Trust in the Time of Inflation.
“If the cost of making something, if the cost of supplying services, if the cost of keeping somebody’s house warm, if the cost of that is beginning to fall, and there are clear signs it is beginning to, that has to be passed on to the consumer at the earliest opportunity”
Inflation Pricing or Profiteering?
Inflation. A technical term rationally explained by accounting for the variety of variables that constitute product price. Yet, consumers do not think technically, and not often rationally.
They may understand, may be even accept increased prices due to COVID-19, or due to the war in Ukraine. Yet, they have an emotive response to rising prices that hides cognisance of cost of raw materials, of supply chain costs and constraints, of wage increase and labour shortage that are passed on to consumers. The consumer response is founded in the perception that companies are taking advantage and raising price beyond what is necessary.
On average, one in two consumers believe that, across a range of ten different consumer costs, companies are increasing prices because they want to increase their profit.
The overall tone is one of being taken advantage of, however, not all sectors are equal in this regard. Most enmity is reserved for the energy sector (electricity and gas), the rental sector, fuel (petrol and diesel) and the mortgage sector, where rising price is linked to greed.
70% of consumers believe that energy companies are increasing prices because they want to increase their prices. It does not help companies’ cases when significantly increased profits are published, contrasted against a very hard-pressed consumer.
Nor when there is a housing crisis. This is at a time when one in three consumers are extremely concerned about the cost-of-living situation in Ireland. It is easy to comprehend why these consumers are significantly more likely to feel worried (49%), anxious (50%), stressed (51%), frustrated (35%), or despair (16%).
This vulnerability could help support a ‘fact’ that some companies are greedy, taking advantage of consumers by increasing prices because they want to increase their profits.
Far less enmity is, however, reserved for, childcare and healthcare. Public Transport, in particular is a sector for which there is a relatively positive perception among consumers. One in three people see the sector price rises linked to profit, but the same proportion determine that Public Transport is trying to keep prices down.
Does it matter to brands if consumers link price rise to profit rise? Does it matter as long as consumers keep buying? Does it matter if there is a dearth of competition and thus consumer choice. If consumers doubt brands in their price intentions, when price rises are about profits, then a reasonable inference is draining trust in those brands.
There may be limited solutions in the supply chain to a brand’s increasing price to the consumer. There is opportunity to attempt to build or at least maintain trust from consumers through transparency, through innovation, and through endeavouring to deliver real value and communicating about this endeavour.
Perhaps this is why brands can learn from the efforts made by Public Transport. Innovation and value were communicated via the TFI 90-minute fare proposition.
Of course, the sector is subsidised by the taxpayer so it is a different decision on price compared to private companies seeking profits. Yet, they have kept talking to consumers throughout the cost-of-living crisis. Brands that show leadership by being empathetic to the consumer in actions and communication will engender better consumer sentiment and long-term brand strength.
