Monday, April 15, 2024

DIGITAL INFLUENCER | Filipino consumer behavior in slow-growth global economy

As the Filipino consumer landscape evolves amidst economic uncertainty and technological advancements, understanding consumer spending behaviors, shifting habits, and a growing consciousness for sustainability and mental well-being are crucial for businesses and policymakers.

Current state of Filipino consumer spending

Germaine Reyes, CEO of Synergy Market Research + Strategic Consultancy, presented key findings at the Philippine Marketing Association Metaverse Hybrid Conference and the World Marketing Summit.

A notable aspect is the fluctuating financial situation of many Filipinos. As of November 2023, 37% reported difficulty meeting their financial needs with their monthly earnings, slightly improving from 42% in March 2022. This trend indicates a persistent struggle among a significant portion of the population to make ends meet.

The psychological impact of these economic challenges on Filipinos cannot be overlooked. A concerning 76% report experiencing mild to severe psychological distress. This distress is more pronounced among females (60%) and the Gen Z population (51%), highlighting the broader social and mental health implications of financial strain.

Businesses and the government have an opportunity to play a constructive role in addressing these mental health concerns. By offering products and services that support well-being or engaging in initiatives that promote mental health awareness, they can resonate more deeply with consumers navigating these challenges.

Expected changes in consumer spending

Looking ahead, approximately 80% of Filipinos are expected to cut back on household spending, particularly in non-essential areas like dining out and leisure activities. These economic pressures lead to heightened price sensitivity among consumers, impacting their spending habits and brand preferences.

Inflation emerges as a top concern, cited by 49% of respondents, highlighting the impact of rising prices on consumer choices. Key areas where price increases are most felt include petrol/diesel, eating out, healthcare products, and food supplements.

The Bangko Sentral ng Pilipinas (BSP)’s Consumer Expectations Survey 3rd quarter report further reinforces this cautious outlook, highlighting concerns over increasing prices, fewer job opportunities, lower income, and the effectiveness of government policies.

Another 48% focus on purchasing only essential items, suggesting a shift towards more prudent spending habits. Consumers are reducing the frequency of purchases or switching to cheaper alternatives in categories like eating out, beauty services, clothing and footwear, cosmetics, household consumer electrical items, tech devices, sanitary care/toiletries, healthcare products, luxury items, alcoholic drinks, and out-of-home entertainment. The rise in digital and online transactions is a notable trend, signaling a shift in the shopping preferences of Filipino consumers.

There is a growing preference for flexible payment options. In the first part of 2023, 13% to 23% of transactions were done using “buy now pay later” plans. For future transactions, there’s a planned increase in using these plans, with 18% to 25% of consumers indicating they will use them.

Filipinos are also actively saving up for long-term investments such as real estate, education, health insurance, and retirement funds. Such saving behavior indicates a strategic approach to financial management, prioritizing future security and stability.

Sustainability influence on purchase decisions

When it comes to making purchase decisions, affordability is paramount for 62% of Filipinos. This focus on cost-effectiveness reflects the economic constraints many are facing. Trust in brands also plays a significant role, with 54% considering it a key factor. This trust factor underscores the importance of brand reputation and reliability in influencing consumer choices.

Despite the cautious spending, there are emerging opportunities for brand growth. By understanding and tapping into specific consumer segments, such as “TikTok users” and “Tactile buyers,” brands can tailor their strategies to meet unique preferences and behaviors. These segments represent a more engaged and dynamic portion of the market, offering potential for innovative and targeted marketing approaches.

The importance of diversity, equity, and inclusion in brand engagement cannot be overstated. Today’s consumers, particularly in the Filipino market, are increasingly aware of and influenced by these factors. Brands that prioritize and authentically integrate these values into their operations and messaging are likely to build stronger, more trusting relationships with their audience.

Sustainability has emerged as a critical expectation among Filipino consumers. There is a growing segment of ‘green-inclined’ consumers who show a willingness to pay more for environment-friendly products. The growing inclination towards eco-consciousness is evidenced by the finding that 7 in 10 Filipino consumers are willing to pay more for environmentally friendly products. Additionally, 52% of Filipinos prefer buying from socially and environmentally responsible companies, as per the YouGov Profiles report.

Reyes emphasized, “This trend underscores the need for companies to adopt sustainable practices, not just as a corporate responsibility but as a strategic approach to meet the expectations of an increasingly environmentally conscious consumer base.”

Influencers should embrace eco-consciousness

In an era where sustainability is more than a buzzword, the role of digital influencers in advocating for environmental responsibility has become increasingly significant. Aligning with eco-conscious values presents not only a path to make a positive impact but also an opportunity to connect with a growing segment of green-inclined consumers.

When it comes to eco-conscious content, authenticity isn’t just important — it’s everything. Greenwashing, the act of making misleading claims about the environmental benefits of a product or service, can severely damage credibility. Genuine commitment to environmental causes goes a long way. This might mean showcasing your sustainable lifestyle, sharing your journey towards reducing your carbon footprint, or educating your audience about environmental issues.

Conclusion

The spending habits of Filipinos in the face of current economic challenges are characterized by a shift towards essential and value-based spending. This blend of caution and strategic planning in spending reflects the broader economic sentiments and priorities of Filipino consumers, characterized by adapting to current economic challenges while also preparing for future stability and growth.

These findings have significant implications for businesses and policymakers. For businesses, there is a clear need to emphasize affordability and trustworthiness in their offerings. Understanding the financial constraints and priorities of consumers can guide more effective marketing strategies and product development.

For policymakers, these insights highlight the need for supportive measures to alleviate financial stress and improve mental well-being. Initiatives that boost economic stability, support mental health, and address the cost-of-living challenges can make a substantial difference in the lives of many Filipinos.

Monitoring global economic developments, I observed that there are many countries that have not yet fully recovered post-pandemic affecting the economy, jobs, tourism, and investments.

For example, many manufacturing companies started expanding outside of China as the country is shifting to high-value manufacturing. The decrease in China’s GDP and future economic forecast has a ripple effect on various countries that rely on it for trade, tourism, and investments, among others. This development also affected consumer spending.

Therefore, what we are experiencing in the Philippines is not unique to us. It is happening in many countries around the world. But being aware of countries that are booming and glooming at these times can also help us realize where we have an edge, and where we need to take action and plan for the future.

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