Strategy & Insight Director at KAM, Blake Gladman, looks at the likely impact of the uncertain economic climate on consumer and how spending habits will shift to navigate the cost of living crisis.
“This month the UK government announced they would be providing a grant of £400 to help struggling households cope with the energy bills crisis. This replaced the previous £200 ‘loan’ that had been in place for UK families, but which was expected to be paid back. At least it’s some semblance of good news for those households which are being hit the hardest.
UK prices are rising by 9% a year, which is the highest rate we’ve seen for 40 years. The Bank of England has recently warned that inflation might reach 10% within months, as the prices of fuel and food put pressure on household spending. The current ‘cost of living crisis’ means that ‘real’ disposable incomes are being squeezed, which is going to have a knock-on effect for how and ‘how much’ households spend on non-essential things such as socialising and entertainment. A clear concern for anyone working within the hospitality industry.
Most Brits expect to adapt their spending
KAM recently conducted a pulse survey with 500 UK adults (+18, nationally representative sample) to gauge how the cost-of-living crisis is likely to impact consumer behaviour in the immediate future.
- 46% say they will cut back on non-essential spending
- 37% say they will have less takeaways than they used to have
- 29% say they will visit restaurants less, 19% say they will visit pubs less
- 25% say they will switch to going to cheaper restaurants and pubs
- 25% say they will take their own lunch to work
- 19% say they will drink less alcohol
Customers do empathise with price rises
Earlier this year as part of the KAM ‘Return of the Pub 2022’ report, which was published in partnership with The BII and with support from Brakes and Stint, we found that pub-goers, in particular, empathise with potential price increases but they will still be a turn off for many
- 75% of pub-goers say they expect prices in pubs to increase in 2022
- 80% believe that it’s acceptable for pubs to increase their prices
- 49% of pub-goers, though, say that they are less likely to visit pubs as often as a direct result of the price increases
From the perspective of the consumer, they can see the price increases coming and they understand and empathise with the situation. The modern consumer is an educated consumer, and they are aware of the pressures that pubs face, as many will be facing similar pressure in their own workplaces and at home.
However, nobody is immune to price rises and 1-in-2 pub goers are saying that they are likely to visit pubs less often as a direct result. So, what can pubs do? Keeping prices down is a tough ask, so pubs should look at ensuring that they can maximise the ‘added value’ wherever possible. Consistency of quality serve, consistency of quality of staff, alongside cleanliness, atmosphere, events, etc. etc. Every asset must be sweated to its maximum if we want to ensure that customers are not just understanding of the price increases but that they are happy to pay them as well.
Experience will as always be key
This comes back to a point that I make a lot and can’t make enough. Experience, experience, experience. We’ve recently worked with clients including Fanzo, Hallgarten & Novum Wines and PointOne on publishing whitepapers, all on different topics (Sport, Wine, and Technology) but all have a thread running through them that highlights the importance of delivering an experience to the consumer, one they CAN’T easily replicate at home. This is key in driving them from their homes and out to hospitality venues. Where they spend their disposable income is a more important decision than ever before for many consumers, so venues and brands need to work harder, and smarter, to show that they are worth it.”
The full “infographic” and “Return of the Pub” report can be accessed via our Access All Areas knowledge hub here.