, consumers reassess their priorities. As the cost of filling a typical family car edges closer to £100, consumers are finding savings in their budget elsewhere. According to the February edition of the7stars’ QT, 74% of UK adults will buy fewer personal items for themselves, while 33% will take shorter or fewer holidays this year.
What is less obvious is which expenditures will make way, and which will survive. As purchasing power shrinks, brands must prove their relative worth to customers. For example, a person might view their recipe box subscription as one luxury too far. Yet, compared to the cost of a weekly takeaway, the subscription is a relative steal. And as 77% of Brits aim to cook more at home to combat price increases (QT, February 2022), the benefits of the box might keep the customer from cancelling.
Furthermore, brands which offer purchase reassurance will benefit. Flexible booking policies and cancellation grace extensions, like those offered on holidays at the height of the pandemic, will help. As Mintel observe from past financial crises, brands taking risk to support consumers often win loyalty once the crisis ends.
However, this is not your parents’ inflation. Since 1992, when inflation last peaked to this point, our lifestyle has changed dramatically. Buy Now, Pay Later schemes will offer a lifeline to many unwilling to lose their luxuries, while others will use hybrid working to curb rising travel costs. According to the7stars’ Lightbox Lowdown, 30% of Brits plan to work from home whenever possible to avoid paying for fuel.
Of course, with 6.2% inflation, price rises are inevitable. But largely, as Mark Ritson argues, brands transparent about the issue and who give customers notice, like Pret in raising its coffee subscription, will be forgiven for doing so. The full effect of this crisis will not be felt overnight. Like brands, consumers need a little longer to adjust.