Pricing and promotion sensitivity in Canada after a year with COVID-19

Marketing & Trade

A year after the spread of corona virus was deemed a pandemic, and Canada issued its stay-at-home order, the world has changed—and so has the shopping behavior of 50% of consumers in this country, according to NielsenIQ proprietary research.¹

There are several reasons why shopping for groceries isn’t the same these days. Restrictions and personal concerns about health care have led 59% of households to visit brick-and-mortar stores less often. With shoppers making fewer trips, there are fewer opportunities for brands to engage with customers in-store. And they are watching their wallets. Unemployment in Canada increased by nearly 4% from 2019 to 2020, and every second Canadian says they only have enough money for food, shelter, and basics. A new, growing group of cost-conscious consumers—“newly constrained”—grew from 22% to 32% in the 4 months from September to December 2020.

It is the right time to think about pricing strategies

Taking all this into consideration, does it make sense to think about changing pricing strategies or adjusting promotion activities? NielsenIQ in Canada analyzed price elasticities in the 40-week pre-Covid period versus the 40-week period after the peak in pandemic pantry loading. Thus, we were able to take a deep look at two periods of relative price stability—absent the fluctuations accompanying extreme shopping behavior. Total grocery CPG sales saw 10% growth, driven mostly by regular-price sales growth of 18%. Overall inflation was at 5%, but the average price level increased by only 2%—the difference accounted for by a behavioral shift away from promotional-priced toward regular-priced goods.

There were fewer promotions in-store during the pandemic, as the focus lay on the supply chain. When Canadian shoppers are visiting stores less often and spending less time in-store, there is less time to search for promotions. Does this mean consumers were less price sensitive? Across all categories studied, the consumer response to regular-price changes was comparable to pre-Covid levels. In fact, 41% of categories experienced a decrease in sensitivity to regular-price changes. Despite a decline in promotional-price sensitivity across all categories studied, the majority of categories continued to be highly sensitive to promotions. Canadians search for deals and tend to find them, with 1 in 2 units sold at a discount.

4 key findings to consider before making any changes

We compiled some facts about price sensitivity and what it means for you:

Plan by item—not by category
41% of categories reported a decrease in regular-price sensitivity during the pandemic, while 9% reported an increase. However, at the item level, between 10% and 40% of items experienced a change in regular-price sensitivity across time frames. Pricing strategies require laser focus, and now is the time to plan by item—not across your total portfolio.

Promotions matter—activate their power
72% of categories remain highly sensitive to promotions. Optimize trade spend by planning by item and retailer to maximize return. 52% of units were sold on promotion during the pandemic. This is still high, but down 4 percentage points from 2019. With all categories studied experiencing a reduction in promotional-price sensitivity, now is the time to realign your trade strategies to maximize trade efficiency.

Time for adjustments—strategies and expectations
There was a 31% reduction in consumer response to promoted price changes in 2020. Strike while the iron is hot. Now is the time to act and reset both promotional strategies and shoppers’ expectations.

Every week counts—choose a diverse mix
63% of shoppers decide where to buy based on weekly sales and promotions. To avoid cherry-picking by customers, retailers need to work with manufacturers to have a diverse mix of categories on promotion, to drive trips and grow baskets.

¹NielsenIQ Report: Pricing and Promotion During the Pandemic, February 2021.