How the Pandemic Transformed Customer Behavior
The COVID-19 pandemic poses unprecedented challenges for retailers and manufacturers, while at the same time causing unexpected changes in customer behavior, too. Customers are now more consciously conducting thorough research before deciding on a purchase, especially for high-value products. Since the beginning of the pandemic, customers’ buying channel preferences have evolved. Most customers have switched from in-store to online shopping for durable, long-lasting products.
A recent study analyzed slow-moving durable consumer goods by exploring changes in customer purchasing behavior, product and brand preferences, and price sensitivity during the pandemic. To visualize and understand the evolving changes, the experts identified a model enterprise as a leading specialty retailer in North America. The analysis compared pre- and post-pandemic data for all transactions and customers in the selected period. Sales patterns for both periods were evaluated and compared to trends in customer behavior. Equal duration had been selected to normalize any impact of cyclical promotions or holiday purchases to ensure that similar seasonal trends were being captured for both groups.
Initial analysis showed that the number of new post-pandemic customers increased by 17% overall in comparison to new customers in the pre-pandemic phase during the same period last year. As the number of customers increased, so did sales in the post-pandemic era by 30%. Let’s take a look at the contributions of the customer groups before and after the pandemic in terms of revenue, the number of customers, transactions, and purchase volume. After the pandemic, it was found that the post-pandemic group was doing better in every way. The average order value (AOV) of customers after the pandemic was also higher than that of pre-pandemic customers.
Purchase Channel Preference
Pre-pandemic customers were uncomfortable buying slow-moving, durable products online. However, the onset of the pandemic seems to have swayed their channel preferences. This highlights the importance of maintaining an effective online presence to ensure that the shopping experience offers ease of navigation, convenience, and customer support. This enables customers to browse for products with ease and seamlessly complete their purchase journey.
Next, let’s look at the evolution of product preferences amongst customers after the pandemic. In the study, post-pandemic promotional items increased in sales across both media, i.e., online and in stores.
Jumping into Website Behavior
It is worth using this information to dig deeper into website buying behavior after COVID-19 due to a post-pandemic surge. The study showed the total AOV for all stores and web channels. AOV for website purchases was less than half the AOV for store purchases. It’s also important to note that promotional items that were growing on the Internet were more affordable than those sold in stores.
A closer look at the product categories sold online revealed that post-pandemic customers are buying more major product categories than before. After the pandemic, customers are buying more of the two major product categories and fewer ancillary categories.
Price Sensitivity Post-Pandemic
- Promotional Product Preferences
In the section above, we emphasized that post-pandemic customers are showing increased price sensitivity.
We observed from the study there has been a shift in terms of sales proportionally between Premium products and Promotional products for Main Category A. After the pandemic, customers switched from Premium products to Promotional products. The increase in sales from Promotional products after the pandemic amounted to 15% while the decrease in sales from Premium products amounted to 17%. This reflected a very direct shift in lower-priced items among 54% of the customers who purchased after the pandemic. Previously, only 34% of customers purchased products from the Promotional line. After the pandemic, changes in customer behavior and price sensitivity were clear. We also observed another interesting fact related to luxury goods. Almost half of the sales come from selling such items, but fewer customers buy luxury goods.
This further shows that the phenomenon of price sensitivity cannot be generalized to all customers and all products within a particular category. Some customers are brand-conscious or less price-conscious, while others still prefer luxury goods and exchanging premium products for promotional items.
The results of this survey are important because they reflect the diverse retail customer base. Some are price-conscious, while others are brand conscious and prefer luxury brands.
- Significant Discounting
Another trend we observed was that post-pandemic customers received higher discounts than pre-pandemic customers. The study summary showed the total discount rates taken by customers before and after the pandemic. After the pandemic, customers received a total of four additional discounts. The discounts received were higher for post-pandemic customers who shopped online. These customers received 8% more discounts than their pre-pandemic peers.
- Importance of Brand Loyalty
We’ve seen some customers shift to promotional items, but it’s also worth watching for impacts at the brand level. This makes it clear whether customers are switching from a particular brand that offers more premium services to a brand that offers more promotions.
Dive into the top brands in Main Category and you’ll see trade-offs between brands among post-pandemic customers. According to the study, we can observe an increase in the share of some blended brands offering promotional, premium, and luxury brands.
The findings show the importance of brand loyalty, especially in the post-pandemic era. If a brand didn’t have strong brand loyalty, customers would have switched to buying premium products from another brand. However, due to their strong loyalty to the brand, customers decided to stick to the same brand’s promotional offer instead of switching brands.
This also highlights the need for diverse product offerings in the post-pandemic world. If a brand did not have a promotional line, customers looking for promotional items were forced to switch to another brand, which reduced the brand’s share after the pandemic.
Pandemic and Customer Behavior
A significant increase in online transactions has been noticed, with some customers becoming price-sensitive and taking advantage of higher discounts after the pandemic. In-depth analysis also revealed another customer segment that is price-insensitive and continued to buy quality products after the pandemic. These results highlight the need to serve the price-sensitive and brand-sensitive customer segment. Both contribute significantly to the company’s overall sales.
It was also found that brand loyalty and product mix play an important role in brand growth and value sharing after a pandemic. Therefore, it is important to offer a diverse product mix in order for other brands in the consumer durables industry to gain a greater share of the growing market.
Data-driven insights like these support strategic decisions and shed light on how to effectively target customers when shopping behavior changes after the pandemic.