The "rockets and feathers" phenomenon describes how prices rise quickly when costs increase but fall slowly when costs decrease. Consumers typically make automatic decisions but think more carefully when prices change. Companies maintain high prices when costs drop to avoid triggering consumer scrutiny and brand switching.

The phenomenon of "cheapflation" has emerged as a significant trend in consumer behavior, particularly in the context of rising inflation rates. As prices surged, many consumers began to gravitate towards lower-cost goods, believing that this shift would help them save money. However, recent research by Harvard Business School Professor Alberto Cavallo and his coauthor Oleksiy Kryvtsov reveals that this strategy may not have been as effective as consumers anticipated. Their analysis, which examined millions of products across more than 90 major retailers in ten countries, found that the prices of budget brands increased at a faster rate than those of premium brands during the inflationary period. Specifically, in the United States, the prices of the cheapest food items rose by 30% from January 2020 to May 2024, compared to a 22% increase for the most expensive food products. This trend indicates that the expected savings from switching to cheaper alternatives were largely negated by the rapid price increases of those very products. The researchers identified several factors contributing to this "cheapflation" phenomenon. One key reason is the heightened demand for lower-priced items as consumers sought to manage their grocery expenses amidst rising costs. Additionally, targeted fiscal stimulus measures may have further fueled this demand. The reliance of cheaper products on global supply chains, which faced disruptions during the COVID-19 pandemic, also played a role in driving up prices. Furthermore, the profit margins for budget brands are often tighter, leading manufacturers to increase prices more aggressively in response to rising supply costs. Interestingly, even after inflation rates began to stabilize, the relative prices of cheaper products remained elevated. This persistent price gap has contributed to consumer perceptions that prices are excessively high, not only in comparison to historical levels but also relative to more expensive alternatives. The research highlights a broader trend where the economic landscape has shifted, leaving consumers grappling with the reality that budget options may no longer provide the financial relief they once did. In summary, the concept of cheapflation underscores the complexities of consumer behavior in an inflationary environment, revealing that the anticipated benefits of switching to budget brands may have been overstated. As prices for these products continue to rise, consumers are left to navigate a challenging economic landscape where their purchasing power is increasingly strained.

Nearly 61% of respondents to a new survey said they had changed their online shopping habits in response to higher prices, hinting at the long-term impacts of inflation. Almost 90% of respondents said their cost of living has gone up over the past 5 years. About half of respondents said that they've considered stacking multiple coupons or reselling highly desired products. Among the factors that persuade online shoppers to buy from a certain brand are free shipping (63%), affordable goods (61%), frequent sales (36%), free and straightforward returns (34%), and loyalty incentives (33%).

Historical practices like bartering have evolved into modern dynamic pricing. Facilitated by big data, AI, and online retail platforms, brands like Wendy's and Walmart are implementing dynamic pricing strategies, addressing consumer fears by ensuring fairness. Dynamic pricing adjusts prices based on demand, time, and customer behavior.

The Empathy Gap explains why we often underestimate how much a buyer's emotional state can influence their behavior and decisions. People — including your customers — suck at predicting how they'll feel and act in the future. Avoid asking customers to predict what they'll want (or buy) in the future when doing customer research and instead find the answer in their past behavior patterns. Factor in “hot” emotional states, like hunger or frustration, in advertising while also framing your product as the solution. Leverage buyers' rational emotional state to sell subscriptions by framing the purchase as a way to prevent a future “hot” emotional state.

This article shares five expert-backed strategies for improving pricing. From breaking down prices to enforcing purchase limits, each strategy is designed to tap into the psychology of consumer behavior. Strategies covered include avoiding round numbers and reframing "free" offers to enhance the perceived value of your products or services.

Rising inflation and economic uncertainty in 2024 have transformed shopping behaviors, with consumers embracing "fun-flation" and buy-it-for-life communities. TikTok's "What's Next" trend report explores these new shopping trends, emphasizing the significance of emotional connections, community, and transparent brand relationships.

People value things more when they're in limited supply – this perception of value drives people to act quickly, usually increasing demand. When scarcity is applied ethically, it leverages psychological triggers that boost engagement without creating a manipulative experience. Always explain to users why the scarcity exists, avoid unnecessary pressure that could tarnish your brand's reputation, and stay truthful to avoid using customers' trust.