Splurge or Save: Navigating Brand Choices Amid Inflation

Are consumers trading down at the grocery store during these unprecedented times in the global economy? A recent McKinsey & Company study notes, "Even though consumers are still spending, they're seeking value. Eighty percent of our survey respondents said they're changing their shopping behavior by trading down, compared with 74 percent of respondents when we last asked them in July 2022." So, what can brands do to ensure they don't lose market share to more affordable alternatives like generic store brands? The latest research from the Yale Center for Customer Insights (YCCI) suggests that, on several occasions, consumers still opt for name-brand splurges despite the pressure to cut costs.

Honing Proprietary Taste
Many consumers reach for a branded option at the grocery store over the cheaper generic label option because of the perfectly calculated seasoning, recipe, or taste associated with premium products, both in terms of the distinctness and the amount of flavor. For example, name-brand savory snacks with proprietary flavors like Dorito’s Nacho Cheese or Snyder’s of Hanover Honey Mustard & Onion might be seen as especially hard to imitate.

Research found that consumers have the impression that name brands continually produce new and delicious flavors. As a result, they are more prone to find value in promotions like a BOGO deal that would allow them to try a new flavor from a name brand.

YCCI research found that messaging which capitalizes on these positive associations with name-brand flavors and taste speaks to consumers, especially among lower and middle-income households. Marketing that leaned in on this insight and highlighted specific flavor offerings resulted in a 9% increase in intent to purchase in an A/B study against a control message. Another similar test showed that messaging that highlighted the amount of seasoning in each bite increased purchase intent by 18%. 

When Social Occasions Call for Higher Priced Purchases
Much of consumer thinking around purchasing name brand is dictated by social moments. For example, some name-brand savory chips are more acutely associated with hosting gatherings and higher-income consumers are averse to offering store brand snacks when hosting or attending parties. As one research participant put it, “If I’m [buying for] people, I’m more concerned about the quality of [chips]. So, I’ll buy something I know is good or better. … I don’t want it to be something that they don’t like, I want them to enjoy themselves.”

The same goes for premium products like beer — in a qualitative study on beer, consumers voiced that premium beer was their choice for social gatherings to help them look good in front of their peers. They also expressed that the perceived reliability and quality of premium beer, which would be more widely enjoyed, made such beer more appropriate for larger, in-person gatherings.

Interestingly, important gathering occasions can be on a smaller scale than one might assume. It turns out that consumers can be more attentive to the offerings at an intimate gathering with close friends and family than at a large party. In qualitative studies on both snacks and whiskey, YCCI found that while consumers might offer a cheaper alternative for a large party with less social intimacy, they want to provide higher quality items when among close friends.

When it comes to kids and snacks, YCCI research revealed that an important social moment occurs in the cafeteria at school, and this moment has important implications for how parents shop and decide.

Qualitative research revealed that parents are sensitive about how their children view the snacks in their lunchbox versus those of their peers. Imagine a cafeteria setting where students are trading chips: those with name-brand snacks can easily participate while others with lesser-known or valued items might feel embarrassed. But do these moments then impact the parents and influence shopping behavior?

YCCI tested this insight in a quantitative study and found that messaging that highlights the parents’ social standing functioned to incentivize name-brand purchases above a generic control message. Ads featuring text like, “Be the cool parent.” and “Don’t embarrass your kids…,” increased intent to purchase for name brand vs. control by between 10%–16% over the control.

Conclusion
Beliefs about taste and social prestige are two major motivating factors in the purchase of name brand products during inflation. Zeroing in on relevant social moments like hosting close friends or in the case of snacks, lunchroom cache, has the potential to influence decision-making. Leaning into proprietary flavors and highlighting taste can also provide a service to consumers who are seeking gratification in their name-brand purchases.

Interested in collaborating with us to uncover more insights into the drivers of consumer behavior? Reach out to us at ycci@som.yale.edu.

Discover more insights from YCCI here.