With high inflation and talk of a possible recession, the current economic situation in the UK can take its toll on consumer spending. How have customers changed their spending behaviour, and what role does technology play in these new habits?
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The current cost of living crisis in the UK has affected consumer perceptions towards products and services. The first part of our survey revealed that consumers were increasingly anxious about rising prices and that they expected businesses to help them manage their budgets by offering discounts and other deals. However, have these concerns impacted consumer buying behaviour? Also, how can businesses react to these changes and identify the best possible price points to meet customer demands while remaining profitable?
Capterra surveyed 1,006 UK consumers who either pay for home expenses and goods in their household or share the responsibility with people they live with. We wanted to gain insights into where these consumers were adjusting their spending on products and services and the role of technology in these new behaviours. With this, how can businesses rethink their discount and pricing strategies to address these new habits and expectations? The full methodology for conducting this study can be found at the bottom of this article.
88% of respondents have changed spending habits due to the current economic situation
The current cost of living crisis has significantly impacted people’s finances, and as a result, many have had to change their spending and saving habits. According to our survey results, 88% of respondents have changed their spending behaviour due to the current economic situation.
If the economy is in a downturn, consumers may feel uncertain about their financial future and become more cautious about how much they spend. Additionally, if people face financial difficulties, such as job loss or reduced income, they may need to cut back on expenses and prioritise essential purchases.
Where are respondents who are changing their habits trying to reduce costs?
Many respondents who are changing their habits to reduce costs have identified specific areas where they are spending less.
As a result of the cost of living crisis, the products that consumers who have changed their purchase habits have most commonly reduced their spending on are clothing (72%), groceries (66%), and bars and restaurants (66%).
There are also a few products that this group of respondents have stopped purchasing altogether. Nearly two in ten have decided to stop purchasing electronics and domestic appliances. Businesses in these sectors must find ways to appeal to these consumers to maintain customer loyalty; for example, by educating consumers on the benefits of energy-saving features or providing attractive offers. However, beyond cutting down on purchases are there other ways that customers are trying to reduce their spending?
What new spending behaviours and habits have consumers adopted?
We wanted to know if the current economic climate had also led consumers to modify their shopping habits to find better deals. According to our survey results, 79% of respondents who have changed their spending behaviour are looking for more discounts. Along with this, respondents are doing more research to compare prices and products before making a purchase (49%), doing more couponing (37%), and participating in loyalty programs more often (38%).
Interestingly, younger generations are less likely to incorporate these habits. For example, only 58% of respondents aged 18 to 25 say they are looking for more discounts, compared to 75% of those aged 46 to 55. This suggests that younger consumers may have different spending priorities or are less concerned with finding the best deals. Businesses should always consider their target market when deploying discount strategies.
In addition to seeking discounts, our survey found that many consumers who have changed their behaviour are buying cheaper products (68%), buying store-brand products more often (55%), and delaying or stopping big purchases (53%). These changes indicate that people are more focused on getting the essentials they need at a lower cost. However, we wanted to know if spending habits would change further if the economic situation were to worsen.
60% of respondents would cut back on groceries if prices keep rising
Our previous survey article showed that consumers are increasingly anxious due to the current cost of living crisis. The challenges of purchasing certain products can cause more worry than others. Four in five survey respondents were somewhat or very worried that they wouldn’t be able to afford their household bills due to the current economic situation. Nearly three in ten respondents felt the same concern about not affording groceries.
If prices continue to increase, consumers may be further deterred from spending money on some products and services. We asked our survey respondents how their purchase behaviour would change if prices were to increase by 15%. The top four products that consumers would reduce their spending on were:
- Groceries (60%)
- Clothing (59%)
- Bars and restaurants (56%)
- Beauty and sanitary products (56%)
There are also items respondents would stop purchasing altogether. Fitness services and gym memberships (26%) were the most frequently chosen service that consumers would stop paying for, followed by sustainable products (24%) and electronics (24%).
Businesses must be cautious when increasing their prices and pay attention to the way consumer are changing their shopping habits to adapt to the economic situation. Brands should consider offering discounts, coupons, and customer loyalty schemes to prevent losing customers who are increasingly comparing prices to find the best deal.
In addition, name brands competing with cheaper store brands should focus on communicating to their customers their unique value proposition, while also understanding how they can meet customer needs. Businesses can leverage customer reviews and surveys to gather insights that can help them differentiate themselves from lower-priced options and build their brand community.
Consumers look online to find the best deals
Online or on-site shopping both have their perks and setbacks. According to our survey, in-person shopping tends to be the better option for over half of our respondents when it comes to checking the quality of products (59%) and buying exactly what you need (54%).
However, aspects where more respondents preferred online shopping to buying in person include:
- Getting the best deals during sales periods (67%)
- Comparing brands/products/retailers to find cheaper products (60%)
- Flexible payments (60%)
- Finding promotions and deals (58%)
Consumers can use a variety of tools to help them find the best deals online. While many were already using these tools before the economic downturn, we wanted to know how many consumers began to use these during the cost-of-living crisis. Our survey indicated that consumers had most commonly started using the following four types of apps and platforms during the current economic crisis:
- Discount and coupon apps (24%)
- Comparison apps and platforms (24%)
- Secondhand platforms (22%)
- Loyalty program platforms (22%)
We looked further to try to understand how consumers were using these platforms and how and why businesses should consider incorporating them into their strategies.
Which platforms do respondents that use discounts, coupons, and loyalty programs use to find deals?
A combined 70% of respondents are using loyalty program apps, regardless of whether they began using them before or during the economic crisis. Additionally, a combined 58% of respondents currently use discounts and coupon apps.
When it comes to finding discounts and coupons or loyalty program offers, there are a variety of online apps and platforms available to consumers. We asked both groups of respondents where they typically searched for offers.
Online marketplaces are checked by two-thirds of discount app and loyalty program users
The majority (66%) of these respondents check online marketplaces like Amazon and eBay for discounts. Businesses can consider using these marketplaces to offer exclusive discounts or promotions to attract and retain customers. By partnering with these platforms, businesses can leverage their vast customer base and gain more visibility. They can also promote their products and services through sponsored ads or by creating a store page on these platforms.
46% of these respondents search for deals on coupon-finding websites
Nearly half of our survey respondents that use loyalty programs or discount and coupon apps search for offers on dedicated deal and coupon-finding websites. Businesses can use these sites to offer promo codes and exclusive discounts. Brands must ensure their offers are attractive enough to stand out among the plethora of promotions on these websites.
Businesses should optimise their websites to offer discounts
Over a third (36%) of respondents who use discount apps or loyalty programs seek offers on vendor websites. Businesses should encourage customers to purchase directly from them and consider offering discounts and loyalty programs exclusive to their websites. The following measures can help optimise a website to offer promotions:
- Create a dedicated web page for discounts to help customers access available deals. Any fields for adding a discount code should be clear and simple to use.
- Use tools like shopping cart software to ensure eCommerce sites incorporate shopping carts that respond automatically when consumers click on discounted products or codes. These can validate coupon codes and help users see the savings applied to individual items in their cart.before they enter payment details.
- Leverage point of sale (POS) software to integrate physical retail stores with eCommerce platforms and create a unified shopping experience for customers. Many POS tools can also help retailers manage inventory to ensure they have enough stock of products on sale and have integrated loyalty programs.
- Promote discounts and offers with pop-ups and banners. By using tools like display advertising software, businesses can use banners to promote discounts to customers as they browse the website. These can be triggered by certain actions, such as adding items to the cart. The discount banners can also automatically add a code to their cart to ensure customers use discount codes successfully.
Newsletters and social media are alternative ways to reach out to consumers
Over a third (35%) of respondents who use discount platforms or loyalty programs find their offers in newsletters. Email marketing tools can help businesses send promotional newsletters, reach out to customers, build relationships, and deliver personalised messages and discounts to their inboxes.
Additionally, social media can be a valuable tool for creating promotions. 33% of respondents who use discount platforms or loyalty programs search for offers on a store’s social media account. Businesses can post about new discounts or promote offers exclusively for social media followers, while encouraging customers to share posts with their friends and family.
Companies can also reach out to respondents that don’t use discount sites
Even respondents that don’t use discounts, coupons, or deal platforms are willing to interact with brands to get discounts. Of our survey respondents who said they didn’t use these platforms, 55% said they would be willing to respond to brand surveys to get better deals.
Businesses can leverage brand surveys to gather customer feedback and improve their products or services, while offering discounts to incentivise customers for this valuable information.
Additionally, nearly half (49%) of these respondents said they would download a brand’s mobile app for discounts. Businesses should consider building their own apps and promoting them across different channels. Offering users a discount for installing the app can encourage downloads. Apps can help companies build brand loyalty and gather valuable customer data and preferences to improve the customer experience.
What different aspects can consumers look for when comparing products?
Businesses must work hard to differentiate their products and services from their competitors. But what do consumers look for when they compare similar items?
Our survey shows that when comparing products online, the majority of respondents who used comparison platforms (75%) primarily compare prices. This underscores the importance of competitive pricing strategies to attract consumers.
How can technology help businesses with pricing?
Decisions regarding price increases or special offers may impact customer loyalty. When developing a pricing strategy, businesses can use tools such as price optimisation software to:
- Collect and analyse market data: Analysing customer behaviour patterns from multiple sources can help brands deliver personalised offers to specific groups of customers. Importantly, these data analyses can help businesses decide when is the best time to offer discounts and price reductions.
- Monitor competitor prices: Many price optimisation tools include dynamic pricing features to analyse competitor prices so brands can decide if they want to match or beat them.
- Automate price changes: When performing sales forecasts and adjusting prices, price optimisation software can save manual work by carrying out automatic sales changes across several channels at the same time. This can reduce the risk of human error, allowing businesses to provide accurate and appealing offers to their customers.
In addition to price, customers place a high value on brand reputation and product quality. 54% of respondents said they compare online reviews when evaluating products or services. Businesses can actively monitor and respond to online reviews to maintain a positive reputation and address any negative feedback.
The third most common aspect that customers compare when evaluating online products was product or service features (42%). Businesses can differentiate themselves by highlighting unique or desirable features of their products or services that set them apart from competitors. Brand management software can help businesses consistently communicate their unique selling points across different channels and touchpoints, such as websites, marketing material, and packaging.
Firms should review pricing strategies to adapt to new consumer behaviour
Our research shows that the current UK economic crisis has impacted consumer spending habits in the following ways:
- Respondents are looking for more discounts and doing more research to compare prices and products before making a purchase
- Many consumers are also buying cheaper products, delaying or stopping big purchases, and buying store-brand products more often
- If prices continue to increase, consumers will likely cut back further on their spending and stop buying some products and services altogether
Businesses may need to offer more discounts and customer loyalty schemes to prevent losing customers who are increasingly comparing prices to find a better deal. Technology can help businesses meet these demands. With consumers using discount and coupon apps, comparison platforms, and searching for offers on online marketplaces, vendor websites and social media, among other platforms, businesses that build a presence in these spaces can extend their reach to potential customers.
However, it can be challenging for businesses to offer discounts and promotions and remain profitable. Therefore, companies must be strategic when determining the timing and durability of their promotional campaigns. By leveraging data and analysing competitor and consumer behaviour, businesses can estimate the best moment and most appropriate discount strategy to launch their promotional campaigns.
Finally, while pricing strategies can play an important role in maintaining customer loyalty during difficult economic times, alternatives exist for companies that may be unable to compete on price or cannot afford to offer continual discounts that risk devaluing their brand. These brands should find other ways to differentiate themselves from competitors and highlight elements consumers typically compare, such as quality, product features, and delivery speed, ensuring their marketing efforts focus on communicating their unique value proposition to the consumer.
To collect the data for this report, Capterra conducted an online survey in March 2023 of 1,006 consumers who are in charge of paying home expenses and goods alone or with someone else. Respondents were selected based on the following criteria:
- Resident in the United Kingdom
- Over 18 years old and under 65 years old
- Responsible for paying home expenses and goods either alone, or with a partner, or with people they live with