We live in a complex world where consumers are facing vast financial pressures, but these pressures are felt differently across the globe. Our team at EyeSee looked into how various pricing adjustment strategies affect shoppers. We’ve previously published key findings for the US market, as well as a more detailed breakdown of four tested CPG categories; now let’s take a closer look at the results for the APAC region.
How does APAC cope with price increases?
EyeSee has just wrapped up its first pricing study in the APAC region to identify how consumer behaviour shifts when exposed to different pricing adjustment scenarios. In studies like these, it is important to test various categories, not just prices. The psychology of buying household items and the mindset of buying chocolate are completely different. The frequency of purchase depends on product category, even in unstable times like these.
Using a conjoint exercise, we looked at four shopping categories:
• Two high-frequency categories – sweets and instant noodles
• Two low-frequency categories – face moisturisers and antibacterial handwash
Consumers were shown different options for increased prices: 5%, 10%, 15%, 20%, and 25%.
Different adaptation scenarios are possible, and while there can be an increase in purchasing multipacks and large packs for household items, this is not what we would expect for indulgence products. Certain patterns and cycles reappear in these situations, and if you are a brand, it is important to stay in touch with the consumer through research, to understand which phase of the cycle they are in and which stage the product category is at, and to consider all these factors to best curb the pressures of the situation.
Here are some of the main findings.
Back to basics and functional
Regarding low-frequency categories, as the crisis continues, consumers are very much looking to cover the basics and stick to essentials. It is important for brands to understand that this is what consumers are searching for when they are choosing between a variety of face moisturisers and antibacterial handwash. Innovation and flavours won’t be dealbreakers – it’s primarily about simplicity, price, and necessity.
When it comes to noodles, a product in the high-frequency category, the price of the category leader does not significantly impact consumer purchasing behaviour. Even if the price increases, the number of purchases remains relatively stable; consumers’ attachment to the well-established leading brand is not at risk but is rather reinforced. This serves as further evidence that consumer behaviour tends to gravitate towards the basics during uncertain times.
Chocolate is still worth it
In our pricing study we had a category for impulse buys, such as chocolate and sweets. We observed that the inflation of prices for small packs of chocolate doesn’t decrease their consumption; on the contrary, it increases it. At the same time, there is a decrease in the consumption of king-size packs and multipacks with increased price. Our hypothesis is that this is probably because small-sized chocolate is treated as a small indulgence and something consumers don’t want to give up.
Knowledge and skills bring optimism
In the Philippines, around one-third of shoppers are price-aware and savvy consumers. They focus on price, calculate the price per unit/kilo/ounce, and know where to find promotions. We found that they are very optimistic about their future personal financial situation, employment security, and job options, as well as the financial situation in the country and the world. This is probably because they have a greater sense of control over their spending, so they feel like they know how to budget and don’t feel like they have to give up anything. As long as the gap between prices and salary doesn’t get too big, inflation won’t ‘break their spirit’ and will keep them spending and optimistic.
(Nothing) sweet about inflation
However, for most APAC consumers, the pressure of inflation is high and it affects their behaviour a lot. It is very important to understand the changes in their behaviour, their new needs, and how these combine to influence the industry. Unpredictable times call for highly predictive insights obtained through relevant tools and research.
While there are many price-aware consumers who can deal with the financial pressure, the majority still can’t handle it. They won’t reject small pleasures and treats such as chocolate, but that is due to the well-known ‘lipstick effect’: the psychological observation that consumers will still tend to buy small luxury items even during an economic downturn. Cash-strapped consumers want to treat themselves to something that lets them forget their financial problems and enjoy a modest thrill. This can’t be applied to low-frequency categories like face moisturisers and antibacterial handwash because the rules are different there and consumers only want the basics.
Knowing all this, it’s crucial to understand your specific categories and how consumer behaviour can change swiftly depending on their needs and the products on offer.
This article was first published in the Q2 2023 edition of Asia Research Media