A cost-of-living crisis, a housing crisis, an energy crisis, and near constant talk in the media of an impending recession – those old enough to remember 2008 might be forgiven for freezing upon hearing the word – so it is no wonder that a mood of uncertainty and pessimism has spread across the public, yet card spending increased in November 2022 by 13% (year on year).
While we have seen lay-offs and redundancies across the tech sector, it is important to remember that this is due to over-extension during the pandemic and not entirely the fault of our current climate. It is also important to remember that this is not 2008, when the country and the public were caught unaware.
The pandemic saw Irish households save huge amounts of income, something that looks to continue based on CSO figures for households – Irish households saved 19% of their income in the third quarter of 2022. Unemployment is at 4.4%, lower than pre-pandemic and the lowest percentage since 2007, real GDP growth is expected to surpass inflation at some point in 2023. All of which shows that Ireland is strongly placed to rebound once the current period of inflation passes.
For now, though, consumers are adapting their thinking and approach to spending as we enter the new year, but how do they do this while maintaining a level of the lifestyle that they have become accustomed to and is there still room from brands that create moments of joy and escapism?
RATIONAL (SYSTEM 1) THINKING BECOMES DOMINANT
Consumers are starting to think more and more with their head as the cost-of-living crisis persists. In our MCCP research over the last year, when probing context and behaviours we are constantly hearing that consumer are reigning in on big purchases, either cancelling them or pushing them out, whether it is the golf or yoga club membership or extension for the house.
And it is not just big purchases that our heads are thinking about. 33% of Irish consumers stated they would turn to online shopping to limit impulse buying in a September 2022 report from PayPal. While the same report found that a further 25% of Irish people have cancelled their gym memberships, instead opting to exercise in the great outdoors.
The rise of private label in supermarkets (46% of the overall grocery market in Ireland) also demonstrates the growing savviness of consumers in how they spend. Will you really notice the own brand tonic in your G&T, will the kids really be able to tell the difference between branded pasta and private label?
EMOTIONAL (SYSTEM 2) THINKING TAKES ON A SMALLER MORE CONSISTENT ROLE IN CONSUMERS LIVES
Adapting and controlling spending as described above allows consumers to indulge their emotional (system 2) thinking in everyday small ways creating micro-moments of joy and escapism that please and distract from our uncertain world. We hear participants describe moments like these in our qualitative research and see further evidence in a 2022 Pay Pal report which found that 80% of Irish people feel it is important to spend money on a treat, despite inflationary pressures. All of which shows there is a growing moment-economy where brands can help block out the negative and suspend reality - even if it is only for a little while!
So what treats are Irish consumers reaching for?
The small permissible kind. Takeaway coffee: Lolly and Cooks report unwavering sales of coffee and coffees with milk alternatives across the year. Sweet treats and pastries. Musgraves reported in September that 63% of Irish consumers are opting for more affordable treats. And there is still a place for treat activities that happen outside of the home. Revolut annual consumer spending report, released in December, found spending in 2022 in restaurants increased by 50%, while spending in beauticians, barbers and hair salons was up 17.7% in 2022.
BRANDS NEED TO SOLVE FOR LIFESTYLE AND RESPONSIBILITY
What all of this shows us is, the inherent tension consumers are wrestling with – what areas can they cut back to maintain (as close to) their accustomed style of living.
Aldi’s Christmas saving card is great example of this – the card can be picked up during the year, in store, and topped up (with any amount) when paying for the weekly shop. Initiatives like this allows consumers to spread ‘the big spend’ out over the year meaning they do not have to compromise come Christmas time if money is tight.
Small treats like coffee and pastries are providing everydayhttps://www.mccp.ie/ and affordable luxuries that provide moments of escapism. Regardless of the cost (coffee: €3-€5, Pastries: €1.50-€4.50) these products provide a blue-print for how bigger and more expensive brands can build and demonstrate value in the mind of the consumer and start to leverage the moment economy.
There are other ways though, that brands can create value in the mind of the consumer and not all of them are linked to price or escapism. If a brand can demonstrate versatility – that its products and services serve more than one value, consumers can rationalise out the purchase easier, particularly if it is a big spend.
Brands can also lean on their values and CSR. Time and time again we hear participants in our research talk about causes that are important to them: Climate change, gender equality, tackling racism, community investment. Articulating your brands efforts in one of these, or a similar area will help build equity in the consumer mind and create value that exists separate from price.
- Is your brand solving the consumer need to balance responsibility and lifestyle - providing a valuable and attainable moment of escape and joy?
- Are your brand and product propositions designed to take advantage of the growing moment economy?
- Are you effectively communicating all of your products clearly and demonstrating the variety of uses it might have, so consumers feel they are getting more ‘bang’ for their buck and more easily justify the purchase.
- Have you clearly articulated and tangibly demonstrated your brand’s work across topical issues such as CSR and Sustainability to create value (beyond price) by appealing to consumers ethical beliefs.
Want to start leveraging the moment economy? Or position your product or service as a conduit for escapism, or a champion of the consumer? Or maybe you just want to hear more about how we can help develop your brand strategy? Feel free to reach out to us at firstname.lastname@example.org