Inflated Prices, Deflated Consumers: The Impact of Price Increases on Shopper Behavior

The rising cost of consumer packaged goods (CPGs) is more than a grocery and retail store annoyance. From social media to the Grammys, U.S. consumers are vocalizing their inflation frustration — and pointing fingers at who they think is responsible. Many feel that brands themselves are behind pricing increases (and with good reason). The New York Times recently reported on soaring food prices, noting some companies reported record profits thanks, in large part, to increased product prices. But it’s not just corporate pricing increases that are responsible for inflated costs. Extreme weather events, supply chain issues, and governmental regulations have all contributed to the squeeze on American wallets.

As those in the CPG space know, when consumer dissatisfaction builds, shopping behaviors can take dramatic and unforeseeable turns. Emergent research shows that in early 2023, consumers are taking grocery store and retail store shopping action as a consequence of perceived price increases. Specifically, 45 percent of consumers now buy certain products less often; 29 percent only purchase certain products when they’re at a discount; and 22 percent have switched to generic or store brands. For both new and established brands, these challenges to expected consumer behavior can put one’s marketing strategy into a tailspin. Thankfully, arming yourself with the knowledge of how consumers react to pricing increases can soften the blow. Here’s what to consider:

Nothing to Yolk About

The product on everyone’s mind right now is, undoubtedly, the incredible, edible egg. Ninety percent (90 percent) of U.S. consumers in January 2023 noted perceiving a price increase when shopping for eggs, with availability, pandemic-related issues and transportation costs being the top factors to blame. While social media users have taken to their favorite meme formats to protest the price increase, some consumers have gone so far as to purchase live chickens in the hopes of combatting the impact of rising egg prices on their grocery budgets. This kind of consumer chaos might ring comical at first, but the impacts of inflation-related buying decisions are no laughing matter. As shoppers scrimp in certain aisles, they’re likely to do the same in others.

As consumer loyalty wavers in favor of lower prices, brands will need to keep one eye on perceptions around cost and value and the other on marketplace trends. For brands and suppliers, it's important to avoid scrambling for information — brand health tracking can ensure that products are positioned where they need to be now and in the future for grocery stores and beyond.

Generic OTC Doing All Too Well

While consumer sentiments around health and wellness-related product costs are already complex, price inflation has added salt to the wound. Over-the-counter (OTC) medicine price increases have 51 percent of consumers buying generic or store brands of pain medication, and 46 percent buying generic or store brand cough and cold medication. Consumers point to manufacturers and lingering effects of the pandemic as the main culprits behind the rise — and the numbers seem to back their concerns: The global OTC drug market is forecasted to grow to $331.1 billion by 2023, and pharmaceutical companies raised prices on more than 1,000 drugs in January 2023 alone. The stress of rising OTC drug costs is outweighed only by the potential health impacts we’ll see as consumers struggle to balance their wellness needs with their wallet.

For nongeneric brands and product lines, evaluating the competition and product value in tandem will be crucial. Directed shopper research can leverage real consumers in real markets, capturing their experience of products both at home and in the grocery store — and offering insight into what makes products standout from unbranded brethren.

Bulking Up

“Shrinkflation” has become a popular term to describe when manufacturers subtly reduce packaging size without lowering (and, sometimes when heightening) product pricing. For many consumers, this is just further proof that brands themselves are behind rising CPG costs. Bulk purchasing has become, for many shoppers, a means to “claw back” the disappearing volume of their favorite products, with 15 percent of shoppers utilizing this strategy. Regardless, the negative association with these perceived “skimpy” sales tactics remain.

There’s a hidden positive to bulk shopping that grocery stores and other retailers can, and should, leverage: sustainability. Millennial shoppers are especially concerned with making sustainable CPG choices, even when it means increased pricing. Bulk shopping also reduces store delivery emissions and cuts waste by pushing older inventory off the shelf before newer products are sold — a win-win for retailers and green-minded consumers alike. But beware, turning toward a bulk retail strategy, while lucrative, will need to be approached with foundational market research so as to not to be perceived as “greenwashing” to savvy shoppers.

Meeting Inflated Expectations

While we can’t know which direction the economy — and shopper behavior — will go, we can prepare to meet expectations by leveraging in-the-moment research and truly listening to consumers. The impacts of inflation on grocery store prices have many struggling. Employing empathetic, human-focused solutions will be key to weathering the storm of consumer frustration — and learning how to shift products, services and communications in response.

Emily Trentacosta is the senior research director of strategy and insights at AMC Global, an international custom market research firm specializing in launch strategies and brand tracking.