Thursday, 30 June 2011

Inside Consumers' Heads - The Psychology of Dealing With Economic Difficulty

Consumer confidence has fallen again according to GfK NOP the social research company, and is now lower than at any time in 2010. It is unlikely to bounce back any time soon. Indeed research done with British consumers by Bord Bia the Irish food board shows that most of us think that there will be no light at the end of the economic tunnel for at least 3 and possibly as much as 10 years.
The lack of confidence seems to stem as much from an overwhelming air of uncertainty as from the harsh reality of coping with rising prices and near static wages.
People are uncertain about whether their jobs are secure. They are rattled by an economic performance which is up one quarter and down the next, and which does not follow a comforting path of modest but predictable growth. They have lost the security blanket of rising house prices, and worse, are bracing themselves for an increase in mortgage rates which many feel unable to afford.
We know much about the way consumers are dealing with economic pressures - searching for money off promotions, comparing prices on the internet, working to a budget, cooking from scratch. The Bord Bia research indicates just how deeply this behaviour has become entrenched.
They point out that 62% of British consumers agree with the statement "I find myself thinking twice before making even the smallest purchase". Haggling has become a way of life for many. As one male put it "We're negotiating on absolutely everything now - gas, electricity, house insurance, Sky subscription. We didn't use to do that". The pursuit of the good deal has become a game, even among the better off.
In summary, as Bord Bia puts it, the consumer's relationship with time has fundamentally changed. Now people are prepared to put in time to get the peace of mind that they have secured the best deal.
Bord Bia also points out that this search for value is here to stay, even when the better times come round again.
In a nutshell, offering the best value, that elusive combination of quality, price and service, will be a prerequisite for business success in the years to come.

Sunday, 12 June 2011

27% of People Cutting Back on Food

Consumers are prioritising expenditure on their mobile phone contract and subscription to satellite TV ahead of food, says research published by insurance company AXA. Apparently 27% of us are cutting back what we spend on food, but only 5% are cancelling their TV subscriptions, and just 1% cancelling their mobile phone contract.

The findings could bring on despair that Brits put so little value on having a good sustaining diet, but according to the Institute of Grocery Distribution it may be more about consumers being efficient in their food buiyng behaviour.

The IGD calls 2011 the year of economising. It has found that buying habits which started to emerge during the recession of 2008 are now being embraced by more people. Their research shows shoppers to be chasing value by balancing price and quality. This they do by buying more on promotion, using the internet to compare prices, and being prepared to use different shopping channels to get the best deal. Thus they might buy online, or spend more at discount channels like ALDI, or stick with the traditional supermarket, all depending on what is available at what price.

Economising is not just about deals. People are planning meals better to avoid waste. They are doing more cooking from scratch because it tends to be cheaper, and are considering growing their own food.

Whilst many of these changes have been noted before one newer trend is a preoccupation with sticking to a budget. This is particularly true of 18-44 year olds, 46% of whom say they are budgetting. And 34% of all shoppers say they cut back at the end of the month rather than overspend before payday.

Supermarkets have forseen many of the trends. Most are extending budget and own label ranges. All offer recipe ideas, and some tie the recipes to a price such as Sainsbury's promotion suggesting how to feed a family of four for £50 per week. All, even those catering for the more affluent customer, run myriad price cutting promotions in an effort to woo shoppers into their stores.

Thursday, 2 June 2011

Adding Value to Beef - Morrisons Traditional Breeds Venture

The news that Morrisons supermarket has introduced a scheme paying farmers a premium for beef from traditional cattle breeds marks a new effort to prove that value can be added to a product which many dismiss as a commodity.
This is an attempt to brand both a breed, the beef Shorthorn, and in the case of the other traditional breeds, to brand a distinctive sector which is part of British farming heritage.

Why might Morrisons, one of the "Big Four" supermarkets, be doing this?

They will have noted that with branding comes as premium price, as proved by Waitrose who for years have sold Aberdeen Angus and Hereford beef alongside standard British. A store check today showed their Angus mince at £8.87p per kilo compared with £5.78p for standard, and Hereford rump steak at £15.99p versus £12.49p for standard.

Morrisons pursuit of premium products reflects another trend which is to introduce higher priced, higher margin products to help offset falling profits caused by cutthroat competition among supermarkets. Importantly, they have recognised that the product has to live up to the price charged, hence their wish for supplying farmers to stick to a specific feeding regime which will enhance product quality.

Clearly this is a commercial move. Morrisons would not be doing it unless they had identified interest among their shoppers.

They do though appear to have considered all aspects of the supply chain, showing flexibility in relaxing some of the grading grid requirements to accommodate the conformation and fat cover which can come with traditonal breeds, and allowing the breed to be determined by the dam as well as the bull.

It is to be hoped that the initiative works. Morrisons have high hopes, believing it will create demand for another 16,000 cattle, a 10% increase on current requirements. It will add value to beef. And, if the idea is well publicised it will allow the many millions who shop at Morrisons every week to understand more about where their meat comes from, and to recognise that meat is not just a commodity to be bought at the lowest possible price.