Insight
Brand Challenge: The Role of Value Perception in Overcoming Declining Consumer Sentiment
May 2024 consumer sentiment numbers are troubling, but are they a bellwether for the rest of the year? What can brands do in response to the declining mood? Can recent cultural shifts around how consumers perceive value provide clues on a new way forward?
Continuing Economic Pressures and Erosion of Confidence
Earlier this year, consumer sentiment in the United States showed a bit of a rebound vs. the past 24 months. However, the May 2024 University of Michigan’s Consumer Sentiment Index indicates a sharp decline, potentially reflecting widespread concerns about personal finances and the broader economic outlook.
This downturn in sentiment is occurring despite some positive macroeconomic indicators, pointing to a complex interplay of factors influencing consumer mood and behavior. Even with some inflationary cooling, persistently high prices in key areas are eroding real incomes. This ongoing financial pressure, political uncertainties, and global unrest all continue to drive dampening consumer confidence.
Cultural Shifts in Perception of Value
Amid these concerns, a broader cultural shift in the perception of value has been emerging. While price has long been the biggest component of value, especially in times of low confidence, consumers are elevating the role of affordable quality, health benefits, consumer experience, thoughtful indulgence, and personal ethics in their purchase decisions. Digging beyond the price tag illuminates deeper thinking on what constitutes value in the minds of consumer today – and how that may be impacting purchase behaviors. Some examples:
- Brand Switching and Embracing Premium Private Label: Economic pressures have prompted consumers to seek affordable options that still meet expectations for quality. A recent study reveals consumers believe items with premium packaging could cost 45% more, delivering perceptions of value, an opportunity that Walmart’s new Bettergood line and Target’s established Good and Gather and Threshold lines are leveraging.
- Choosing Sustainability and Ethical Production: Driven largely by Millennials, consumers are seeking out products that align with their beliefs about the environment, ethical sourcing and manufacturing, and social impact. Recent studies revealed that 85% of consumers have shifted their purchasing behavior towards more sustainable products in the past five years, and 60% are willing to pay more for sustainable products (2023 Global Sustainability Study by Simon-Kucher). Consumers perceive value from brands that think and act beyond the bottom line.
- Prioritizing Health and Wellness: Increased awareness around health and well-being has changed consumer purchase behavior. Better-For-You products and services are a hot spot in the market, with the wellness arena projected to grow to $7 trillion by 2025, up from $4.4 trillion in 2020 (2022 Global Wellness Economy Monitor by the Global Wellness Institute). This movement underscores a broader definition of value that reflects a significant shift in consumer priorities toward maintaining a healthier lifestyle.
Consumers are more discerning with their money in turbulent times, and 2024 (and beyond) will be no different. It is critical to understand not just sentiment, but also how consumers think about value, how their value perceptions are changing, and what is driving their purchase decisions with eroding confidence as a backdrop.
What Does All This Mean for Brands and Marketers?
In our explorations of value perceptions and the demand landscape, Upland is seeing signals that indicate a potential longer-term change in consumption patterns. This includes a renewed focus on essential goods paired with splurges on premium, experiential, healthy, ethically aligned products that consumers consider worthy of a higher price point because of the perceived value (and emotional benefits) they provide. We’ve heard this consistently from consumers across projects in diverse categories ranging from beverage to frozen food to home durables.
As consumers continue to navigate uncertainties, their purchase decisions will increasingly be influenced by emotions, reflecting this blend of financial prudence and thoughtful indulgence. There will be a balancing act between needs and wants, with consumers willing to sometimes spend more to find enjoyment in challenging times.
Brands and businesses that can deliver against these changing needs/priorities and align with consumers on what they perceive as value will fare better when sentiment is low. How well brands can track, adapt to, and address these multifaceted expectations in the future will greatly impact how well they can succeed in the long term.
Reach out to Jacqueline.Holliday@go-upland.com to learn how Upland maps future market trajectory and uncovers shifting consumer needs far sooner, helping brands create a value proposition consumers will embrace.
