1、Kearney Consumer InstituteQ4 2024Cant buy me loveFrom price tags to financial mindsets2 2While the current inflation cycle may be easing,consumer frustration over prices will persist.3We have less upward pressure,but there are some that are still talking about cost increases,and were fighting back o

2、n that aggressively because we think prices need to come down.Walmart CEOWere in a penny business.There are many places that consumers can turn to check for lower prices or find merchandise elsewhere,from going to stores to browsing on their phones to compare the prices of a gallon of milk at differ

3、ent retailers.Target CEOGiven consumers are getting squeezed financially,this is not a year for us to optimize profits.This is a year to try to navigate on a thinner profit,but to make sure that we support people.IKEA CEO “Funflation,”Taylor Swiftthose experiences are really where people are willing

4、 to pay,meaning the bigger ticket items in electronics are not right now where people are interested.Televisions and PCs are being pushed to the back burner and other sectors including appliances,pet supplies,and home improvement are also being hit by the recent consumer trend.Best Buy CEOConsumers

5、are beginning to behave like theyre in a low-growth,low-inflation economy.Bank of America CEOThe lower-income consumer in the US is stretched.and is strategizing a lot to make their budgets get to the end of the month.Pepsi CEOPrice challenges continue to top executive agendas.Consumers continue to

6、be even more discriminating with every dollar that they spend as they face elevated prices in their day-to-day spending.McDonalds CEO4Sourced:US Census,JP Morgan;Kearney analysis The latest inflation cycle altered the consumer price conversation.In some markets,including the US,spend has persisted a

7、nd inflation and other metrics are stabilizing.But consumers continue to bemoan the prices of goods.Mediocre consumer sentimentConsumers around the world continue to voice stress about prices and the economy.Inflation and the economy a top concern(23%increase in US consumer prices from 20192024)Spec

8、ific segments of consumers hit particularly hard 1325Consumer reference price,or the psychological threshold for what something“should”cost,will continue to drive the perception that prices are too high.5Consumers reference prices mismatch todays pricing realities.Source:Kearney analysisConsumers st

9、icker shock should not be surprising.%Price increase(US)2019 to 2024Commodities Eggs(per dozen)White bread(per pound)Ground beef(per pound)Milk(per gallon)Consumer favoritesChanel No.5 Eau de ParfumCanada Goose Chilliwack BomberLevis 501 JeansNike Dunk SneakersFast food classicsBurger King WhopperMc

10、Donalds Big Mac Meal2039%4059%6079%80%+Sources:Mental Accounting and Consumer Choice by Richard Thaler;Kearney analysis Kearney XX/ID652Where consumers notice price changes,and if it dissuades purchase,variesSource:Kearney Consumer Institute Price Study;Q4 2024of consumers notice price increases of

11、individual items%48%while others notice the total price at checkout While consumers voice concern,their behavior does not always align.Sixty-one percent state they have generally purchased the same products and services over the past six months despite noticing increases.Kearney XX/ID7Certain situat

12、ions still benefit.Source:Kearney Consumer Institute Price Study,Q4 202451%38%32%31%25%24%17%17%When something goes on saleWhen on vacationWhen celebrating a success/achievementWhen want something to be more convenientWhen with friends/family who are also spendingWhen in a rushWhen sad/upsetFor reta

13、il therapySales and vacations are a license to spend.Situations where consumers will spend more than normal(US data featured)Sales and vacations also lead in France,Brazil,and Australia,while celebrating a success tops the list in UAE.8 8However,consumers mindsets about money are often negative,part

14、icularly in certain markets.2.3As likely to feel worse off than better off financially when comparing themselves to those around them.xUS consumers are14%35%30%20%Feel good about itFeel indifferent it is usually for something I needFeel bad about it I try not to spend unless I have toFeel good at fi

15、rst,but bad shortly after“When I spend money,I usually”Source:Kearney Consumer Institute Price Study,Q4 2024Sentiment is echoed in France(2.5x)and Australia(1.6x)while consumers in UAE and Brazil are more likely(2.5x and 2.2x)to feel better off than those around them.Consumers in France,Australia,an

16、d Brazil also tend to feel negative after spending.9 9Broader factors beyond prices inform consumer spending behavior.Combine voiced concerns and observed behavior with financial mindset to expand the perspective.Kearney XX/ID10Economic and pricing analyses miss the psychology of money.DistortionMis

17、understand real financial situation PrudenceWorry about finances;monitor closelyAvoidanceIgnore money situation and financial adviceSecurityAble to stay on track without effort or worry Financial literacy:Ability to understand and use financial skills(personal financial management,budgeting,investin

18、g)Influenced by upbringing and appetite to learnLow literacy example:Spend$30 on food delivery despite having$250 debt payment because$30 is lessMoney dysmorphia:Mismatch between perception and reality of financial stateExternally influenced,particularly by media Goes both directions(spend more than

19、 means because it is“normal”vs.worry about finances despite being well off)Financial stress(high)Financial stress(low)Financial comprehension(high)Financial comprehension(low)Sources:Investopedia,Bank Rate;Kearney analysis Existing financial concepts highlight the mental struggles with money.Consume

20、rs potential financial mindsets can vary based on knowledge and stress tendencies.Kearney XX/ID1111Consumers are surprisingly understanding of certain price increases.Source:Kearney Consumer Institute Price Study,Q4 202477%73%71%45%36%35%23%27%29%55%64%65%Larger size/more productQuality improvedCost

21、 to make increasesCost of similar products increasesCustomer service level increasesBetter design/visual appealNoYesIs a price increase reasonable?(US data featured)Brands can Consider variable cost pricing options.Drive trust with consumers by adjusting prices when input costs decline.Be transparen

22、t when market forces hand to increase prices.Communicate increases clearly and offer trade-offs to maintain value.Carefully evaluate whether projects such as rebranding or customer service changes are worthwhile if they necessitate a price increase.12Redefine willingness to pay from a consumer persp

23、ective.Grasp human aspects of financial decisions Willingness to pay has gotten too analytical,often missing the emotions and frustrations behind decision-making.Incorporate consumer spend motivesSpend is often miscategorizedsomething seen as a“want”might be a“need”for some consumers,impacting willi

24、ngness to pay.Click for KCIs brief on spend motives.Assess spend beyond a single product It is often not just about the price of one product,but rather how that spend fits into a consumers overall spending.Data analysis,including price elasticity Consumer surveys,such as asking consumers to guess wh

25、at they would payThe psychological mindsetThe role in the wallet overall“Willingness to pay”is a combination of:It misses:13What is it?Kearney think tank creating thoughtful,consumer-first content and perspectives,assessing existing and evolving consumer behaviors,needs,and decision-makingWhat does

26、it do?Advocates for the consumer Challenges existing assumptions Reframes to ask different questions Generates conversation Translates into action Kearney Consumer Institute(KCI)For further discussion,please contact:Katie ThomasLead,Kearney Consumer IAlysia DaSilvaAssociate,Kearney Consumer I Kearney Consumer Institute