Combat Consumer Inflation Concerns With Straight Talk About Product Shortages and Price Increases

Introduction

The supply chain chaos of the prolonged COVID-19 era impacts many more consumer product categories than the personal care shortages of toilet paper and sanitizer. But CMOs of B2C brands should consider that, on the whole, consumers are more worried about price increases than product shortages. Shoppers are also unlikely to blame brands directly for these realities, as long as brands keep lines of communication open and put certain safeguards in place.

Even though consumers are more worried about price hikes than product shortages, the latter are still on shoppers’ radar. Consumers are nearly as worried about finding the products they want to buy in-store at the end of 2021 as they were in March 2020 (the onset of the COVID-19 pandemic). See Figure 1. Nearly half have noticed more out-of-stock products than usual online and in-store.“Out of stock” notifications are up 325% over 2019.Recognizing the disruption to consumers’ holiday dinner plans or the perception that disruptions are possible, Kraft Heinz announced its Spread the Feeling promotion — paying consumers to bake or buy desserts that don’t feature Philadelphia cream cheese in December 2021.

Consumer concern about price gouging (sellers opportunistically marking up goods) is higher than it has been at any point since March 2020. But so is concern about prices going up due to demand (a closer, if imperfect, measure of consumer sentiment about inflation). Demand-driven price increases are of greater concern to respondents in Gartner’s Consumer Community (GCC) panel at the end of 2021 than worry about illness due to COVID-19 and concern for the U.S. economy in general (long the top overall concern).

In fact, demand-driven price increases are the top concern of GCC respondents at the close of 2021. This is the only concern that has grown in absolute terms since the beginning of the pandemic.(Gartner has tracked consumer sentiment about the impacts of COVID-19 in questionnaires served to the Gartner Consumer Community panel at regular intervals more than 20 times since March 2020.)

CMOs have opportunities to sweeten consumers’ association with their product and retail brands amid these heightened pricing and availability concerns. By recognizing and responding to the specific sources of worry and disappointment that consumers articulate, and by messaging with transparency about product availability and price increases, brands can demonstrate care and support for the challenges that alert shoppers face.

“Keep customers in the loop,” says Winifred, a baby boomer GCC respondent from Texas who experienced in-store shortages of air freshener and bleach due to port and shipping slowdowns. “The consumer [should be made] aware of the progress.”

A majority of consumers identify the pandemic in general as the cause of both product shortages and price increases (see Figure 2). They also see supply chain issues (and related production costs) as a direct contributor to price increases, while about a quarter say that manufacturing problems cause product shortages.

But consumers point fingers at each other before they blame sellers of the goods they buy, or even government trade policies, for price increases and product shortages. These accusations hold a glimmer of truth: About a third of GCC respondents admit to either shopping in greater quantities than usual or recently stocking up on things they didn’t readily need (see Figure 3).

A majority (70%) of GCC respondents cited concern about price increases, while almost a quarter noted concern about product availability (see Figure 4).

Concern about shortages remains highest for nondurables like food and other consumer packaged goods — things consumers must acquire with regularity. Consumers’ product availability worries should be top of mind for CMOs of product brands, but also for CMOs of the retailer brands that stock them, from multiline “big box” stores to grocers, convenience stores and more.

GCC respondents see prices up in all categories. Top areas include the same nondurable categories giving consumers cause for availability concerns, with the addition of gasoline, automobiles and building supplies (a big driver of supply-chain-related headlines since summer 2021). Consumers are highly invested in the perceived health of the U.S. economy. (Worry for the U.S. economy has remained one of the highest pandemic-related consumer concerns since spring 2020.) Many people closely follow the prices of fuel (89%), lumber (81%) and groceries (85%) to keep current and informed.

Widespread awareness of price increases doesn’t necessarily cause consumers to change purchase behavior, however — especially nondurable products that consumers need to buy frequently. In fact, U.S. consumer spending increased more than expected in October 2021.Consumers are most likely to withhold purchases of products and services they view as discretionary.

Sellers — such as retailer brands and product brands that sell directly to consumers — may be relieved to know that consumers aren’t associating their heightened worry and disappointment about pricing and availability primarily with brands. But marketing leaders should still use this opportunity to sweeten consumers’ associations with their brands.

GCC respondents who shared personal experiences with product shortages remembered and appreciated when store employees or brand associates provided any details about product availability, timelines and logistics. Prior to the pandemic, marketers might have considered this type of transparency to be unnecessary oversharing that exposes a brand to further risk when uncertainty about timing precision abounds. Early in the pandemic, however, Gartner advised marketers to err on the side of too much information about product availability (see ).

Consumers are also willing for retailers to return to rationing, as necessary, to curb the consumer-driven overconsumption they see. Some GCC respondents are quick to mention the continued disconnect between digital brand channels that aim to provide information about in-store inventory, and what’s actually on store shelves.This is happening despite the pains that digital marketers have taken in the past two years to improve digital product inventory filters and fulfillment expectations (see ).

Consumers currently view price increases driven by demand as a more pressing issue than the notion that companies are engaging in unwarranted price markups. That said, brands should explain the rationale behind price changes, because consumers are paying attention. Consumers recall brand communications regarding price increases at nearly the same rate as product shortage messaging. About a fifth of GCC respondents have seen brand communications that aim to explain the economics of price increases.

But more important for brands to get right than the details of proactive price messaging is an understanding that consumers are paying closer attention than ever to value. Price vigilance or watchfulness means that customers may be more apt to notice if brands succeed in keeping prices steady but instead change packaging to decrease the amount of product per unit or remove amenities (known as “shrinkflation”). Or, they may notice when brands use cheaper materials to make something that aims to pass as the same product (known as “skimpflation”). Product value proposition choices like these are more likely to weaken brand trust and tarnish reputations than price increases linked to major economic news stories around supply chain, manufacturing and government policy.

Gartner Consumer Community: Consumer COVID-19 Concerns Tracker (March 2020 through November 2021, n = 226-393, depending on collection date). Note: While Gartner Consumer Community (n = 504) members resemble the U.S. general population, the data presented above is based on the responses of community members who chose to take each individual activity (sample sizes vary). Results from the activities may not be representative of the general population and the data should only be used for directional insights.

Gartner Consumer Community (16-23 November 2021, n = 327). Note: While Gartner Consumer Community (n = 504) members resemble the U.S. general population, the data presented above is based on the responses of community members who chose to take each individual activity (sample sizes vary). Results from the activities may not be representative of the general population and the data should only be used for directional insights.

Stockout Notifications Up 325% From 2019: Adobe, Retail Dive.

Spread the Feeling, Philadelphia Cream Cheese.

Gartner Consumer Community (8-15 December, n = 294). Note: While Gartner Consumer Community (n = 504) members resemble the U.S. general population, the data presented above is based on the responses of community members who chose to take each individual activity (sample sizes vary). Results from the activities may not be representative of the general population and the data should only be used for directional insights.

U.S. Consumer Spending Surges in October; Inflation Heats Up Again, Reuters.

You Are Getting Less For What You’re Spending. Here’s Why, Forbes.

Inflation Is a Common Economic Term. Have You Heard of Skimpflation?, NPR.

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