The influence of inflation on consumer spending

Cost of living, inflation, and consumer spending are key topics that continue to dominate the news, but what impact do they have on businesses?

Put simply, inflation means an increase in the cost of goods and services. While it might sound positive that businesses are able to charge more for their products, high inflation means that their input costs are also likely to have gone up, decreasing their margins. After a few years of growth, global inflation is set to ease to 4.2%¹ in 2025, but we’re not out of the woods yet. Consumers are becoming more intentional with their spending, prioritising quality, convenience, and long-term value over impulsive purchases.

Businesses can adapt by offering 

• strategic incentives, 
• enhanced customer experiences, and 
• products that align with evolving consumer expectations.¹

How inflation shapes consumer spending habits 

Economic uncertainty and shifting financial priorities are redefining consumer spending inflation trends. Today’s consumers are no longer just looking for the lowest price - they’re considering the overall value of a product or service too.

Key consumer trends in 2025:

• Purposeful purchasing: consumers expect brands to offer affordability, functionality, convenience, and long-term benefits
• Experiences over possessions: 59% of consumers believe spending on experiences remains important, reflecting their preference for meaningful purchases
• Convenience counts: 50% of consumers are willing to spend money to save time, emphasising efficiency and ease of use
• Informed shopping: 57% of consumers now extensively research products and services before making a decision.¹

Retailers are responding: what the cost of living increase means for business

The rising cost of living is driving businesses to refine their approach to customer engagement. Consumers are not just looking for discounts—they want brands to demonstrate clear benefits and offer incentives that go beyond immediate savings.

Business strategies for addressing consumer cost of living:

• Segmented strategies: understanding different consumer priorities is essential. For example, targeting product offerings to life stages can increase relevance and engagement. Learn more about the spending habits of Baby Boomers and Gen Z 
• Getting involved: 46% of consumers want to engage with brands to influence product development*. Collecting feedback and insights can strengthen loyalty and ensure new offerings align with customer needs.
• Experiencing loyalty: consumers expect more than just redeemable points. Brands that offer exclusive experiences, special events, or early access to new products can build stronger relationships with their customers.
• Creating omnichannel consistency: from engaging social media campaigns to personalised shopping journeys, brands must ensure a seamless customer experience across all touchpoints.

Shaping the future of consumer spending

As the cost of living increases in 2025, businesses are adapting. They’re going beyond price incentives, and focusing on long-term engagement and real value creation.  By embracing data-driven insights, personalised marketing, and innovative loyalty programs, brands can remain competitive in a market shaped by inflation and consumer spending shifts.

Source: Euromonitor Voice of the Consumer: Lifestyles Survey

About Goodman insights

Explore more insights