Defend Against Consumer Tradedown: It’s Your Brand Versus… Itself


Defend Against Consumer Tradedown: It’s Your Brand Versus… Itself



by , October 3, 2022

As product marketers face inflationary pressures, many wonder, at what point will people switch from premium to store brands?


But neuroscience reveals this fallacy. Consumer data shows that  even in lower-income households, pricing considerations do not solely underlie shopper behavior.


This may appear counterintuitive, but it’s central to human experience and our natural response to stress. When something bad happens, is your reaction metered and rational? Of course not. You lose sleep, fixate on the negative. It’s a natural emotional reaction.


The worse a situation, the stronger the emotional response. And yet, most manufacturers and retailers are resigned to the assumption that it’s a zero-sum scenario focused on price, the starting line of the proverbial race to the bottom.


This can be explained by established psychology, vetted for decades in academia. The emotional reaction to mounting prices is explained by what a research psychologist might refer to as the “what-the-hell effect.”


Restraint induces stress. Self-control is a mental resource. Insight into human cognitive processes reveals that the more decisions we have to make, the more we need to exercise restraint, which creates stress. When the brain is tired, it has difficulty recruiting the mental resources to make wise decisions — creating a vicious cycle.


Faced with inflation, folks must “recruit” their brain for EVERY decision. When they used to buy things on autopilot (aka System 1), they are now pressed to evaluate every decision (System 2):



  • Is my rent higher than it should be?
  • Is this the best place to buy groceries anymore?
  • Is buying the premium brand worth the cost?

Depleted cognitive resources. When self-control is drained, our brains resort to autopilot, sometimes irrational responses. You’ve been rigidly following your diet, but a stressful day leads you to indulge in a slice of leftover cake from a co-worker’s birthday party.


You lament the choice, but rather than making a rational choice to stop, you think, “I’ve already ruined my diet, what the hell,” down another slice, and grab a burger and fries for dinner. Rationally, it makes no sense to let one small infraction derail your good behavior, but when the brain has low cognitive resources, our depleted willpower struggles to resist.


Subconscious to self: What the hell? Likewise, consumers, fatigued by constant decision-making, and months of budgeting, say, “I’m over budget, have racked up credit card debt, and can’t pay my bills. What does it matter if I spend a few extra dollars to get the name-brand product, or splurge on an unneeded small luxury?”


In other words, our subconscious brain says “what the hell.” This triggers the purchase of brands that provide the best EXPERIENCE, with our subconscious mind evaluating through the senses vs. rational, comparative math.


Winning brands will trust the science of human behavior, and resist the urge to focus on price. Brand leaders should calibrate the experience they provide — or could, via activations like promotions and digital content sharing — to ensure they retain loyal consumers, and attract new users.


As product marketers face inflationary pressures, many wonder, at what point will people switch from premium to store brands?

 

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