Inflation Is Changing Consumer Shopping Behavior. How Can CPG Companies Adapt?

Sometimes it seems like the last time anyone was sure of anything was in early 2020, before a pandemic turned the world on its head. Hearing that the economy is turbulent and unpredictable isn’t really news anymore. What isn’t turbulent and unpredictable? 

But consumer packaged goods (CPG) companies can’t afford to shrug off economic forecasts—not when they’re influencing consumer behavior and affecting revenue. So, what should companies do? 

That depends on exactly how consumers are responding.  

Where Inflation Is Headed—and How Consumers Are Adjusting Their Shopping Behavior 

According to the Bureau of Labor Statistics, the consumer price index rose 0.5% in January 2023, for a 6.4% year-over-year increase. A more limited measure, the core personal consumption expenditures price index, increased by 0.6% in January for a 4.7% increase from a year ago. 

These numbers outpaced expectations, leading to renewed concerns about inflation and the potential for an extended recession. Consumers are responding to the unrelenting economic uncertainty in a variety of ways.  

First, they’re cutting their non-essential spending. But that begs the question: what’s essential? Is brand-name toilet paper worth the expense? What about brand-name household cleaning products—especially as consumers continue to grapple with contagious diseases? 

Then there are the trade-offs. Consumers who cut back on non-essential activities like dining out may compensate by increasing their spending on a replacement activity. That could translate to spending more money on higher-quality groceries.  

With less disposable income, some purchasers may prefer a smaller package that’s less expensive. Others are playing a long game and would rather buy in bulk to pay less per unit at discount stores like Walmart or membership stores like Costco.  

Finally, many purchasers shift toward store or “value” brands during tough economic times. In 2022, store brands saw steady growth, increasing by 11.3% by the end of the year. But store brands aren’t always of the same quality that purchasers expect—which could drive shoppers right back to their preferred name brand.  

So, how can sellers adapt to changes in consumer behavior when those changes are highly variable? 

How CPG Companies Can Stay Ahead of Economic Trends 

There is no one-size-fits-all response for producers, even if you focus on a specific segment of the market.  

But there is one constant, no matter the economic environment: know your customers. We’re not talking about the “average” or “typical” consumer. We’re talking about your precise customer personas.  

How do you find out what they want? The typical approach is to assemble a focus group and ask people how they use products and what they look for when making a purchase. But those answers aren’t always authentic or truthful, and running these types of studies can be logistically and financially challenging.  

It’s not that people are trying to be dishonest; they just genuinely don’t remember how often they drink soda or how much they purchase at a time. Maybe two two-liter bottles per week? Oh but wait, aren’t there always at least a dozen soda cans in the recycling bin? Where do those even come from? The mundane details of everyday life aren’t something that most of us pay close attention to, so we tend to be poor self-reporters.  

Fortunately, there’s another way to explore customer preferences.  

QualSights combines qualitative and quantitative data so you can generate an exact picture of how your consumer segments use your products—in real time, within their homes. Our Product Consumption Intelligence (PCI) technology provides up-to-the-moment data each time a consumer reaches for or dispenses a product, complete with the exact number of grams dispensed per use.  

In conjunction with that, our Mobile Qualitative Platform provides the contextual details you need to understand the why and how behind the raw numbers. You can ask users what they’re doing as they use your products or engage them with contemporaneous questions while they’re in the store making purchasing decisions. That way, you’re getting real insights, not faulty perceptions.  

Ready to counteract the effects of inflation? Schedule a demonstration today to learn how QualSights can give you the data you need to succeed in any economy.