Keeping Customers During Inflation: More Than Just Price
Retailers can foster loyalty and secure long-term growth by focusing on quality, innovation, and a deep understanding of consumer preferences.
In a world where inflation shapes consumer behaviour, businesses face a significant challenge: retaining and winning over customers without solely relying on price cuts. Retailers often fall back on sales events and markdowns, but today’s consumers are looking for something more — value.
This article explores how quality, innovation, and a customer-first approach can help businesses thrive in challenging economic times, with insights from global and Indian markets.
The Shift in Consumer Behavior
Over the past two years, cautious spending has become the norm. While discount stores and off-price retailers have benefited from this trend, department stores and businesses selling full-price goods have struggled. This is because today’s customers aren’t solely price-driven; they value quality, durability, and meaningful experiences.
For instance, Tata’s Croma has seen success by focusing on premium products that promise longevity and innovation, even as customers weigh their spending decisions more carefully.
Quality Over Quantity: A Rising Trend
- The Price-Quality Heuristic
Research shows that as prices rise, consumers expect higher quality. This “price-quality heuristic” reflects a basic rule of thumb: a higher price often signals a superior product. Shoppers are now more discerning, refusing to compromise on quality even when inflation bites.
For example, a noticeable trend in Indian footwear markets is parents prioritizing quality over cost when shopping for their children. A recent survey revealed that 67% of parents buying school shoes preferred durability and comfort over lower prices.
- The Role of Product Transparency
Modern consumers, especially Millennials and Gen Z, prioritize product reviews, influencer opinions, and sustainability. Social media plays a pivotal role in driving purchase decisions. For example, startups like boAt in India leverage influencer campaigns to emphasize quality and innovation, appealing to younger audiences looking for reliable, stylish audio gear.
Redefining “Quality”
What constitutes quality varies across customer segments. For some, it may be craftsmanship and durability; for others, it may be sustainability or customer service.
- Premium Craftsmanship: High-end brands like Tanishq thrive by offering superior designs and impeccable quality.
- Sustainability: Companies like Fabindia have attracted environmentally conscious buyers by promoting eco-friendly manufacturing and fair trade practices.
- Convenience and Service: Retailers who offer seamless return policies or extended warranties, like Amazon India, often gain a competitive edge.
How Retailers Are Adapting
- Leveraging Private Labels
Private labels are becoming a go-to strategy for retailers to offer high-quality products at competitive prices. For instance, Reliance Trends has successfully built its private label portfolio by focusing on fit, style, and affordability, appealing to middle-income consumers looking for value without compromise.
- Investing in Newness
Brands that innovate their products often attract shoppers even when discretionary spending is under pressure. Tata Starbucks, for instance, offers premium coffee experiences, including speciality brews, which help maintain customer interest despite higher price points.
The Art and Science of Pricing
Determining the right price requires balancing customer data, market dynamics, and value perception. Consumers often expect:
- Higher prices for brand names or organic products.
- Lower prices for private labels or bulk purchases.
Retailers can use loyalty programs to better understand customer preferences. For example, BigBasket, India’s leading online grocery store, leverages customer data to offer tailored discounts on premium products, enhancing the perceived value of its offerings.
The Indian Consumer Perspective
- Quality as Value
Quality has become synonymous with value in India, where cultural and demographic diversity heavily influences consumer behaviour. Indian shoppers are increasingly willing to pay more for products that:
- We promise durability, such as for appliances from Voltas.
- Align with cultural values, such as artisanal clothing from Khadi India.
- Offer health benefits, like organic produce from 24 Mantra Organic.
- Trading Down Without Sacrificing Quality
Interestingly, trading down can also reflect a quality search. For instance, customers switching from daily coffee shop visits to investing in at-home premium brewing equipment demonstrates this trend.
Building Loyalty Through Value
The secret to winning in inflationary times lies in offering value beyond just price. Here are actionable strategies:
- Innovative Products: Introduce features that genuinely improve the customer experience.
- Transparent Communication: Share details about product quality, sourcing, and sustainability.
- Loyalty Programs: Use data to personalize offers and understand what drives customer satisfaction.
Zomato excels in this by providing tailored discounts and exclusive perks to loyal customers, ensuring they feel valued even during economic uncertainty.
Conclusion: Beyond Short-Term Fixes
Inflationary times require more than just discounts to engage customers. Retailers can foster loyalty and secure long-term growth by focusing on quality, innovation, and a deep understanding of consumer preferences.
Brands like boAt, Croma, and Fabindia prove that investing in value — rather than cutting corners — creates lasting customer relationships and drives success, even in challenging times.
