Despite consumers’ voiced concerns about inflation and finances, retail spend continues to grow and people continue to plan vacations. Even though they say they’re stressed about their grocery bill, they’ll happily shell out money (and lots of it) for Taylor Swift tickets—which makes one think that the way economists track consumer dollars doesn’t make much sense.
Even consumers themselves aren’t sure where they stand—when asked in a recent survey by the Kearney Consumer Institute (KCI), 44 percent of consumers say their finances have gotten worse in the last 6 months but 51 percent say they will get better going forward.
“Our current focus is exactly what keeps us from seeing what we hope to see,” said KCI lead Katie Thomas, in a news release. “We are so focused on categories and who’s going to win or lose that we aren’t looking at the how and the why behind consumer spend. And, when it comes to areas we ought to be paying attention to, we generalize so broadly that we miss any critical insights. For example, we say consumers are only spending on necessities—but don’t define what those necessities actually are. For some consumers, it may only be core groceries. Others may deem clothes and shoes a necessity.”
This split in the way brands understand consumers and categories and the way consumers see themselves explains why consumers can simultaneously be pressed for money, yet are able to find it for expensive concert tickets and other definite non-necessities.
The key to understanding—and thereby increasing—consumer spending is to take a “consumer first perspective”
Thomas describes this approach as one that blends economics and emotions. The approach “flips the traditional commercial script” by first evaluating the total consumer wallet based on how they view and categorize spend on their own terms. This understanding of how a consumer emotionally categorizes their spend can then be applied to brand marketers’ understanding of category-level transactions. For example, are M&Ms an indulgence, a reward, a guilty pleasure, or a necessity? Only each consumer knows which category is accurate for him or her.
As a result of its survey and analytical work, KCI is introducing the concept of “consumer motives” as the starting point to understanding spend. While they vary by brand, motives generally fall into four buckets, each with its own unique perks and risks:
- Essentials—seen as necessary or functional
- Value—investment in quality, product that works hard, potential future value
- Pleasure—shopping as fun, “retail therapy,” reward/treat, and
- Expression—communicating or projecting externally, including ego, style, and values
Understanding how a consumer qualifies their spend, and going one level deeper, allows brands to assess the risks and opportunities that exist by motive.
The firm suggests brands follow three simple steps to reorient to a more “consumer first” approach
In the short term, determine consumer motive attribution. In the medium term, map future demand by motive. And, finally, over the long term, shift the portfolio to match consumer-first priorities. “The growing options consumers have combined with the constant news cycle bemoaning inflation concerns makes for an increasingly aware, savvy consumer who is spending thoughtfully across the whole wallet,” Thomas added.