As inflation looms, brands have to work harder for loyalty

Yahoo

28-03-2025

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Amid economic pressures and tariff uncertainty, consumers are reassessing their shopping choices and showing less loyalty to brands, according to the EY Future Consumer Index released Wednesday. EY surveyed 20,000 consumers across 26 countries.
Price sensitivity was the No. 1 purchase consideration for 4 in 5 consumers globally. More than half of consumers are very concerned about rising living costs.
'The survey findings tell us it's simply not enough to be just good enough,' said Rob Holston, EY Global and Americas consumer products sector leader, 'Brand loyalty is in the balance and consumers aren't just buying names anymore — they're buying value, quality, purpose and performance.
Consumers are concerned about the economy, and as prices rise, they want more from brands to earn their loyalty.
Anxiety about the economy is widespread. In addition to the EY survey, the Conference Board found that consumer expectations hit a 12-year low in March as expectations for employment, personal income and business environment over the next six months dropped.
More than three-quarters of consumers are changing their purchase behavior in response to price increases, the EY survey found.
In many cases, consumers are moving away from brand names. About one-third of consumers say they no longer consider brands when making purchase decisions. About two-thirds say private label items are just as good as branded products, and just over half only buy branded products when they are on sale.
On an earnings call Wednesday, Dollar Tree said the inflationary environment had led to increased traffic at the discounter's stores.
'What's been most interesting is this time around, this inflationary environment, all shoppers across all income cohorts, including the higher income, is finding Dollar Tree as part of their solution,' Dollar Tree CEO Michael Creedon said. 'We believe it doesn't matter how much money you make, everybody is hurting right now.'
Though consumers are widely prioritizing prices over brand loyalty, all is not lost for loyalty: Two-thirds of respondents say they still value brands.
But consumers have higher expectations for value, trust and relevance.
Among customers who have left a brand for another, about half say they would return to a premium branded product if it offers better quality or performance, and one-third say they would return for better value.
As prices rise, consumers want more value for what they're paying. Customer experience can be a differentiator, Mario Matulich, president of Customer Management Practice, told CX Dive earlier this month.
'Those that are prioritizing CX as a primary offering, as a major piece and a foundational piece of their value proposition, those organizations are a position to gain market share in the in the next interim period where [inflation] may be the case, where prices are going up,' Matulich said.