Retail Brand Advertisers Inflation

With steady retail performance off the menu, how can FMCG brands ensure success?



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February 21, 2022 | 6 min read

Although aware that consumer trends are anything but certain, retailers had reason to hope for steadier times in late 2021, especially fast-moving consumer goods (FMCG) brands

Despite major supply chain issues, reports suggested a new baseline was forming for both online and in-store grocery shopping. Some traditional habits even returned over the festive season, including visits to supermarkets to stock up on celebratory treats. Now, however, it looks like surging inflation is set to send budding stability off track as shoppers face the fastest price hike in almost 30 years.

This newest curve ball highlights two key truths for modern retail. Most obvious is the fact that industry fortunes can still turn rapidly, and as buying behaviour remains changeable, there is the ongoing need for smart adaptation. To sustain relationships and revenue, retailers must ensure marketing activities are fuelled by accurate understanding of current consumer tastes.

That, in turn, will mean harnessing tools that provide constantly refreshing insight into campaign performance, alongside the ability to instantly align messages with evolving needs.

Ensuring engagement as price pressures soar

Unsurprisingly, inflation is the largest of the impending challenges facing FMCG brands. With UK grocery price increases hitting 3.8% at last count, many shoppers will have little choice but to curb spending and keep budgets trim if rates keep growing.

Indeed, according to Kantar forecasts, sustained growth over the next 12 months will add an extra £180 to the average UK household grocery bill. This marks a stark turnaround from the shopping landscape a few months ago, when our own research found 47% of consumers were planning to spend more with retail brands over the next six months.

In fact, our most recent study reveals the economy may already be an important factor in buying decisions. For female buyers — who are statistically four times more likely to be the main grocery shopper — there is a distinct preference for mid-price supermarkets such as Tesco and Sainsburys. Clearly, meeting the needs of pressured consumers is going to involve a shift away from a focus on purpose and value (as amplified by the pandemic), and back towards traditional motivators, such as price.

But this rule won’t apply universally. Our research has also shown that for male shoppers, the preferred shopping venue is a premium supermarket. With supply chain issues thrown into the mix, there might also be a shift in supermarket preference in future, as consumers shop around to try to find the stock they’re looking to buy. To ensure messages strike the right tone, brands will need to keep a close watch on exactly how different shoppers respond to different messages, tactics, and offers.

At a practical level, that will mean going beyond basic proxies that often give a misleading view of true engagement — such as capturing accidental clicks by relying on click-through rates (CTRs). Instead, applying outcome based KPIs will enable brands to track tangible signs of performance against specific campaign objectives; this allows them to trace the precise impact made by each message and determine which offers are working for different audiences, as well as measuring ROI.

Staying in tune with evolving needs

Pandemic influence over consumer shopping behavior isn’t new to retailers or consumers themselves. As our latest study reveals, 56% recognize their habits have changed significantly. When it comes to FMCG, probably the greatest pivot has been the mass migration to online shopping, and back again. Where the first lockdown saw digital buys surge by as much as 94%, the loosening of restrictions and rising confidence have seen many shoppers rediscover their appetite for physical purchases at varying levels of intensity – peaking in May 2021 and slowing by December, although staying well above 2019 levels of in-store shopping.

So, it’s not unexpected that real-world buying is becoming the norm again for most shoppers, with 65% of respondents in our study choosing to buy groceries in stores. But once again, not all consumers are following the general crowd. For example, our data shows 55–64-year-olds align with current trends: they are most likely to do their grocery shopping in-store and visit a supermarket multiple times a week. Younger cohorts, however, have retained their taste for online purchases; with 18–24-year-olds most likely to do their shopping online and only visit a supermarket monthly.

This mixed selection of behaviors and preferences makes it critical for FMCG brands to inform their marketing activities with a regularly updated understanding of their target audience. Artificial intelligence (AI) can play a key role in helping them do so accurately and efficiently. For instance, smart algorithms can assess the impact of multiple variables on likely consumer responses, combining this insight with historic ad serving data to determine which opportunities will offer the best chance of a positive response and performance against campaign goals.

In the longer term, AI can also enable brands to fuel better connections and results over time by creating a closed measurement loop. For example, harnessing AI systems that can create models for diverse data sets will allow brands to persistently predict what consumers are likely to do, and want, next.

Retailers can pair their rich first-party data, such as purchases and consumer research, with these machine learning capabilities to reveal behavioral patterns and predict how different consumer segments will behave. This will allow FMCG brands to continuously match their marketing approaches with evolving shopper habits; adjusting ads to fit current preferences, however much they change.

With inflation likely to put a return to steady sales off the menu, it’s apparent consumer trends won’t be inching closer to normal just yet. FMCG brands must focus on further developing the versatility and data-driven adjustment they have honed across the pandemic; using insights from granular measurement to understand true campaign impact on in-the-moment audience response and adjust activity accordingly. Persistently tracking how their efforts fare, and what actions they inspire, will be essential to create a virtuous cycle of adaptation – where marketing is always aligned with current consumer preferences, not outdated assumptions.

Retail Brand Advertisers Inflation


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