With inflation on the rise, customer behaviour is changing in the eCommerce industry. Discover how merchants can adapt their marketing strategies to meet changing customer needs and succeed in 2023 by using price comparison platforms.
Inflation has been on the rise globally, and it has led to changes in customer behaviour, especially in the eCommerce industry. This blog post will discuss the impact of inflation on customer behaviour and why using idealo as a performance marketing channel is the most promising strategy for merchants to be successful in 2023.
Understanding the lipstick effect and its impact on consumer behaviour in times of inflation
The Lipstick Effect, a term coined during the 2001 recession, describes the phenomenon of consumers indulging in small luxuries during tough economic times. Despite the impact of tough economic times on consumer behaviour, their need for luxury to feel good has not changed. However, customers’ strategies for satisfying their needs have changed as they focus more on finding good deals and small luxuries – i.e. buying lipsticks and perfumes.
The need in this example is to feel good. The behaviour is the strategy to satisfy that need, again: i.e. buying lipsticks and perfumes.
Our takeaways for understanding the ecommerce market in 2023 are: While needs remain the same, behaviours – also known as strategies to meet those needs – will change in times of crisis.
Examples for this change in behaviour was particularly evident in the shopping behaviour on idealo.de. Not only did we see a shift towards more price comparison, but also for smaller tickets. More on this in the next chapter.
To summarise: Understanding the Lipstick Effect highlights the difference between customer needs and behaviour and emphasises the need for merchants to adapt to changing customer behaviour in order to remain competitive and successful.
eCommerce in 2023: It’s…a journey.
Let’s shift our focus from lipsticks to the media coverage of e-commerce in recent months.
In a nutshell: The rise in inflation has had a significant impact on consumer behaviour in the e-commerce industry, with demand for lower-priced products increasing across all categories. Consumers are more likely to choose the cheapest offer over other factors due to the high-cost sensitivity caused by inflation.
idealos data supports this. It shows a sharp increase in all visitor-related metrics, highlighting the shift towards price comparison. Let’s take a look at our Price Alert feature to gain further insight into Costumer’s strategies.
For those who don’t know:
Any idealo user can activate a Price Alert for any product they like, but which is currently too expensive. The customer then sets the desired price and receives a notification as soon as the desired price is reached or even undercut.
From the merchant’s point of view, it shows:
1. Purchase intent and interest
2. A target price for a particular product.
The number of set price alerts demonstrates the shift in customer behaviour towards more pre-planned shopping. A 46% increase in set price alerts on Black Friday 2022 shows that customers are willing to limit themselves and to wait for products to reach their desired price. At the same time, discounts missed expectations by a similar margin as in 2021, indicating that merchants need to be data-driven and adapt their marketing strategies to remain competitive.
Let’s summarise what we’ve seen so far: The Lipstick Effect highlights the importance of understanding customer behaviour in tough economic times, and merchants need to adapt to these changes by being data-driven and using smart marketing strategies. Rising inflation has led to a shift in consumer behaviour towards more pre-planned shopping and cost sensitivity, with demand for value products increasing across all categories.
Your customers: A lot has changed – but all of it?
If you felt that everything you have read so far has been bad news, this next piece of information will be for you: Cost sensitivity aside, and despite the impact of inflation on customer behaviour, customer needs have largely remained the same.
Data from idealo shows minimal change on the demand side, with little movement in the top categories and customers continuing to buy what they have always bought.
But let’s take a closer look at this behaviour using one of our tools mentioned above: Our Price Alerts provide insight into the specific products that shoppers are looking for, demonstrating the consistency of shopper needs despite the impact of inflation on behaviour.
What we are seeing is that shoppers want to spend less than the market will allow and, as a result, are becoming more cost sensitive and targeted in their shopping. However, discounting has missed expectations by a similar margin as in 2021. This indicates both a strong willingness to make purchases and the fact that inflation has already been factored into the wallets of your future customers.
The data suggests that despite the impact of inflation on customer behaviour, customer needs have remained consistent, with minimal change on the demand side. Prices in the market are not much higher than customers’ target prices. It can be argued that this has always been the case. But remember that your customers’ relationship with their money has changed: they are much more cost sensitive than 2 years ago. Missing their target price by €10 means something very different now than it might in 2021.
As a retailer, you can benefit from this insight into customer behaviour by being data-driven in your pricing, exploring new channels and using smart marketing strategies to reach customers effectively.
In high demand: Smart Marketing Strategies for Merchants
To stay competitive in a market where discounting is critical, retailers need to adopt smart marketing strategies that respond to changing customer needs and behaviours. Being data-driven is essential to ensure that product ranges and pricing remain smart and competitive. Make sure to use all the data you have.
Exploring new channels is also critical as customers seek new ways to meet their needs and demands. Smart marketing and communications can make a difference, as customers appreciate knowing that retailers are moving in their direction. Investing in marketing is essential to ensure merchants can effectively reach their customers. By telling customers that merchants are moving in their direction, customers are more likely to appreciate and respond positively to their marketing efforts.
Conclusion: Price comparison platforms are a great bet for 2023
In conclusion, merchants who want to remain competitive and successful in the face of inflation and cost sensitivity need to adapt their marketing strategies to reflect changing customer behaviour. By being data-driven, exploring new channels and using idealo as a performance marketing channel, merchants can reach their target audience effectively and efficiently. idealo’s USPs, including delivering high performance traffic to shops, being one of the largest performance marketing channels in Europe and prioritising price as the number one factor in customer decision making, make it the best choice for merchants in 2023.
In other words: For your customers, idealo is one of the best price comparison platforms in the world. For you as a merchant, idealo is one of the largest performance marketing channels in Europe.
Our users can compare up to 500 million offers on idealo, read reviews and user opinions and, once they have decided to buy, use the “Go to Shop” button to go to your shop and complete the purchase.
As a merchant, you can benefit from more than just reach: Because of the price comparison, the quality of our traffic is significantly higher than other performance marketing channels. Users who come to your site through this channel are at the end of the funnel. In addition, your offers are ranked by price. The cheaper, the higher. Whatever your marketing budget.
What this means for you is that you always get highly qualified traffic that gives you great value for money. Performance-based billing and a quick and easy onboarding process make working with idealo even more attractive and profitable for you.
In other words: Merchants who invest in smart marketing strategies, adapt to changing customer behaviour and use idealo as a performance marketing channel will position themselves for success in 2023 and beyond.
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