Customers, squeezed hard by food inflation, are looking carefully at the cost of their baskets. Picture: 123RF
Cost-conscious South Africans are concerned about price ahead of brand loyalty, according to new data from the Marketing Research Foundation. This is leading to a rethink in sales strategy, mainly in the fast-moving consumer goods category.
The disclosure comes in new data from the Marketing All Product Survey (Maps) and covers products and brands, intermedia comparisons and a host of consumer behaviour measures.
Extensive field work done last year shows that in the grocery category, 54% of respondents say they buy another brand because it costs less, against 48% a year earlier. And 47% said they would buy toiletries based on a cheaper price, against 36% previously.
When it comes to brand loyalty in the grocery sector, 39% are brand loyal, compared with 33% 12 months earlier.
A brand manager at a leading supermarket chain tells the FM: “Consumers have become far more sensitive to price points and are loyal to brands that understand their pain and offer value for money.” He says his group has noticed more purchases, in middle- to higher-income groups, being made based on weekly advertised specials.
According to a note from Kevin Lings, chief economist at Stanlib, South Africa’s food prices were up 14.4% year on year in March 2023, the highest rate of food inflation since March 2009. Food inflation, he says, has since eased to 12%, but this is still well above target. Food is the biggest single component of the consumer price index, accounting for more than 15% of the basket.
Lings writes that the main factors influencing domestic food prices are a weaker rand, load-shedding, the need for producers and retailers to restore profit margins, and the deterioration of infrastructure, especially in rural areas.
He says local food inflation is expected to moderate to an average of 5.5% in 2024, assuming a continued slowing in global food inflation, an easing of electricity outages, an improvement in summer crop production, a stable rand, and a stabilisation of margins in the food supply chain.
Carolyn White, of shopper marketing agency Shopper Foundry, believes retailers are adopting new strategies to sustain consumer interest and ensure sales growth.
“Many are introducing novel product formats that cater to changing consumer budgets. By offering alternatives such as smaller sizes or quantities, they ensure affordability without compromising quality. This approach resonates with cost-conscious consumers and diversifies options.”
She says affordable bundles and deals have gained prominence as retailers strive to provide maximum value. By combining complementary products or services at a reduced cost, retailers can enhance purchasing power and encourage larger basket sizes, ultimately sustaining sales growth.
White says the new marketing environment is all about adding value. “Retailers such as Dis-Chem are venturing into innovative domains to provide holistic value to consumers. The chain’s entry into the medical aid sector not only provides medical aid coverage but also grants access to benefits, creating a synergy between health and retail services. This value-added approach showcases a strategic integration of sectors to meet consumers’ comprehensive needs.”
Her business partner at Shopper Foundry, Ivana Rhodes, tells the FM: “Amid these economic challenges, retailers are also better leveraging technology to enhance customer engagement. Loyalty programmes have gained traction as they provide rewards and incentives for repeat business, ensuring customer retention. Digital engagement through apps and online platforms also keeps customers informed about promotions and deals.”
The pair say that to accommodate diverse consumer financial situations, retailers are also expanding their payment options. This includes flexible financing plans, buy-now-pay-later schemes and facilitating payment through multiple channels to ensure accessibility and convenience.
Another strategy involves local sourcing and support. Says White: “Retailers are doubling down on supporting local businesses and products. By sourcing locally, they stimulate the local economy while offering consumers products that resonate with their community values. This approach builds a sense of unity and contributes to sustainable growth.”
Allied to that is increased involvement in community initiatives which resonate with the rise of the Generation Z consumer, people born between 1997 and 2012. Due to what is described as their native digital fluency, they have a “unique and critical influence” over purchasing trends. These young consumers value authenticity, social responsibility and personalisation in brands.
Rhodes says retailers are increasingly engaging in community-driven initiatives and corporate social responsibility activities. “By giving back to the community, they build goodwill and strengthen their bond with consumers who appreciate brands that contribute to society.”
Both agree that effective communication is vital in times of economic volatility. Retailers, they say, should be engaging with customers through transparent communication about pricing changes, discounts and special offers. This, they believe, fosters trust and positive relationships.
This piece originally appeared in the Financial Mail.
