The Value Shopper - How to understand and win with shoppers in an economic downturn

And it is a challenge. Shoppers around the world have already become more price sensitive. And it is not just those that have lost jobs, seen pay-cuts, or fear for their jobs. Even those with relatively secure jobs change their spending as they become concerned for the economy in general. And this economic downturn could be really significant. So, what should marketers do about it? How should we try to win with the value shopper in an economic downturn?

The Value Shopper - Shoppers change behavior in an economic downturn

So how does an economic downturn impact shopper behavior? I mean – beyond the fact that many shoppers will become more price conscious, more likely to seek out deals, promotions and sharp prices? The best way to analyze this is to use the Shopper Economics™ model. Shopper Economics™ explains how different shoppers make decisions: about where to shop, which categories to buy, and which products to pick up and which to leave. So, what can Shopper Economics™ tell us?

Shopper Economics™ - A model to better understand shoppers

Shopper Economics™ explains that shopping decisions are a trade off between ‘value’ and ‘cost’. Value, for a shopper, is itself made up of two broad elements: shopper value (what the shopping experience is like) and consumer value (what the perceived consumption occasion is worth). Likewise, ‘cost’ for a shopper, is made up of two components: time and money. So how does an economic downturn impact a shopper’s perception of value and cost?

In an economic downturn, value shoppers trade ‘value’ for ‘cost’

At its simplest, we see cost-factors given more weight, and value factors less. So, a shopper is more likely to go shopping in a store without air-conditioning, for example, if they can get a deal. Or to trade down to a mainstream product rather than a premium one (trading perceived consumer value for economic cost).

In an economic downturn, value shoppers trade ‘time’ for ‘money’

A shopper is likewise more likely to trade time cost for financial cost. Shoppers might shop around, looking for a deal. Or be more likely to put up with a store with a long queue if they believe that they can save a few dollars.

So much so obvious, and you arguably don’t need a sophisticated model like Shopper Economics™ to explain this. But – there’s much more to it than that!

Not everyone is a value shopper – and not all the time

The trade-offs that shoppers make simply aren’t that simple. For one thing, the decisions they make are not consistent. Different shoppers will have different Shopper Economics™. Not all shoppers will become ‘value shoppers’ over night. Many will continue shopping, or at least some of their shopping, in the same way they always have. But many will change and become more ‘value oriented in their decisions. But even these value shoppers will not be consistent in this regard.

The value shopper is inconsistent

The same shopper will make different decisions by category, by shopper mission even. And different shoppers in the same store, on the same mission: they might have different Shopper Economics™ too. So the first implication of this is that we need to be careful about making generic assumptions about how shoppers will behave as the economy shifts. We need to know who our target shoppers are: and understand their Shopper Economics™.

Secondly, there are some interesting implications of these shifts, that people don’t often consider:

Value shoppers shift stores in an economic downturn

I know it sounds obvious, but some value shoppers will choose to take some of their shopper missions to different stores as a result in shifts in their Shopper Economics™. Some online shoppers might start visiting offline stores as they want to avoid any delivery charges, or because they find it easier to spot bargains as they move aisle to aisle. Some shoppers will shift from mainstream channels to discounters. Some might spend less in convenience stores, preferring to stock up more in supermarkets and hypermarkets.

And some won’t. So its critical for brands and retailers to get a handle on which shoppers are shopping where, and how this is changing. Covid-19 has disrupted shopping behavior already, it is likely that the economic downturn could mix things up even more. This could have huge implications for the in-store marketing mix, channel mix, and trade investment strategies.

Value Shopping isn’t all about ‘lowest price’

And while we talk about stocking up: let’s think about value shoppers and their behavior in store. Some might be interested in buying in bulk, because they can get a discount. Others will be focused on buying small packs, as their disposable cash is limited. Getting your pack and price strategy right is going to be key as the economic pressure builds on shoppers.

The value shopper – the attention opportunity

Shoppers in new, unfamiliar environments are also likely to spend more time shopping. Shoppers searching for deals may find themselves shopping unfamiliar stores, and unfamiliar aisles. And while much of their attention will be focused on scanning the shelves for little yellow discount stickers: they are shopping much more actively. This means that it might be easier to grab their attention. Yes, they are value focused. But not exclusively. Shoppers often scan shelves subconsciously. But in an unfamiliar environment they are much more likely to be engaged. This could be a great opportunity for a brand with clear communication, and the right pack/price mix.

Trading down isn’t always what you think it is

Remember that some value shoppers might be trading down into your category or segment. A coffee shopper giving up on capsules and buying regular roast coffee might still be focused on a fabulous taste experience, even if they are ‘trading down’ from capsules. People who used to eat out a lot might now be seeking restaurant-quality ready meals. Is your brand or category ready to catch these shoppers as they search an unfamiliar aisle?

Stop making assumptions about shopper behavior in an economic downturn

It is easy to assume that shoppers during an economic downturn are obsessed by price. This simply isn’t true. All of the dimensions of Shopper Economics™ are still in play. The relative weighting might have shifted, but it isn’t all about price. Value shopping is more complicated than that. 

Mike Anthony