How to keep costs low as prices rise

The sudden surge in consumer prices—up 8.6% year over year in May, the biggest jump in 40 years—is taking a bite out of many Americans’ spending. In a survey by Dig Insights in collaboration with Drop for Business Insights, 71% said their household income is not keeping pace with inflation, and 49% said they were worse off financially today than a year ago.

In addition, 83% of respondents said they were spending more carefully than they did just a few months ago because of how expensive everything has become. The survey found that in addition to driving less and making fewer discretionary purchases, consumers are spending smarter by stocking up on deals, doing more comparison shopping, buying store brands, and increasing their use of coupons and loyalty points.

Despite so many people feeling the financial pinch, consumers are still itching to get out and do the things they were constrained from doing in the depths of the COVID-19 pandemic. In April, U.S. consumer spending increased by 0.9%, while spending jumped by 1.4% in March. Spending on air travel and hotels, for instance, is way up over last year. Drop for Business data shows airline and aviation services spending increased 93.3% in May compared to the same month a year earlier. Restaurant and entertainment sales are robust. And even gasoline purchases have increased in dollar terms, 31.5% year over year, despite the jump in pump prices. While these are large increases––these categories were down significantly during the pandemic––it indicates people are spending more normally again.

AN APP TO HELP CONSUMERS SAVE

Fortunately, consumers have tools to combat inflation that they didn’t have 40 years ago, such as rewards programs that help people save money on key purchases. For instance, Drop, an innovative Toronto-based technology company is adding value back into people’s wallets through a novel rewards app used by more than 5 million people in the U.S. and Canada. It allows people to earn points on purchases from more than 500 of the most popular brands and has become a favorite go to for many shoppers, especially the millennial and Gen Z age cohorts.

Users can earn points in several ways, including buying goods and services—beauty, clothing, take-out, groceries, travel and much more—through the app or by simply linking their card and shopping as normal. Drop also provides points in exchange for completing surveys and sharing opinions on trending topics or playing games.

Drop, which is ahead of the curve among its peers when it comes to creating innovative solutions that help people save, also launched a Beat Back Inflation campaign, offering bonus rewards on some of the items witnessing the biggest price increases.

“Our data shows consumers are becoming more intentional with their spending to combat the financial and emotional burden of high inflation. People are stocking up on more deals, redeeming more loyalty points, and choosing to spend more on real-life experiences,” says Drop founder Derrick Fung. “We’re using the challenge of helping people navigate inflation as an opportunity to better connect with existing customers and win over new ones. With more personalized rewards, our users will be able to afford more of those experiences they are after this summer and beyond.”

MORE REWARD CHOICE

What Drop recognizes better than traditional loyalty programs is that while many consumers may want to buy the same types of products, they are less likely to be interested in a single kind of reward. It strives to diversify the rewards customers can take advantage of and the ways in which they can redeem them.

Earlier this year, Drop introduced crypto redemption, whereby users can direct their points into a Drop-owned wallet that fluctuates with the prices of bitcoin and Ethereum. Users can convert their crypto back into points at any time, giving members the opportunity to play in the cryptocurrency space without making a cash commitment.

It’s also journeying into Web3, offering customers in-app Collectibles, which are similar to nonfungible tokens (NFT), in both the shopping and gaming spaces. The company has created 1,000 Shop Collectibles that feature stackable rewards, allowing members to earn more points the more they shop. Drop also launched 10,000 Drop Pets that people can collect, feed, and watch bring home surprises like points, powerups, and bonuses. These Web3 elements are pairing exclusivity with tangible access beyond the blockchain. This is a first for the loyalty space and incentivizes users to centralize their shopping behavior in-app. Apps like Drop are disrupting the loyalty rewards market by inviting customers to experience Web3 in an easy, low-stakes way, while building the Web3 experience alongside them.

Drop for Business allows brands to add value rather than simply discounting their product. For example, the platform comes with analytics that shows consumer spending patterns in real time, which can then help inform companies as to what kinds of products to issue rewards on. In May 2022, Drop saw airlines and aviation services spending increased by 93.3% year over year, followed by gas stations, up 31.5%, and gyms and fitness centers, which increased by 30.1%. At the other end of the scale, spending on stockbrokers declined 35.4% from last year, while home decor and hardware store purchases were down 6.8% and 2.7%, respectively.

While inflation looks to spoil the post-pandemic recovery party, there are strategies, such as using innovative rewards programs, that can put real value back into consumers’ wallets.