The right decisions in the midst of economic uncertainty

In the times of uncertainty On a global level, it is very important to have information and market knowledge to make the right decisions. They will be able to define risks and increase the potential of business decisions.

In this context, companies and brands operating in Mexico face consumers who are adapting the behavior of inflation (7.68% according to OECD, in April 2022), therefore it is essential to establish emotional connections in order to achieve their loyalty.

In accordance with Simeon Pickers, CEO of de Psyma Latina, a recent study by a consulting firm points out that Mexicans are looking for consumption strategies such as postponing, reducing, canceling services and products; larger or smaller presentations as they see fit. They also replaced premium brands with generic ones and chose those with which they feel a greater emotional connection.

The manager points out that companies must generate market knowledge in order to make decisions that reduce business risk or increase potential. “We need to connect more and more with people, understand and clearly reveal what is happening to them on an emotional level,” says Pickers.

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It is important to identify the causes of consumer behavior and changes in their value code.

Decision-making strategies in an inflationary environment

In accordance with Bernd Watcher, CEO of Psyma Group and Efraín Monsalvo, Associate Director of Healthcare at Psyma Latinacompanies can respond with five strategies:

1. Discover consumer emotions

The current economic situation is changing rapidly. High uncertainty also implies high volatility in the mood of consumers. Psychological market analysis is extremely important for building empathic relationships with people.

2. Measure the thresholds of acceptable prices and willingness to pay

Research has found that purchasing behavior differs significantly from normal market conditions during financial crises and high inflation.

Therefore, previous data may become outdated when predicting reactions to price increases. The price research methodologiessuch as the Van Westerndorp and Gabor-Granger price sensitivity gauges, allow traders to reset their acceptable price range.

3. Check brand preferences and attribute importance

Economic and psychological changes caused by inflation can lead to changes in brand preferences. Order of importance of attributes, especially price and emotional benefits. In addition, it can change when high inflation reduces the purchasing power of consumers.

4. Test the communication

Advertising can empower brands, paving the way for less price sensitivity for their products. But you need to test your ads before you run them. This can prevent an ineffective campaign and, worse, ads that cause an unwanted reaction.

5. Evaluate the product portfolio

In times of high inflation, it is useful to examine profitability by SKU or service as this allows brands to minimize costs by eliminating underperforming products.

It helps identify products with inelastic demand or segments with low price sensitivity to increase price without sacrificing volume.

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