Economic challenges in Australia: 88% users noticed increase in price of products/services
Published on 04/05/2023 by Ojasvini
Have consumers noticed any change in the price/size of a product or service in the last year? Are they aware of the concept of shrinkflation? Which type of product has observed the highest surge? Are users trying to better manage their finances to deal with surge pricing? Read more to find answers to these and other similar questions.
In this article
No one would like to pay more for less, meaning that a reasonably aware consumer would not prefer paying more than they ideally should for a particular product. With current economic challenges at play and the inflation rate at a three-decade high, consumers might notice a surge in the price of a product/service and/or decrease in the product sizes. Is there consumer awareness regarding these changes?
Across all income groups it might be a situation of concern, but it’s likely to be even more challenging among lower-income consumers. To explore these aspects, Software Advice conducted an online survey gathering the participation of 1,007 respondents who are either solely in charge of paying home expenses and goods or are taking care of such expenses along with their partner or people they live with.
In order to evaluate their level of awareness, we asked them multiple questions, including which product they regularly use and which now has a difference in price, size, or availability, how did they first notice the price changes, if companies doing enough to combat this situation, and other similar questions. The full methodology can be found at the end of this article.
Preview of our analysis:
- 88% of the respondents have noticed an increase in the price of products and/or services
- 93% of the survey-takers who saw a change in prices observed an increase in the price of groceries
- 87% of the same sub-set of respondents saw a surge in the price of household bills
- Majority of consumers who have noticed price changes have observed these changes on-site, in-person in the retail or service shop
- Combined total of 95% of consumers who have noticed product and service price changes find it useful if companies communicate price increases personally
- Majority of consumers who have noticed product and service price changes want their favourite companies to be more transparent with product/service changes
- In the event of unavailability, more than half of consumers who have noticed an availability change in products or services would purchase an alternative product/service from a different company but keep looking for the one they wanted originally
- Almost 40% of survey-takers who have noticed product and service price changes feel that companies are not doing enough to help customers manage the rising prices of products and/or services
Have users noticed changes in prices of products/services?
In order to fully understand how aware consumers are about price changes, we asked them whether they have noticed any change in the price/size/availability of products or services in the last year. The responses we got are depicted in the chart below:
It is interesting to note that only 2% of the respondents didn’t notice any such changes. This data points out the fact that the majority of our participants are aware of these changes and typically tend to notice them.
What is shrinkflation?
In an economic sense, shrinkflation typically refers to a practice wherein the size or quantity of a product is reduced while its price usually remains the same. For instance, a can of beans having 200 grams of weight is priced at $10 but is later changed to include only 150 grams at the same price. Such a practice generally occurs when there is an ongoing global problem, inflation, or supply-chain issues. In addition, as per 9 News, ‘shrinkflation is the result of rising costs for manufacturers; it costs them more to produce the product, and so the amount of product they can sell for the same price decreases’.
93% consumers saw an increase in the price of groceries
Delving deeper, we left out these 2% of respondents who didn’t notice any change in the price/size/availability of products or services and asked the rest of our survey-takers (who said ‘yes’ to having noticed a change) to indicate the products they regularly use that are now different in terms of price, size, or availability. Here’s what they had to say:
- Out of the 88% of the respondents who noticed a price increase in a product and/or service, 93% noticed it in groceries
- 73% of them noticed an increase in the price of beauty and sanitary products (make-up, cosmetics, soaps, and shampoos)
- 63% saw a surge in the price of clothing
- 61% answered with medicine, and another 61% saw an increase in the price of sustainable products (fair-trade and bio/organic products)
- 60% noticed a spike in the price of electronics (laptops, TVs, smartphones, and tablets)
- 59% of the participants saw a rise in prices for domestic appliances
In terms of a decrease in the size of a product, out of the subset of respondents who noticed a decrease in product size and/or service scope, 71% observed a product size decrease in groceries, followed by beauty and sanitary products (34%), medicine (25%), sustainable products (24%), electronics (19%), domestic appliances (19%), and clothing (16%).
87% experienced a surge in the price of household bills
Moving forward, we asked those respondents who have noticed a service price increase and service scope and availability decrease to indicate the services they use in their daily life where they have experienced a change in price, scope, or availability. We recorded the following observations:
Clearly, as per the data, out of the 88% of the respondents who noticed a price increase in a product and/or service, 87% noticed it in household bills.
How did users first notice price increases in products/services?
We wanted to know the very first instance the respondents noticed the price surge. Therefore, we asked only those 88% of the respondents who noticed a price increase in a product and/or service about how they first noticed this increase. These are the responses we got:
Is there a change in company behaviour due to price surges?
Noticing that the majority of our respondents have noticed price increases in the past year, we asked the same set of participants as above whether they have noticed any changes in how companies communicate with customers when products and/or services are given a price increase. We received the following responses:
- 29% of the participants said yes, adding that ‘companies have increased the frequency of communication and have been more transparent in sharing updates and information’
- 27% said no, adding that ‘they’ve not noticed any significant changes’
- 21% answered in affirmative, stating that ‘the companies have increased the frequency of communication, but have been less transparent about their communication’
- 14% of them mentioned that ‘companies have reduced the frequency of communication and have been less transparent in their messaging’
- 5% said ‘they haven't noticed because they’re not in contact at all with brands/companies’
- The remaining 4% observed that ‘the companies have been more transparent but have reduced the frequency of their communication’
95% find it useful if companies communicate price increases personally
Additionally, we questioned surveyed respondents on how useful it would be if their preferred companies communicated a price increase of products and/or services to them personally (via email, newsletter, SMS, etc.). We asked them to rank their responses from 1 to 4, with 1 being ‘very useful’ and 4 being ‘not useful at all’. To this, we got the following results:
- A combined total of 95% of participants find it useful if companies communicate price increases personally, out of which:
- 44% of the respondents rated their response ‘1’ and said it would be very useful if their preferred companies communicated a price increase of products and/or services to them personally
- 36% answered with ‘2’, mentioning that it would be moderately useful
- 15% of them rated it ‘3’, saying that it would be slightly useful
- The remaining 5% of the participants answered with ‘4’, indicating that it would not be useful at all
How can companies effectively communicate about price/product size/availability changes to consumers?
Here are a few different ways companies can effectively communicate about price/product size/availability changes so consumers can respond to them appropriately:
- The brands can try and be transparent about such changes and clearly mention that on the product packaging. For instance, if the weight of a cookie box is reduced from 500 grams to 350 grams, it should ideally be mentioned on the box.
- Although consumers might not be accepting of such changes, brands should try to make these changes a part of their advertising. For instance, they can promote the positives stating that the quality has not been compromised or that the new packaging is more environmentally friendly.
- Alternatively, brands can consider running last-chance promotions on the products whose prices will likely increase. They can also introduce discount coupons or first-time buyer discounts as a way to tempt new customers.
How do firms react to product size/service scope decrease?
Going forward, we questioned a specific set of consumers who have noticed a decrease in the product sizes or decline in the scope of services offered on how they would like their favourite companies to react to such changes. The responses we got are depicted in the chart below:
As the data indicates, out of the 25% of respondents who noticed product size decrease and service scope decrease, the majority of the consumers want their favourite companies to be more transparent with product/service changes (65%) and offer more discounts (63%). Keeping this in mind, businesses can perhaps take insights from this data and try and navigate and communicate price changes in a more transparent way to their customers.
What do users do if a preferred product/service is unavailable?
To understand how consumers would react in a particular situation, we asked those specific set of respondents (17%) who have noticed availability change in a product or service their typical response to a particular item being unavailable. We recorded the following answers:
- 57% of the respondents said ‘they would purchase an alternative product/service from a different company, but keep looking for the one they wanted originally’
- 36% of them said ‘they would purchase an alternative product/service from a different company, and stop looking for the one they wanted originally’
- 5% mentioned that ‘they would stop looking for this type of product/service as it is not essential for them’
Are companies helping users manage price surges?
We asked those respondents who have noticed product and service price change in the past year their opinion on whether companies are making an effort to help customers manage this surge. The response to this is depicted in the chart below:
As per our findings above, some respondents (38%) feel that the companies are not trying to help them manage price surges. Businesses can take note of these and try and help consumers in a better way. For instance, they can be clear about any price change, update their sales and promotional materials, try and give their customers notice in advance, work on the best way to effectively communicate with them, logically explain the reasoning behind such changes and allowing consumers to reach out with any further questions/concerns.
How can price changes influence customers’ buying decisions?
As per the Australian Competition and Consumer Commission, ‘businesses must not mislead consumers about what they'll be charged or why’. In addition, the same guidance also mentions that ‘businesses must set prices independently of their competitors and it’s illegal for businesses to agree on prices among themselves or engage in other anti-competitive pricing behaviour’.
Having said that, sudden price fluctuations in products or services can influence a customer’s buying behaviour. While it might seem unfair, price increases due to factors such as inflation, recession, and demand and supply disruption cannot be considered irrational or illegal. Businesses should ideally be transparent about price changes and ensure full compliance with any regulatory pricing laws. In addition, not revealing the reality of such changes clearly to the customers might be unethical and could potentially pose challenges for the brand.
What will we cover in the second part of this article series?
- Have consumers changed their spending behaviour due to the current economic situation?
- What does inflation mean for consumers in the short/long run?
- Have users modified their spending habits to find better deals due to the current economic situation?
- Do customers keep track of their savings/spending?
- Has the current economic situation changed the methods consumers use to pay?
- Are consumers worried about rising prices and the current economic situation?
- Do consumers prefer online shopping or the traditional method of buying in person?
- What technology do to enable consumers to monitor and better manage their expenses?
- Can technology help consumers face an economic crisis?
To collect data for this statistical report, Software Advice conducted an online survey from 31 March 2023 to 11 April 2023, gathering the participation of 1,007 Australian respondents. The selection criteria for the participants is mentioned below:
- Australian residents aged 18 to 65 years old
- Those who are in charge of paying home expenses and goods (either alone or along with their partner or the people they live with)
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