By all accounts, the U.S. economy continues to do well despite a slowing trend in gross domestic product over the last two quarters. Unfortunately, this hasn’t exactly translated to the average American household, where above-average inflation rates over the last few years have left lower- and middle-class families struggling to keep up.

Frugal budgeting means cutting unnecessary expenses, and indulgent food items and dining out are often the first things to go. How can food and beverage businesses continue to entice consumers leaning into cost-conscious buying behaviors?

Understanding what drives these behaviors and identifying consumer pain points is a good place to start. From there, you can develop strategies to create value at an affordable price point while preserving quality and brand integrity.

Driving Factors in Consumer Frugality Trends

In addition to overblown inflation, consumer uncertainty can be a major factor in purchasing decisions. Why are consumers concerned?

To start, it’s an election year, one in which people on both sides of the aisle harbor real fears about the future of our country. The situation feels dire, no matter who you support, and political tensions can impact consumer confidence. 

Recent polling indicates that consumer sentiment is in sharp decline, likely due to high inflation, interest rates that have yet to come down, and slowing job growth.

The Bureau of Labor Statistics reports job growth below market expectations, and the unemployment rate has started to trend upward. 

Paired with months of layoffs in the tech industry starting in late 2023 and continuing into 2024, some fear a recession could be on the horizon. This has led to a more frugal mindset, contributing to tighter budgets as consumers prepare to face an uncertain future.

Related: Value Meals — Restaurants Battling Inflation

The Impact on Household Purchasing Decisions

When consumer sentiment is shaky, a couple of things can happen. First, people may be inclined to hoard excess income in preparation for an economic downturn, job loss, or inflation that continues to outpace cost-of-living raises.

In addition, consumers may cling to brands they know and trust, taking comfort in familiarity rather than leaning into adventurous or experimental spending on the unknown. 

Of course, those interested in cost-conscious behaviors might simply cut indulgences and even reduce spending on staples by turning to generic product alternatives.

Appealing to Cost-Conscious Consumers

First and foremost, businesses need to understand their consumers. This means gauging their pain points and finding solutions, including providing items that make sense to target demographics.

This is no easy feat for restaurants and food manufacturers who want to maintain quality but are also suffering from inflation in the supply chain, which can make cost-cutting difficult. There are a few things you can do to thread the needle.

Instead of leaping right to cutting labor or diminishing product quality – things that directly impact consumer experience – consider auditing your entire operation to find inventive ways to streamline and trim expenses. Automation technologies, for example, can have a major long-term impact.

You might also try offering menu or product bundles to boost purchases while providing consumers with added value. Revamping your menu with dishes that take advantage of cost-effective ingredients can also curb costs and allow you to pass savings on to consumers.

Strategies for Market Positioning

Whatever changes you make, you need to effectively communicate them to consumers. Providing valuable and cost-effective solutions is only useful if consumers recognize and act on the perceived value.

Depending on the market segment you’re catering to, you could try strategies like simplifying your menu, offering smaller portion sizes and pricing, promoting limited-time offers, or positioning menu items as affordable luxuries. 

When you understand why consumers are spending cautiously and what they want, you can make mindful changes to meet them where they’re at.

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