Marketers have to start taking into account the impact of higher gas prices on their customers buying habits. The Nielsen Company, a global information and media company, conducted a survey in December 2007, when regular gas averaged $3.06 in the US which converts to 81 cents per liter in Canada.
The key finding according to Todd Hale, senior vice president of Consumer Shopping & Insights is:
“Manufacturers and retailers need to be alert to the fact that consumers are looking to save by altering where they shop, how they shop and what products and brands they buy. Value, convenience and competitive pricing will be more important than ever in the year ahead.”
How big is the impact of higher gas prices?
- 49 percent of U.S. consumers are reducing their spending to compensate for rising gas prices (up four points from June 2007)
- 70 percent of consumers are combining shopping trips and errands
- 41 percent are eating out less
- 39 percent staying home more often
The year ahead could be tough for some restaurants, but the silver lining is there may be an opportunity for consumer packaged goods manufacturers and retailers to find growth in at-home meal solutions and at-work meals. (Read my earlier post on Sensational Suppers)
Sixty percent of consumers surveyed said they had less money to spend during the holidays due to increased gas prices.
The study also points out that this could also signal an increase in shopping over the internet.
How are spending habits changing?
- The survey shows that 27 percent of consumers are reacting to gas prices by shopping more at supercenters, or megastores and big-box stores, where more items needed are in one store.
- “Nearly a third of households still travel 11 miles or more to a supercenter, and high gas prices will likely reduce the number of quick trips these households make,” said Hale.
- Twenty-five percent of consumers are using coupons to save money, up from 20 percent in June 2007.
- Twenty-three percent of consumers indicate they will buy less expensive grocery brands to deal with higher gas prices, signaling a possible boost for private label or store-brand products and lower-priced branded products.
What does all of this mean to your business?
Take some time to reflect on the impact of higher prices combined with tightening credit. Are you prepared? Does your marketing reflect the reality of a tougher 2008? Has anything changed in your marketing plan for 2008?
Realtors – Fewer people will be driving aimlessly to look for open houses and will probably rely more on their newspaper and the internet.
Retailers – Consumers will be more responsive to coupons and sales, but your advertising will have to improve to get the message to them. Direct mail to your customers will be more effective.
Restaurants – People may want to make a reservation to make sure they do not waste a trip. How effective is your reservation handling? Restaurants near shopping centers may be better off than stand-alone locations as people want to combine trips.
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