NielsenIQ 2022 Balancing Act: Sharing Tips on Consumer Preference and Perception for SMB Growth

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By: Wise Marketer Staff |

Posted on September 27, 2022

As if small and medium-sized businesses (SMBs) don’t have enough to deal with in the battle against large global brands, the impact of inflation on consumer shopping behaviors brings another curveball. But it doesn’t mean there aren’t opportunities for SMBs to grow their businesses, especially when taking a deeper look at consumer preferences and perceptions of small brands.

We interviewed Lauren Fernandes, Global Director of Thought Leadership at NielsenIQ, to get insights from its latest global study, The 2022 Balancing Act on how SMB's can grow by balancing consumer preference and perception . NielsenIQ is rolling out findings from the effort in stages. Fernandes discusses what’s up against SMBs and details a strategic model that can help SMBs grow at scale.

Wise Marketer (WM): With so many disruptive forces impacting businesses today—soaring inflation, the Ukraine crisis, continuing pandemic concerns—how do small and large brands respond differently, how are they challenged, what are their opportunities?

Lauren Fernandes (LF): Brands of all sizes are dealing with unprecedented disruptive change, and consumers, too, are reacting in unique ways following consecutive years of “new norms”.  When you consider the soaring rates of inflation, the rising price of raw materials, concerns around the lingering pandemic, interests in improvements to the environment, supply chain issues, and more, it’s a seemingly endless list of challenges that have created specific opportunities across the spectrum of brand size.

For SMBs, in the face of global concerns, many have done well to lean into their local strengths. Leveraging the reliability of local supply networks, as well as appealing to consumers’ interests in supporting local causes, “local affiliation” has and remains a differentiator for smaller brands. On the flipside, for larger brands, leveraging economies of scale and deeper resources to invest in ample innovation are key to responding to today’s challenged marketplace. While it may be harder for big brands to adapt nimbly to global supply chain hurdles, these businesses may be best equipped to deliver consistency on price at a time when consumers need it most.

From a consumer standpoint, we actually see e-commerce leveraged for its cost-saving potential. Through the NielsenIQ 2022 Balancing Act, we see that 1 in 4 consumers globally are shopping online to get better deals, and more consumers say they usually seek large brands for their online purchases.  

WM: With this new report, The NielsenIQ 2022 Balancing Act, describe what you mean, especially since the perception when it comes to a retail battle between large brands and small brands is that there would be a heavy imbalance toward large brands?

LF: Broadly speaking, our report title had quite a literal meaning. As we alluded in the last question, it’s tough to be a brand today, and even tougher when you’ve got the limited budget, reach and resources of a smaller business. The report introduces a 4-point strategic framework to help businesses, particularly smaller ones, grow at scale. We shine a light on the key priorities worth juggling, so companies can unleash and leverage data that is within their grasp, through platforms like Byzzer. We recognize at the onset, that small and large brands face different challenges throughout today’s difficult macroeconomic climate. And so, we highlight learnings on the various opportunities that exist across the spectrum of brand size.

From the consumer cohorts that are most likely to “buy small” vs. “buy large”, down to the growing demand consumers have for innovation today, there are a lot of factors and varying consumer preferences at play when consumers are making a brand choice. This report guides understanding of the unique ‘balancing act’ each brand has before them, along with recommendations for how to best navigate the brand motivators and preferences that surround their consumers’ behavior. And for the first time, smaller brands can gain a specific perspective on these opportunities, through our analysis aligned to their core consumers.  

WM: Simply put, what does it mean to be a small brand or a large brand, how do consumers perceive them?

LF: Our research revealed that SMBs carry a perception of being “local” (33%), “independent” (31%), and “unfamiliar:” (27%). Which, inherently, are differentiators that showcase how consumers themselves perceive “small brands” at the point of purchase. The good news is that despite many SMB’s being largely “unfamiliar” in terms of notoriety, consumers, in general, are considering a wider variety of brands when deciding what to buy. In fact, more than half of global respondents (51%) say they’re buying a greater variety of brands than they were before COVID-19.  Broadened brand consideration presents a huge opportunity for smaller brands who may now be in the running for more purchases than before.

For large brands, not surprisingly, nearly half of the respondents viewed them as “very popular, recognizable, or world-renowned". So, consumer expectations of quality, notoriety and reputation will hold greater weight. When asked to assess different reasons to buy a brand, consumers were most likely to associate the following factors to their purchases of large brands: being the most well-known in the category, always being available in stores or online, and having a wide product range.

Brands can use these types of insights to guide what components of their brand are most worthwhile to invest in, noting that consumers have very different expectations of different-sized brands.

WM: How has inflation and the current economic conditions altered how consumers shop for small and large brands today?

LF: The obvious answer is that price sensitivity is on the rise. Already, it’s clear that affordability is a top priority across all global consumer groups analyzed. In fact, nearly all of global respondents (93%) say that a brand’s affordability, or ability to provide good value for money, is a primary factor of importance to them. 

Current economic conditions will require operating in a two-speed world where a brand’s “value” is built upon two distinct, but cooperative foundations: affordability + meaningful differentiation. While initially, lowest priced products may have an advantage, it’s reasonable to expect that over a longer course of time, especially amid recessionary conditions, that cost savings will only carry a brand so far. A product that is not affordable to core consumers may not be considered... but at the same time, a product that is affordable, but not meaningfully differentiated, is less likely to earn continued loyalty among consumers. 

Our research identifies unique ways in which small brand buyers seek to save on expenses. For the “Exclusive Small Brand Buyers”, or those who say they prefer buying smaller brands, offering things like smaller pack sizes is a specific strategy likely to serve the cost-conscious needs of the SMB captive audience. For “Exclusive Large Brand Buyers”, they are looking to save money by shopping online to get better deals (32%) and buying larger/economy sizes of their products of choice (27%). 

WM: Are there any notable differences by region to how consumers across the world are reacting to small brands vs. large brands?

LF: There definitely are some interesting delineations in consumer brand preference across the world. I think even at the broader global level, there’s a really interesting vantage point to understanding the opportunities aligned to Small vs. Large brands.

Our study uncovered that across the globe, consumers can fit into one of four groups of brand buyers, ranging between the most agnostic in terms of brand choice, to those with more exclusive brand preferences:

  • Agnostic Brand Buyers — those who don’t think deeply about which brand is behind their purchase
  • Unintentional Small Brand Buyers — those who form the middle-ground of demonstrating “some” preference to buying smaller brands, but only when it’s convenient to do so
  • Exclusive Small Brand Buyers — those who claim they prefer to buy smaller brands.
  • Exclusive Large Brand Buyers — those who claim they buy well-known large brands whenever possible.

Worth noting, Agnostic Brand Buyers represent the largest share of global consumers (41%) and are therefore a huge opportunity for brands of all sizes to try to nurture and convert. For small brands, there’s already a sizeable audience of buyers who say they have at least some interest in “buying small”, highlighting the importance of tailoring product messaging to the right captive audience. 

The study also looked at differences in brand performance by region and spotlighted some specific countries where small and medium-sized businesses have out-performed (or, have been purchased a lot, among shoppers). In the United States, for example, SMBs contributed to 52% of the total FMCG market growth in Q1 2022. That is one of the higher-scoring regions, where small brands have driven a large share of sales growth, and clearly carry some weight with shoppers.

From the lens of consumers, those who said they had small brand buying preferences were heavily concentrated in France, Germany, and Italy, where nearly half of respondents claim to be Unintentional or Exclusive Small Brand Buyers. In the U.S., 44% of respondents have some preference to buying small, compared to the global average of 38% of consumers.

This research confirms there are large swaths of the population eager to engage with small brands that pique their interests. So, while there’s a lot of priorities to balance in order to succeed, the stakes are high for even the smallest of businesses.

WM: Considering the bulk of the data in the report, ultimately, what’s the strategy ahead for small brands as they try and build growth and scale?

LF: Ultimately, despite inflation and the disruptors we talked about earlier, there is ample opportunity ahead for SMBs. Shoppers want to buy small and independent. But rising prices call for bold justification of the value (both monetary and otherwise) that consumers are getting from consuming your product. Now is not the time to sacrifice on your mission statement to buyers. Those that believe in and trust your value proposition need the reassurance that their precious purchase decisions will be honored by brands. Using the key learnings about consumer interests from our Brand Balancing Act research, can help highlight what priorities are most important.

Smaller brands need to orient their strategies around these four key insight bases:

1) First base is “preference,” where we lean into data around what consumers want. Consumer needs and reasons for choosing a brand have fragmented. Knowing what types of brand preferences exist and aligning efforts to the core factors that drive purchase decisions is key to success. For example, 4 in 10 respondents consider themselves to be Agnostic brand buyers, so there’s a large group of “open-minded” shoppers to reel in.

2) Secondly, brands should regularly benchmark their “performance,” understanding which brands are setting the pace for growth and seeing where smaller brands are outperforming larger brands. This is a simple, but essential exercise to guide promotional focus and setting achievable sales targets.

3) The third base is what we call, “trend-cycle,” where we highlight the different trendsetting mentalities of consumers today. This outlines how open your consumers are to trying new things and can influence the level of nurturing, reminders and depth of discounts required to entice new sales.  

4) Lastly, is a focus on meaningful brand “differentiation.” This is where brands must hone into their signature style or standpoint to connect to the hearts and minds of consumers. NielsenIQ identified three hallmarks of brand differentiation, where small brands are currently driving big change. We believe these are hot trends that could signal broad consumer demand shifts yet to come.

With limited analytics budgets available to most small and medium-sized businesses, it is important to identify the opportunities that are within reach and focus on the approaches that will matter most. It's easy to be overwhelmed by the sheer volume of potential opportunities for business growth or transformation.

That’s why self-service, intelligent platforms like Byzzer, provide a great solution to bringing the 4-step strategic framework to life. Powered by trusted data inputs, these four bases aim to outline how SMBs can approach building a stronger strategy in a simple, approachable way.