We asked our members which of five choices had the greatest impact on their customer-facing strategy; “economic pressures” was by far the dominant answer. And this is not going away, as bank failures and growing numbers of layoffs mean more pressure on the rapidly shrinking middle class. A C-suite executive at a leading global consumer goods company foresees the consumer continuing to struggle through the beginning of 2024. Knowing that people are trading down, the executive is focused on engineering absolute value toward the lower end. One approach is to reduce the number of SKUs to try to be more intentional about what the customer will choose during a downturn. “Placing fewer but bigger bets is really important,” the executive said. “There’s more risk in having 100 things versus 10 things.” Steve James, chief marketing officer at Fannie Mae, observed similarly cautious behavior in home buying. He said, “As wage growth hasn’t kept up with inflation, the consumer is more financially challenged than they’ve ever been.”

Until very recently, there was no indication that those with a lot of disposable income were starting to tap the brakes, accelerating a post-pandemic trend called premiumization—or the belief that making different “classes” of products available at various prices is a smart customer strategy. It also means focusing on the top-earning segment of the market. This is happening at Beam Suntory, the maker of Jim Beam and other liquor brands. “In the world of spirits, we find that consumers are willing to pay for brands that they feel are worth it—brands that have a strong connection to and that offer an incredible experience at every touchpoint,” said Ivan Hidalgo, VP of North America marketing for Beam Suntory. “This growth mostly resides in the premium segment of our portfolio, and we expect it to continue to grow.”

Yet even the high-end customer is suddenly feeling a bit of a squeeze, according to the National Retail Federation. “We are starting to see high-income spenders make tradeoffs,” said NRF Vice President of Retail and Consumer Insights Katherine Cullen. “While they still feel comfortable spending, like mid-income consumers, they are considering ways to balance their budgets and may be pulling back in some areas in order to compensate for higher costs elsewhere.”