Inflation! Inflation! Inflation! -https://ift.tt/e4nPuZs –
Is it the supply chain? Or is it the so-called “great resignation” driving wages higher? Maybe it’s all that federal aid that poured money into consumers’ wallets over the last year? Perhaps it’s that chip shortage you keep hearing about?
Whatever the cause, you’ve probably noticed by now that consumer prices are on the rise. Pols, pundits, wonks and dismal scientists (aka, economists) debate causes of and potential policy solutions to inflation. Consumers don’t debate. They simply see that trips to the pump–and elsewhere–are becoming more expensive. And they worry about it.
Uneven Price Increases, Uneven Consumer Concern
Last fall we spoke with about 400 consumers who shared with us their concerns. Fifty-nine percent of respondents cited that inflation was a real worry, slightly less than those who worried about a “new wave” of COVID-19 (62%). Consumers with more money, however, evinced slightly less concern across the board.
Just under half of consumers with over $100k in HHI expressed concern, while consumers of modest-to-middle income showed more widespread alarm. And why not? Lower income leads to fewer discretionary dollars, leaving folks with precious little wiggle room to absorb price increases. At the same time, not all categories experienced the same inflationary pressures. Food and energy costs are accelerating, but when the CPI is examined with food and energy eliminated, prices remain elevated but more modestly so.
Even so, when we asked those same consumers last fall if they were reconsidering planned purchases into the new year, only a quarter of respondents said yes. (Only 17% of those with incomes north of $100k agreed.) This is why we didn’t expect consumers to cut back on spending heading into the holidays.
Then, as fall turned to winter, consumers began feeling more alarmed.
Safety Nets Evaporate
We have been tracking consumer concerns related to COVID-19 since the US lockdown began in March 2020. In our most recent look at the data, price increases and other effects on the US economy took center stage, even as the Omicron variant began accelerating globally.
In fact, becoming ill fell to eighth in November 2021. Expiring child tax credits, enhanced unemployment benefits and eviction moratoriums along side rising prices, put inflation front and center for consumers.
Lots of Noise, Very Little Signal
Consumers and marketers understandably obsess over inflation. Supply- and demand-chains out-of-whack, and with potential future variants, we might expect a lot of inflationary reverberations for at least a year. For consumers and marketers alike this environment yields uncertainty. Still, there are a couple of things you can do:
Our research has found that straight talk about supply shortages and price increases is acceptable, and actually appreciated.
Not everyone feels the same pinch. Affluent consumers are feeling fairly comfortable about their finances, and they will continue to spend like it.
When prices rise, diminished consumer spending power forces consumers to reevaluate luxuries and necessities. As we’ve written many times, think of ways to position your brand, product or service as a necessity.