Indicators suggest that the worst of the economic strain is behind us. And while this doesn’t mean consumers will enjoy unabated shopping sprees any time soon, it may hint that more people will consider factors beyond the price tag when selecting a brand.
In tight economic times, consumer decision-making is generally limited to factors of price and quality — in other words, how do I get the most bang for my buck? When the grip on household spending loosens, though, and consumers find themselves with more disposable income, they have more room to consider other factors in their decision-making.
The U.S. Consumer Price Index for June 2023 saw the smallest monthly increase since 2021, signaling that inflation may have plateaued and offering consumers a bit of reprieve from the previous years’ bank account blitz.
In 2022, U.S. food prices had their largest annual increase since the 1980s, and per-capita disposable income fell by 6.6 percent. Now, food prices are beginning to stabilize, and the forecast for 2023 indicates that disposable income will start to see a small climb. Meanwhile, the global economy is also beginning to recover from disruptions caused by the COVID-19 pandemic.
If consumers find economic relief in the near future, they’ll enjoy more freedom to choose products and services based on preferences beyond simply finding the best price.
Data from Glow, a consumer data research company, shows that U.S. consumers consider price and quality as the most important factors when selecting goods or services in any industry. Given the state of the economy as of late, this isn’t much of a surprise.
Alongside price and quality, other purchase drivers include ease of use, customer support, availability and convenience, features and benefits, and sustainability. The final factor there, sustainability, is already top of mind for many consumers — and its relevance is quickly growing.
So, what really goes through consumers’ minds when they consider making a purchase? In industries where the price-quality combo is comparable between brands, consumers are more likely to look to the next set of drivers to aid in their final decision-making, said Mike Johnston, managing director of data products at Glow.
When we look at the Glow data for sustainability as a purchase driver across industries, it features as a top-three driver for 40 percent of U.S. consumers when it comes to energy providers, as well as 31 percent in the auto industry. The industry that sustainability ranked lowest in, convenience stores, still saw 20 percent of consumers ranking it as a top-three purchase driver.
“If there is a factor that is important to 1 in 5 consumers, or more, this is significant for any business as it can have a material impact on whether their brand is selected,” Johnston said.
The whole spectrum of environmental, social and governance (ESG) issues is gaining traction with a large share of consumers. Granted, some consumers stand firmly in the “anti-ESG” camp, but a significant portion of shoppers are shifting their purchase drivers to prioritize sustainability.
Based on a recent study by NIQ, 69 percent of global consumers say that sustainability and ESG concerns have increased in importance to them over the last two years. It’s no surprise that the climate crisis has prompted many people to reevaluate their buying habits, but that’s only part of the reason why sustainability issues are playing a more prominent role.
“There are a mix of reasons for the growing importance of sustainability across consumers,” Johnston said. He points to the growing exposure in society of social issues, corporate scandals and the global climate crisis, as well as the changing demographics of the consumer base, as to why sustainability demand is on the rise.
“Sustainability and ESG issues are routinely seen to be more important with younger consumers,” Johnston said. These younger consumers, like millennials and Gen Z, are growing in importance quickly and increasingly occupying a larger share of the market.
We can call them young, but there’s a good chunk of millennials who are closer to retirement than they are to high school, and they aren’t getting any younger. The dynamics of the market are changing as baby boomers and Gen Xers scale back their market influence.
For millennials, 61 percent say that sustainability and ESG issues have increased in importance for them in the last 12 months. Across all categories, sustainability is a top-three purchase driver for 33 percent to 50 percent of these consumers. Aside from convenience stores, at least 10 percent of millennials ranked sustainability as the top purchase driver in all categories.
On the other side of the coin, baby boomers are least concerned about sustainability when making a purchase, according to Glow data.
It’s growing in importance, but sustainability hasn’t yet reached the level of a standalone purchase driver in most cases. Depending on the product, price or quality has the ability to settle decisions single handedly.
It’s not uncommon to think or hear a shopper say, “I don’t care, just give me the cheapest one you got,” signaling price as the sole purchase driver. Or, likewise, “I don’t care what it costs, I just want the job done right,” meaning quality trumps everything else.
Consumers who care about sustainability are often willing to pay more and possibly even make a sacrifice on quality or convenience. But how much more will they pay, and how much else will they sacrifice? The answers to those questions vary depending on the product, industry, and consumer but are generally something like, “A little bit, but not too much.”
“There are many studies that show that consumers are willing to pay a premium for sustainable products,” Johnston said. In particular, Gen Z and millennials are more eager to pay those premiums.
Businesses that embrace the sustainability surge and can find that sweet spot between price, quality and sustainability will position themselves to attract a large share of the growing market for more sustainable products.
This article series is sponsored by Glow and produced by the TriplePundit editorial team.
Image credit: Jacob Lund/Adobe Stock
Andrew Kaminsky is a freelance writer with no fixed location. He travels all corners of the globe learning about the different groups that call this planet home, seeing natural wonders, and sharing laughs with the people he finds along the way. An alum of the University of Winnipeg's International Development program, Andrew is particularly interested in international relations and sustainable development. In his spare time you are likely to find Andrew engaging in anything sport-related, or finding common ground with new friends over a craft beer.