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May 24, 2022

How Marketers Can Address Consumer Inflation Concerns

Katya Skogen

Marketers today are tasked with addressing consumer concerns around inflation, geopolitical events, and ongoing COVID-19 challenges. 

Gartner experts are presenting research on cultural and consumer insights toward major societal and macroeconomic disruptions during the Gartner Marketing Symposium/Xpo 2022, taking place virtually now through May 25. 

We caught up with Katya Skogen, Director, Research in the Gartner for Marketing Leaders practice specifically to learn where consumers are placing the blame for inflation and how marketers can address consumer concerns and adjust branding and communications to them accordingly.

Members of the media who would like to speak with a Gartner expert regarding this topic can contact Matt LoDolce to schedule an interview.

Q: What are consumers identifying as the main driver for inflation?

A: According to a Gartner survey of 270 U.S. consumers conducted in March 2022, a majority of consumers continue to identify production challenges and increasing manufacturing costs as the primary driver of price hikes. The Russian invasion of Ukraine is tied with the pandemic as the second most cited factor contributing to price increases (47% each). However, nearly 40% of respondents cited manufacturers and retailers’ focus on boosting their profits as one of the drivers behind price hikes. In November 2021, only 30% of respondents believed it to be the case.

The dramatic shift in consumer concern about price increases should give CMOs pause. 

Given the signs of increasing consumer skepticism toward brands’ justification of price increases, the way companies frame pricing may backfire if not approached carefully. A quick scan of recent earnings calls, which are, admittedly, not targeted at average consumers but rather regularly reported on in the media, hint at some brands’ cavalier approach to such, claiming overly positive pricing environments. Brands’ optimistic outlook rests on the assumption that consumers who are spending “with vengeance” are willing to fund the companies’ recovering or growing profit margins. 

Q: Are there any categories or sectors being more closely scrutinized by consumers vis-a-vis inflation? 

A: GCC respondents’ observations and personal experiences reflect consumer price index (CPI) changes that show gas and energy, as well as food and beverages as the categories with the highest CPI year-over-year hikes.

Sellers — retailers and product brands that sell directly to consumers — must understand 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 less expensive 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 loyalty, and tarnish reputations than price increases that can be credibly linked to major disruptions that affect supply chain, manufacturing or government policy.

Q: With manufacturers and retailers beginning to shoulder the blame, how can marketers help to address consumer concerns?

A: When Gartner asked GCC respondents to describe, in their own words what, if anything, businesses should communicate to their customers to address the persistent price increases, consumers offered a few ideas:

  • Clear justification: The most common suggestion was to explain the reasons why the products they make or sell are now more expensive. Thirty-eight percent of respondents expressed their desire to get clear, detailed, honest and proactive explanations, free from confusing jargon or blame-shifting. Just over 10%of respondents insisted that nothing companies say would change their perception of brands’ motives. They are convinced that corporate greed is the primary driver of price hikes, and companies will always put profit ahead of consumer interest, which CMOs must strive to reverse.
  • Action plan: The second most popular response was from consumers who are open to hearing about any practical steps that brands are taking to manage pricing and minimize the inflationary pressure on their customers—today and in the future. Approximately 40% of GCC respondents insist that companies must do more to absorb some or all of the additional costs instead of passing it onto their customers. Expectations in this realm range from adjusting to slimmer profit margins, implementing more efficient processes and curbing executive pay to offering additional sales, discounts or rewards to shoppers to incentivize their loyalty.

Although marketing leaders may not always be responsible for pricing strategy, CMOs must manage the brand-related fallout from such decisions. Brands must keep lines of communication open and work to counter emerging consumer suspicion that companies are profiting from inflationary pricing.

CMOs must closely watch consumers’ heightened pricing sensitivity and vigilance. By recognizing and responding to the specific sources of worry, disappointment and blame for price increases that consumers articulate, brands must demonstrate care and support for the challenges that alert shoppers face through price transparency. Marketers should consider their perspective when conducting internal pricing strategies. 

Gartner clients can learn more about consumer sentiment around inflation in “Consumers Begin to Blame Companies for Price Increases.”

About the Gartner Marketing Symposium/Xpo

Experts will provide more detailed analysis on consumer insights for marketing leaders during the Gartner Marketing Symposium/Xpo is taking place virtually May 23-25, 2022. At the conference, marketing leaders are learning the latest from the latest research and Gartner experts covering the trends, tools and emerging technologies they need to deliver business results. Follow news and updates coming out of the conference on the Gartner Newsroom on Twitter and LinkedIn using #GartnerMKTG. For the full agenda and to register visit: https://www.gartner.com/en/conferences/na/marketing-symposium-us

If you are a member of the media who would like to speak further on these topics with a Gartner expert, please contact Matt LoDolce at Matt.LoDolce@Gartner.com. Members of the media can reference this material in their articles with proper attribution to Gartner.

About Gartner

Gartner, Inc. (NYSE: IT) delivers actionable, objective insight to executives and their teams. Our expert guidance and tools enable faster, smarter decisions and stronger performance on an organization’s mission critical priorities. To learn more, visit gartner.com.

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