The Value Proposition

Datamonitor just issued a report titled “Recessionary Consumers & Product Choice: Implications for 2009,” in which they announce: “Confidence has been eroded and there is an increased likelihood of consumers reappraising their consumption habits, with price one of the major motivators in product choice. The desire for products with competitive pricing is not just about ‘cheapness’ however, consumers are more interested in focusing on essentials, emotionally meaningful products and value for money.”

Right now, though, it’s difficult to pinpoint exactly what that means in terms of product development: Is fine chocolate a luxury or an affordable indulgence? Can organics provide real or perceived benefits that transcend the costs? Do higher-priced convenience foods trump home cooking?

As always you’re going to have to do your homework to answer these and specific questions related to your products. And knowing your target consumer is key. For example, higher-priced convenience foods should still hold sway with the time-crushed employed who have been asked to shoulder the work of their recently departed colleagues. But for those with more time on their hands—those whose hours and paychecks have been cut significantly or completely?home cooking and brown-bagging have taken on a new patina. And that indulgent chocolate just might provide a endorphin-laden boost to any depression caused by their personal economics.

But merely reformulating on the basis of price is not going to be a winning strategy unless you’re selling commodities and making a profit from it. (Not to mention that economics might drive you to make really, really, REALLY bad decisions, like for example, continuing to ship microbially suspect product instead of tossing it...) Value-added has never been more critical in the food industry. The hardest task is identifying exactly what that means—and who’s willing to pay for it.

   –Lynn A. Kuntz