Expert View: Jana Bowden, Professor of Marketing and Consumer Behaviour, Macquarie University

Understanding the new cost-conscious consumer: it’s a matter of mindset

There is no doubt that Aussies are doing it tough. Budget sensitivity is everywhere. The cost-of-living crisis, inflationary conditions, mortgage rate rises, and increasing fuel and energy prices mean that many consumers just can’t catch a budget break.  

We are now in an era of cost-conscious consumerism, and fear drives the new consumer psyche. Consumers are no longer thinking simply about what to buy. They are reassessing what, how, when, where and why to buy across all categories - from milk to motor vehicles. 

Consumers are questioning their brand selections and asking: Is it essential? Are there cheaper options? Should I buy now, delay my purchase, or not buy at all?

This fundamental reset means a new ‘buyer mission’ is at play. Consumers are prioritising needs over wants. This translates into saving money, swapping brands, switching across retailers, trading down labels, buying private labels, tuning into deals, and often, cutting spend altogether.  

Cash-conscious and clued-up consumers are also empowering themselves through research. They now spend a disproportionate amount of time researching potential purchases online before buying to ease their minds and ensure they’re getting bang for their buck.  

When the buyer mission changes fundamentally, retailers must adapt their offer. 

Dealing with the permacrisis: Profiling, pricing, and pitching  

The cost-of-living permacrisis is occupying consumers’ thoughts. Responding to this requires retailers to be aware, sensitive and responsive to consumers’ needs. This means getting the fundamentals right via competitive prices, budget options and nudge tactics to hook cost-conscious consumers. Consumers want to feel like they’re getting a deal.  

But pricing psychology also shapes consumers’ minds more deeply. Discounts, percentage-off deals, bundles, coupons, codes, app offers, flash sales, freebies and intent-based offers change consumers’ emotions. 

These tactics make consumers feel positive about spending. They create excitement, enhance urgency, give consumers a sense of agency (and pride) in their deal-hunting and help achieve conversion. Psychological levers capture new buyers during their pre-purchase journey and bring them into the fold.

New consumer mindset, new value hooks 

Price adjustments are core to targeting the new consumer but don’t assure a loyal buyer. Understanding what drives their mentality is key. 

Consumers are looking for value - not just financially but emotionally. No matter what category consumers buy from, they want to feel valued. That means understanding their mindset and delivering on experience. It means personalisation, not just routine offers. It means connection, not just run-of-the-mill ‘communication’. Engagement is the holy grail, and to achieve it, retailers must find new ways of shaping consumers' perceptions of ‘value’ alongside competitive pricing. 

The consumer decision-making journey is certainly more complex. Consumers spend 6 hours and 40 minutes online daily1, and 70% of this is via smartphones2. A huge 82% of the Australian population, or 9.4 million, are shopping online in 20233. That means more online shopping, researching, reading and reviewing. This gives retailers the edge to engage with current and potential buyers at each stage of their online journey, from awareness to interest and consideration. 

But it’s not just online that matters for retail.

Research shows 80% of consumers have become strategic shoppers4, preferring to shop in omnichannel mode. Retailers must track consumers across brand channels to follow their inspiration, discovery and purchase journeys. Then, optimise messaging, personalise offers, and continuously communicate with new and return shoppers.

For most retailers, we see an obsession-like focus on customer-centricity online via minutiae-level customer data analysis. Yet, when leveraging those insights, the shopfloor becomes a proverbial black hole. Many retailers simply don’t know the customer is there until they checkout.

This has to change. Omnichannel should be about adding value. Channel opportunity comes through gaining and leveraging customer intelligence to address and close gaps in a customer’s journey.

The future of retail is physical with a digital difference

Consumers are searching for engagement, entertainment and enriched retail experiences. In fact, three in five consumers want an immersive in-store experience. That means an interactive relationship and multiple touchpoints to connect with the brand across digital and physical store environments – an experience (r)evolution. 

Melding online shopper journey information with in-store visitation data gives retailers 360-degree consumer visibility to anticipate shoppers' needs and delight them at each touchpoint rather than just meeting their basic expectations. Tech activation in-store further enhances the experience. 

Other innovations like digital check-in points in-store can be used to add value. Greater tech integration into stores can help digitally savvy consumers search inventory, request assistance remotely and check deal information. Retailers can track and talk to consumers from when they log in online to walking through the doors and right to the point of sale– that’s real continuous connection with consumers. 

Meaningful personalisation and value can deliver breakthrough opportunities, and gaining consumers’ trust in collecting their digital data is key to crossing the online to in-store consumer visibility chasm. 

Despite the cash crunch, retailers must remember that the cost-of-living crisis isn’t weighed in dollars alone. It’s also about experience. Perceptions of value and an engaging purchase journey are box tickers for all consumers. Spending isn’t just a practical activity; it’s an enriching, immersive and emotional journey, too.

Copyright © 2023 Jana Bowden


Things you should know

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