Consumer Behavior in Uncertain Times
An in-depth analysis of the hypothesis along with meticulous research data reveals that consumers tend to be more cautious and economical during a slowdown and thus look out for cheaper or discounted products trying to be at par in quality to their used brands. This however breaks the concept of brand loyalty thus disproving the hypothesis crafted.
The specified hypothesis is disproved by virtue of the research as it has been observed through various sources and channels that consumers tend to be more cautious and economical during a slowdown and thus seek cheaper or discounted products that are on par in quality to their used brands.
Consumer behavior shift
- The 2008 financial crisis altered consumer behaviors to an extent that the effect on how Americans are inclined towards cheaper alternatives is still visible.
- Large retailers fueled this by changing perceptions and training consumers to anticipate products cheaply and swiftly, which ruined the concept of brand loyalty.
- Consumers liking or disliking the concept of discounts did not matter much as people who moved to discounted players at the time of the Great Recession continued the trend of buying from them post recession.
- A proven reduction in consumer confidence towards their favored brands was evident by the adoption of a replacement of logical standby, distinguishing their purchases or leaving various labels altogether.
- This further altered the representation and perception that consumers had on brands and the benefits they afford, thereby providing them with an improved agility to change brands.
- Even in situations where people are loyal to a few brands, they generally choose to stand by for a price drop, either through promotions or other discount coupons.
Viewing from the Brand (Retailer) perspective
- A substantial decline in sales forced many brands through tough times with the heightened number of previously added stores. As an example, LVMH was blindsided after flash sale online sources such as Gilt Groupe emerged, providing excess inventory for a higher cost. As a response to this challenge, brands like Nordstrom, Sak's, and Macy's had to launch their discount models since their premium establishments saw growth plummet.
- Tips provided by some sites also focus on ways or alternatives for how brands can present a compelling logical or sentimental advantage over their competitors, such that even if consumers switch to more affordable brands, they are more likely to return once the recession concludes.
- For example, the American recession had a significant impact in diminishing brand loyalty across a wide variety of products from Jiff peanut butter to Advil pain reliever.
- During the 2008 recession in the United States, merely four out of ten brands were able to hold on to about half of their loyal customers.
- In 2018, the combined annual retail sales growth of some prominent labels fell by about 3.6%.
- A research study by Researchgate found that more than two-thirds (65%) of American shoppers utilize coupons more often, opting to purchase goods at low prices while sacrificing comfort shopping and concentrating on saving, indicating an outward shift from the otherwise pricey brands they were loyal to.
- It was further observed that 19% of highly loyal customers diminished their loyalty, while 33% completely moved on to an alternate label in the same segment.
- Coca Cola saw 25% of Classic Coke purchasers become less committed which was comparable to Procter & Gamble's branded Crest toothpaste that witnessed more than half (59%) of its highly loyal purchases become less loyal.
- All of this served as a great opportunity for retailers like Kroger and Walmart who were able to offer their private labels for much more reasonable prices, permitting the consumers to stretch their dollar.
How Consumers value Trust & the preference for price-picking and promotions
- The recession caused online retailers like Amazon and chain stores like Walmart to provide cheaper alternatives to consumers and inculcate a trust in their product values while enjoying rising sales.
- A report from Deloitte highlights how during the Great Recession, shoppers who converted to discount players have remained with those discount retailers.
- A similar instance is evident from a Researchgate report, which depicts how consumers eagerly watch out for a price drop by virtue of promotions or discount coupons, which, in turn, has drastically modified the perception and representation they had regarding their brands.
- Technology and new age decision-making tools have further aided smart consumption, as modern consumers are more agile and swift in their reaction to price changes. This group has the capacity to switch brands quickly while seeking the lowest prices, thus yielding quality as well as loyalty.
Our research began by comprehending the general perception of people during a financial crisis, economic slowdown, or a recession. Thus, we performed a search on the consumer behavior shift to understand the thought perspective of a customer during a crisis. For this, we looked into comprehensive research articles, research papers, and academic presentations that have analyzed and contextualized the phenomenon in retrospect. The American Great Recession served as an excellent tool to analyze real-time cases of pattern shift. Such sources included sites such as Academia, Researchgate, T&F Online, Semantic Scholar, and Google Scholar.
Also, we conducted a deep dive into journals of economic literature in sites such as JSTOR, SCImagoJR, RePEc, etc. We wanted to assess the reaction of people in such cases of financial breakdown. However, we observed that the aspects covered were mostly related to the reasons for an economic downturn, symptoms, and significance for businesses in terms of production slow down or lower profit margins. We performed further analysis of news and media channels like CNBC, Washington Post, etc. to assess the impact of the slowdown on the general public. The idea was to gauge a change in temperament of people, leading to purchasing and a generalist market trend.
Next, we focused on analyzing some top brands hampered by the economic slowdown. This strategy involved scanning through the annual reports, press releases, financial data, company presentations, etc. of a few leading brands like Macy’s, LVMH, Christian Dior, Bulgari, and Forever 21, among others, to assess losses incurred, store shutdowns, and similar events, that indicate a drop in sales. To implement a holistic approach, a study was also performed on cheaper options, which primarily consisted of private labels from chain retailers, such as Walmart, and other online stores, such as Amazon, that witnessed sound profits during the slowdown by luring consumers with more affordable, discounted, and promotional choices by a marginal or no compromise to quality and accessibility of products.