The current cost of living crisis is challenging consumers in ways that are changing their spending habits. Across all categories tested, most consumers have made changes or are planning to make changes to their spending habits.
While it may be clear that cutting back is a common response by consumers to the cost of living crisis, it is useful for brands to understand where, how much, and why. For example, 39% of consumers who spend on eating out are cutting back on this versus 18% who have stopped spending on this completely. 21% of consumers who drink out of home have stopped spending on this already, and 21% of consumers who spend on fitness or sport have stopped spending on this.
These pragmatic mindsets are sculpting what engagement methods and loyalty drivers are most effective. Interestingly, 51% of consumers now agree that they often change their mind about what brands or shops to use as a result of deals or offers, in comparison to 49% of consumers in 2020.
“Our new research reveals consumers are more likely to have cut back their spending than to have stopped spending completely. This places consumers in an interesting mindset where they are prioritising their needs and questioning existing habits and loyalties. Consumers still want to be loyal to the brands they love and they also want to retain the habits they have built up,” said Chair of the DMA Customer Engagement Committee, MD at REaD Group Insight. “However, that may not always be possible in these unprecedented times, so offers and cheap prices are becoming increasingly attractive. For brands, that creates a challenge, to stick or to twist, to keep doing what built up loyal customers or to chase possible switchers with offers.”
Consumer spending on holidays and media subscriptions seems to be more protected, as 38% and 42% aren’t expecting to change their current spend.
The rising disloyalty mindset
Those consumers who are planning to cut back will put further pressure on existing loyalty mindsets as they start to change their spending habits.
Feelings of disloyalty have increased among consumers over the past two years – 41% of consumers claim that they feel less loyal to brands and companies than they did a year ago, in comparison to 34% stating this in 2020.
In terms of the types of mindsets consumers best associate with, there has been notable growth observed in Habitual Loyals* – rising to 21% from 17%. ‘Active Disloyals’ and ‘Situational Loyals**’ have declined slightly (from 21% to 18% and 11% to 9% respectively).
These changes are likely the result of consumers placing a spotlight on non-essential purchases while personal finances are strained.
Tim Bond, Director of Insight at the DMA added: “The UK’s cost of living crisis provides a significant backdrop to any recent changes observed in consumer attitudes to loyalty. But change doesn’t have to be a bad thing if brands are responsive and actively seeking opportunities for how they can best serve their customers. While we have seen an impact on discretionary spending and shopping habits, this hasn’t stopped all consumers from feeling loyalty – just the most effective ways for brand to earn and retain it.”
To find out more about the research, visit: https://dma.org.uk/research/customer-engagement-how-to-win-trust-and-loyalty-2022
*Habitual Loyals – consumers displaying loyalty to everyday items over more expensive items
**Situational Loyals – consumers displaying loyalty when purchasing more expensive items