IN BRIEF:
• Consumers are becoming more discerning, favoring quality and affordability over brand loyalty.
• The integration of AI with personalized human interaction is essential for creating seamless customer experiences.
• As consumers focus on meaningful home life, brands and retailers must adapt their strategies to meet these changing expectations.
Consumers today are more conscious of their choices and prioritize quality products and services at reasonable prices. They are not merely following trends; instead, they are actively seeking out what aligns with their needs and values. This shift toward a more independent consumer was highlighted in the evolving nature of consumer engagement, where the emphasis is now on creating meaningful connections through data, technology, and genuine human interaction.
According to the EY Future Consumer Index, which provides insights that reflect the current mindset of consumers and the implications for businesses aiming to meet their needs, understanding consumer behavior is crucial for brands and retailers looking to adapt to these changes. By adapting to the evolving consumer preferences discussed below, business can form strategies they can implement to stay relevant in a competitive market.
A SHIFT IN CONSUMER PRIORITIESConsumers are increasingly viewing private label products as viable alternatives to branded items, often perceiving them as comparable in quality rather than just cheaper options. This trend is evident as more consumers express satisfaction with private labels, leading to a significant shift in purchasing behavior.
The growing acceptance of private label products is notable, with 48% of consumers indicating that brand names are not a major factor in their purchasing decisions. Additionally, 38% of consumers do not intend to revert to branded products after trying private labels, and 34% are open to purchasing lower-cost versions of popular items.
This change is largely driven by economic factors, as consumers seek to save money amid rising prices. As a result, private label products have become a habitual choice across various income levels, proving that they can meet consumer needs effectively.
THE EVOLVING ROLE OF BRANDS AND RETAILERSThis shift in consumer behavior challenges traditional advantages held by consumer packaged goods (CPG) companies, while retailers are seizing the opportunity to promote private label offerings. Retailers are strategically placing these products in prominent locations and expanding their ranges to include various price points. By analyzing point-of-sale data, they can respond quickly to emerging trends, allowing them to curate choices that resonate with consumers and foster loyalty.
As consumers become more brand-agnostic, particularly younger generations, they actively seek out affordable alternatives and share their discoveries on social media. This trend, often referred to as “dupe culture,” has made bargain hunting a popular pursuit.
The influence of established brands is waning, especially as some companies face backlash for raising prices or reducing product sizes to maintain profit margins. Today’s consumers have access to a wider array of choices and are more informed than ever about alternatives to higher-priced brands, often learning about them through social media and digital channels.
MEETING THE NEEDS OF THE MODERN CONSUMERAs customer journeys become more complex and less linear, consumers expect to shop on their terms — whether in-store, online, or through various digital platforms. They desire seamless experiences that blend technology with personal interaction. While artificial intelligence (AI) can enhance the shopping experience through personalized recommendations, consumers still value the human touch, especially for significant purchases.
To succeed, companies must effectively combine technology with human engagement. By leveraging AI to support customer interactions, businesses can help consumers make informed decisions while also ensuring that sales associates are equipped to provide valuable assistance. For example, a local airline leverages an AI agent that allows the automation of common inquiries such as flight bookings, itinerary changes, and travel documentation requirements, but also maintains in-person customer service at airports. Additionally, a large local fast-food chain adopted a composable architecture while maintaining flexibility across its tech ecosystem as part of its global business strategy. It also focused on automating key areas of its business to reduce manual work in store operations and main office functions while reducing the burden of back-end processes.
Achieving a holistic view of each customer through AI will be vital, yet many organizations are still working toward this goal. There is also a pressing need to address customer service gaps, as consumers often express dissatisfaction with online processes and support. A more integrated approach that combines advanced technology with empathetic human service is essential for resolving customer concerns effectively.
EMBRACING A NEW CONSUMER MINDSETAs consumers reevaluate their values and spending habits, particularly considering recent economic challenges, their preferences are shifting. Many are now focused on value for money and are adapting their behaviors to navigate affordability concerns. This includes a renewed emphasis on home life, where consumers are opting for experiences that hold personal significance over convenience services.
A significant 72% of consumers indicate they will prioritize value for money moving forward, while 55% express concern about the rising cost of living. The home has become a central hub for consumption, with consumers increasingly choosing to cook and entertain at home rather than spending on restaurants or cinemas.
To remain relevant, consumer companies must reassess their engagement strategies, particularly with younger audiences. As consumers become less willing to pay for digital conveniences, businesses need to redefine the role of digital channels in driving revenue while enhancing their physical presence to foster deeper connections.
ALIGNING WITH CHANGING PREFERENCESConsumers are becoming more intentional about their purchases and how they spend their time. They seek seamless experiences throughout their shopping journeys and appreciate the benefits of technology in delivering personalized recommendations. However, they also desire human interaction for complex transactions and reassurance on larger purchases. Ensuring confidence in their spending has become increasingly important as consumers prioritize meaningful in-home activities.
To thrive in this evolving landscape, companies must adapt their strategies to align with the changing preferences of consumers, blending digital efficiency with authentic, real-world interactions to create a cohesive and engaging consumer experience.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.
Maria Kathrina S. Macaisa-Peña is a business consulting partner and the consumer products and retail sector leader of SGV & Co.