Consumer confidence remains fragile and volatile
All of the markets we track remain in negative territory on our Consumer Confidence Index at the end of the year and all markets have seen peaks and troughs throughout the year.
Pressure on budgets remains intense across European households and we have seen significant declines in perceptions of disposable household income in the latest across the UK, Germany, Spain and Nordic markets. We have also seen growing concerns around employment security, with perceptions of personal job situations down significantly this period in Italy, Germany, Spain and the Nordics.
So what?: The volatile picture in multiple markets means that brands must keep their finger on the pulse of the reality for their target consumers, so they can continue to optimise growth in a challenging trading environment.
Consumer spending remains focused on the essentials
With pressure on incomes and uncertainty about the future, spending on discretionary categories remains under pressure across the board. For example, in the alcohol sector, the festive season has not seen consumers prioritise spending on drinks, either in or out-of-home. Younger consumers in particular, appear to be cutting expenditure in this sector, with nearly two-thirds of 18–34-year-olds stating that inflation has impacted what they spend on alcohol both in the retailers (63%) and in the hospitality sector (67%).
So what?: We continue to see brands gaining share by offering something different to consumers looking to spend strategically. In the year ahead, brands will need to continuously review their range and offer to ensure they are still relevant to the needs of consumers.
Defining the right value proposition remains paramount
It’s evident that brands will need to communicate value for money to consumers in the current environment. However, data from our latest wave shows that it is also critical to be mindful of the nuances of how value is defined by different groups. For example, we have seen that older generations typically have a more traditional, price-point– based view of how value for money is defined. Whilst price-point is still important for younger consumers, more indirect features and messages (such as extended warranties, customer testimonials and exclusive sales / promotions) can play an important role in communicating value.
So what?: Brands need to be clear about the needs of their target audience for their communications. In addition, it is also crucial to reflect on the key touchpoints for engaging with this audience (especially at the point-of-sale), to ensure that the right message is being delivered at the right time for maximum effect.
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