Businesses must overcome a growing crisis in consumer price sensitivity, reveals new DMA research

New research by the Data & Marketing Association (DMA UK) and Tapestry Research, the Customer Engagement: How to Win Back Customers and (Re)Build Loyalty 2023 report, reveals some important consumer habits in response to the ongoing cost-of-living crisis, which show consumers have become increasingly price sensitive over recent years, with a huge surge in the past year.

Discounts and promotions are an increasingly important driver of consumer demand in a challenging economic climate, with 51% of UK adults using them to trial new brands and products (up from 44%).

However, the downside of more consumers becoming hooked on discounts and offers is a considerable decline in brand loyalty: 63% of consumers claim they often change their mind about what brands/shops/sites to use as a result of deals and offers – an all-time high since the DMA’s research began.

In addition, almost half (48%) would even stop buying from a brand if they stopped offering deals – also an all-time high in the research – suggesting price sensitivity is increasingly impacting brand loyalty.

This is likely a key indicator as to why 81% of consumers stated that they spend time comparing prices before making an important purchase (up from 67% in 2022).

Ian Gibbs, Director of Insight at the Data & Marketing Association (DMA UK), said: “The use of price promotions is a vital tool in helping businesses hit their short-term KPIs. However, their over-use will result in consumers becoming hooked on deals and offers, displaying the higher levels of price sensitivity (or price elasticity) that ultimately eat into profit margins. Businesses need a cost-of-living crisis exit strategy whereby they look to reduce the use of price promotions in the marketing mix, and instead refocus on brand and customer service-led reasons to drive loyalty to their brand.”

Most Consumers Feel Less Loyal

Loyalty is on the decline – with 61% of consumers feeling less loyal to brands now than they did a year ago (an increase from 41% in 2022). 48% of consumers are even diversifying their brand repertoires by using cheaper alternatives alongside their favourite brands.

The ficklest consumer behaviour is in the ‘essential’ categories (e.g., groceries, household goods) where loyalty has dipped the most.

An average of 1 in 3 consumers have said they’ve started using cheaper grocery or household product brands alongside the ones they normally use, with a further quarter saying they’ve completely switched away from their normal brand.

Gibbs concluded: “Despite the state of the world around them, consumers are feeling personally empowered by their ability to shop around for the best deals. A great deal might be good news for a consumer of course, but we have seen consumers starting to have concerns that lower prices might mean worse customer service – which is not good for anyone in the long run. Consumers want a brand that’s reliable and value for money – so, brands cannot afford to be unfit for purpose while household budgets are under pressure, especially with competition for their loyalty fiercer than ever.”

Further information can be found on the DMA website:

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