The Market Pulse Survey was created as a means to measure consumers’ sentiment regarding consumption and the market, at any point in time, by comparing the results of the survey against a pre-established benchmark – the Q1 2011 score, 100 points.
This benchmark, known as IRI’s Shopper Sentiment Index (SSI), provides perspective in terms of price sensitivity, brand loyalty and changes in spending for certain lifestyle maintenance that consumers may exhibit. The SSI, and the survey as a whole, provides insight into how the economy is impacting consumers and affecting how they shop for CPGs. With a value greater than the index, consumers reflect a less price-driven mentality, given more to brand loyalty and increased capability in maintaining desired lifestyles without major adjustment.
According to data collected from previous Market Pulse Surveys, overall consumer sentiment has seen varied growth during the past few years and quarters, but what makes this particular quarter significant is the sentiment surge.
After posting an SSI of 120 for the fourth quarter of 2014, the Index jumped to 138 in the first quarter of 2015, representing the biggest increase in a quarterly SSI score since the 2011 launch, indicating an improvement in consumer outlook and confidence.
Breaking down the data into individual age groups, the survey reveals that Millennials—“typically disgruntled” and the lowest scoring group, as described by the survey—have seen several consecutive, quarterly increases, elevating their score to the highest level yet, 131 (compared to 95 in Q3 2014 and 114 in Q4 2014).
While Millennial, as well as overall, consumer sentiment is on the rise, according to the SSI, it still falls on CPG manufacturers to provide consumers with affordable options that present clear value in order to drive sales and growth, noted IRI executives who warned that misinterpreting this data, such as to see a shift in consumer preference to that of thriftiness would be potentially disastrous.
“A sharp withdrawal of value-focused programs would be a mistake,” insisted Sue Viamari, editor, Thought Leadership.
A Shift in Priorities
The consumers of today are not the consumers of pre-recession America.
“Generally speaking, based on research, pre-recession consumers had more discretionary income and less concern with how their money was spent,” explained Viamari. “The mentality is much different now. We now see a lot of deliberate purchase behavior, consumers ask, ‘what do I need vs. what do I want?’”
The Market Pulse Survey reveals a consumer mentality that is still primarily deal-seeking. Specifically, among Millennials, 25% reported having difficulty buying groceries and, as a result, 26% said they buy more on deal than a year ago. Consumers on the whole, mirror that exact behavior, exhibiting a more price-conscious and bargain-seeking mentality. Q1 2015 revealed that 29% of consumers bought 30% of their most recent basket on discount.
“Consumers are much more aware of the different shopping options, they now more consider, ‘how do I get these products?’” Viamari stated, “They are looking for opportunities to save money through the many shopping channels.”
Among Millennials, the internet has become a major source for deal shopping. According to the survey, 47% of Millennials download coupons from couponing sites such as SmartSource; compared to 45% of whom use retailer websites; 43% prefer manufacturer websites; and 35% use online deal sites, such as Woot or Groupon.
In addition to considering different shopping channels for saving money on their purchases, consumers, in general, also continue to exhibit varying money saving strategies, such as:
• Making shopping lists before entering a store,
• Looking at circulars,
• Stocking up on certain items because they are on-sale,
• Seeking out and buying store brands, and
• Selecting products to create more meals at lowest total cost.
Though the percentages for all of these money saving techniques are fairly high, hovering around 50%, they have all seen drops in their values up to 7% between Q4 2014 and Q1 2015, indicating marked declines in money-saving tendencies.
In personal care, specifically, consumers are looking for opportunities to save money by stretching product usage or using alternatives. As Viamari concedes, typically, this would be a negative, however, it also opens the door to positive opportunities to those marketers who know consumers and what they want.
The Good News
While typically a negative for the industry, these conservative shoppers are providing an alternate avenue for CPG manufacturers to pursue, if they do their research and know exactly what it is that consumers want, according to IRI. It is up to the CPG marketers to utilize the resources at their disposal to focus on consumers’ needs at a micro level.
“The broad net marketing approach no longer works, for one thing the population is becoming too diverse,” stated Viamari. “The CPG industry has the technology to understand their consumers, and their consumers want to be understood.”
In the personal care space, consumers want to save money, yet still have the spa experience, so they are turning to whomever is able to provide that option for them, according to Viamari.
“Consumers save money by using CPG solutions that are higher end; those solutions may cost more upfront than a spa treatment, but the results are more than comparable and the expense is a one-time occurrence,” she explained.
This is good news for CPG manufacturers. The positive factor is that consumer demand is leading to innovation, where innovation takes the form of higher-end, quality goods, at a premium price—what the consumers want, as evidenced by the report.
Comparing the results of the Market Pulse Survey to the results of IRI’s New Product Pacesetters Report, it is evident that product sales are strong in both the food- and nonfood-based CPG industries for those marketers that successfully understand their consumers. In the non-food sector, brands such as Cottonelle, Gain, Arm & Hammer, Tidy Cats and Old Spice all introduced extremely successful products last year.
These products found a way to offer what it was that consumers wanted— quality goods and quality price, what IRI refers to as the value proposition; they simplified daily, mundane tasks and put the power of professionals in their hands. According to the New Product Pacesetters Report, 1 in 5 consumers enthusiastically embrace new products in home and personal care and 71% want to get more done in less time with home care products.
Simplicity, both in product function and ingredients, within these product categories, will drive growth. the Pacesetters Report revealed that 1 out of every 3 of these new products do make life easier. Capitalizing on these factors, marketers can successfully maximize market reach and catalyze future growth.
The Challenge for Manufacturers
There is a need to be met and managing costs is critical, according to IRI. In the current, wage-restricted, consumer environment, manufacturers need to be able to utilize large-scale marketing analytic capabilities to create invaluable consumer insight for enhanced digital merchandising and communications.
According to Viamari, "For the near term, purchase behavior and loyalty will be strongly influenced by products and programs that meet or exceed consumers' expectations for great quality and strong results at a reasonable price point."