The Value Differential

Consumers are demanding greater value from every product and service they buy. This personal value is now being defined as personal return on investment (ROI), stemming from the desire to make the most of everything we haveincluding the investment of time, emotional reward, experience and money. This reality of finite resources and time creates the desire to demand even greater value. These value requirements transcend product cost and function to include a value differential prompting consumers to look longer and harder at the products they buy in order to evaluate the real value of the products as opposed to just the perceived value. This is the differential that is now driving new consumer demand. Increased food functionality, Fair Trade ingredients and a sustainable supply chain are all examples of value differentials that are beginning to play bigger roles in consumers decision to acquire good or services.

Consumer Consumption Readjustment

During the past few years as the economy has dipped into recessionary levels and major markets have come close to the brink of collapse, consumers have made major readjustments in their consumption habits. In fact, two out of five American consumers now indicate they have actually become more of a saver than a spender during the past year. Furthermore, more than half feel they live a more satisfying life by having fewer material possessions.

With pervasive uncertainty and lowered discretionary income, consumers have been forced to reevaluate not only their spending, but the overall value of what they are buying. The value of store brands continues to see gains in the consumers eyes, with almost seven in ten of the population agreeing that they are often as good as or better than national brands, an 11 percent increase since 2007. In fact, consumers, overall, are becoming more experimental across brands and less brand loyal (Figure 1).

This new value-conscious consumer behavior is also reflected in how consumers view advertising and the shopping experience. They are skeptical of companies telling them what they need, and instead desire more control over their decisions. In fact, more than half of Americans indicate they would rather find out about new products and services on their own compared to traditional advertising. In addition, the shopping experience becomes another level of personal ROI with seven out of 10 consumers agreeing that when they go shopping, the overall experience with the store is just as important as what they are purchasing.

Greater Value Desired

The value differentials that encompass Fair Trade, resource management, and the efficacy and productivity of corporate social responsibility programs are increasingly part of the emotional and social value equation, yielding a growing dimension to personal ROI.

In essence, corporate social responsibility (CSR) is gradually taking a foothold in how consumers view a company and its products. CSR will continue to grow in consumers minds as a value differential and will increasingly impact consumers purchase decisions (Figure 2).

Increased corporate responsibility measures are not only viewed by consumers as the right thing to do, they are impacting consumers willingness to pay for that added value, with one out of five indicating they are willing to pay 20 percent more for products which are made in an environmentally friendly and sustainable way.

Personal ROI Translates to Food Choices

Food is no longer a one-dimensional means to provide sustenance. It, too, has value differentials from disease prevention to anti-aging to quality-of-life issues. In fact, the majority of consumers feel eating healthy helps them feel in control of their life, and healthy foods and beverages can be used to improve the quality of their life. Furthermore, approximately half of consumers indicate they would be more likely to purchase a food or beverage product if it provided heart-health benefits, boosted their immunity, lowered cholesterol, helped prevent cancer and boosted their energy levels.

With almost two-thirds of consumers preferring to get their daily nutritional requirements in the foods they eat rather than having to take dietary supplements, consumers are also looking for foods that are enriched and fortified with nutrients that are oftentimes difficult to get in sufficient quantities in the foods they consume. Half want their store to carry foods enriched with omega-3s and one-third want foods enriched with probiotics. Use of fortified foods has grown 34 percent since 2000; functional food use has literally doubled.

Consumers are also using value differentials as a means to make better food choices to avoid ingredients such as preservatives and pesticides that many believe have caused increased food allergies. In fact, four out of five organic food and beverage users initiated use of organics in order to avoid pesticides, toxins, hormones and genetically modified organisms (GMOs), highlighting how organic users use the value differential of less is more in order to create more ROI.

Consumers are recalculating value based on a new set of measures and beliefs. While monetary cost will always be a factor in an unstable economy, consumers are increasingly evaluating the real value of products as they continue to seek more ROI. Corporate social responsibility, sustainability, functionality beyond traditional function, Fair Trade practices and fortification are just a few of the differentiating factors creating increased value for the consumer. Understanding how consumers are using these value differentials to make purchase decisions is key in reaching this new discerning consumer, no matter how high they set the bar.

Steve French is managing partner with the Natural Marketing Institute (NMI), a strategic consulting, market research and business development firm specializing in the health, wellness and sustainability marketplace. Contact him at [email protected] or visit NMIsolutions.com .