Changing Consumer Behavior?

January 4, 2010

Could it be that the U.S. consumer is finally adopting my “good is good enough” attitude when it comes to products?

For years, I have insisted that I don’t need the best when it comes to consumer products. From TVs to cars to shave cream, I’ve always settled for lower-priced products, reasoning that products that do just an “OK job” are fine with me. It all stems from being über-cheap and not deriving any pleasure from the majority of material goods.

Now, it seems, I’m not alone and it could have implications for consumer packaged goods companies. According to a recent study by McKinsey, in any given category, an average of 18% of consumer-packaged-goods consumers bought lower-priced brands in the past two years. Of the consumers who switched to cheaper products, 46% said they performed better than expected, and the large majority of these consumers said the performance of such products was much better than expected. As a result, 34% of the switchers said they no longer preferred higher-priced products, and an additional 41% said that while they preferred the premium brand, it “was not worth the money.”

As a result, McKinsey researchers argue, a growing number of consumers are now in play for makers of lower-priced products. The percentage up for grabs varies by category and depends on how many consumers switch from higher-priced brands, their experience with cheaper ones, and the way they revise their buying intentions. For example, only 12% of beer buyers switched to cheaper brands. Of those, 31% said that their experience was more positive than they had expected, which means that only about 4% of customers are in play. Among buyers of cold and allergy medicines, however, more than 20% tried a lower-priced option, and 48% of those consumers said the experience was better than expected. That means 10% of the people who buy cold and allergy medicines are now in play, according to McKinsey.

The same could be true in CPG categories close to my heart, namely household and personal care products. But I’m inclined to think that all it takes to break the McKinsey theory is the green eye of envy. Once the one well-heeled consumer starts spending lavishly again and it won’t be long before everybody on the block just “has to have it.” That goes for electronics, appliances, cars and ultimately, cosmetics too.

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