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FEATURE19 September 2013

Not easily sold

Features

According to Dunnhumby, a consumer’s sensitivity to price greatly influences their response to advertising tactics and the channel of delivery. Justin Petty explains what this might mean for marketers and decision makers.

What’s the big idea?

There are a couple of big ideas that emerged from our research – quite surprising ones, too. 

First, most people expect price sensitivity to be highly correlated with demographics like age and income. But that isn’t the case. There is some correlation with income, but on the whole, we see price sensitive and non-price sensitive households across all demographics. 

Second, just because a consumer is price sensitive doesn’t mean they can’t be brand loyal and profitable. Many price sensitive customers are also the most loyal. They often spend more than other customers, too.

What does this mean for my business?

You may want to rethink your media planning strategies. How do you change your message or creative depending on the channel and the audience segment being reached? Do you understand if your brand is a price sensitive brand or not? How does that affect your media strategy? How can you become more personalized and speak to each consumer in a more effective, customized way? That’s where the industry is heading. How far behind or on top of this are you?

OK. So what’s the plan of action?

First, understand your brand through the customer lens. What is the makeup of your brand buyers with respect to price sensitivity, brand loyalty, shopping mission, and other factors? 

Then, find ways to target each consumer segment in a more relevant and personalized way. For example, use a value/price message to your most price sensitive consumers and a quality or convenience message to your least price sensitive consumers. 

In today’s world we can reach individual consumers through targeted online, mobile, and even TV ads. It’s not just direct mail and email anymore. So the idea of reaching the right customer with the right message at the right time is now possible across media channels.

Now we know all this, what questions should we be asking next?

There’s a cross-channel component that we are just beginning to explore. This is similar to a media mix model approach, but at the household level – so you can break out results by consumer segments. Big questions emerge: Does online display plus TV have a 1+1=3 effect? Does that effect hold true for all of my brand buyers or does it work better for some customers and not for others? This is what we at dunnhumby see as the next step: Brands expanding what they’ve done in a single media channel approach to a multi-media approach.

The full report, Using Advertising to Engage the Price Sensitive Consumer, is online here.

@RESEARCH LIVE

2 Comments

6 years ago

I just downloaded and read the report. In the page 3, regarding how price sensitive consumers respond to mkt efforts, results shows that TV Alone is more effective than TV+Circular, but it doesn't make sense to me. Am I missunderstanding something?

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6 years ago

Interesting to see price sensitivity being classified as people who buy low, medium or high priced products. I would have said they are more likely to be defined as Economy, Everyday and Premium shoppers? Premium shoppers can in many circumstances be more price sensitive to price changes than Everyday shoppers for instance?

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