Macro Trends Consumer Behaviour and Brand Opportunities in the 2010s

Macro trends, consumer behaviour and brand opportunities in the 2010s James Aitchison, Warc, June 2011

Overview

This document covers: • Forces affecting consumers’ lives • Key trends in consumer behaviour • Changes to the environment: media & retail • Opportunities for brands to win

Forces affecting consumers’ lives

Forces affecting consumers’ lives

• Economic weakness: western economies will remain fragile and consumer confidence low well into the 2010s. • Households under pressure: budgets will remain stretched by employment volatility, stagnating incomes, continued weakness in the property market and rising fuel, food and energy costs. • Ageing population: by 2030, one in five Americans will be aged over 65, compared to one in eight in 2009, with many still working and active in their networks and communities. • Health and wellbeing: with an aging population facing uncertain healthcare costs, consumers are taking increasing responsibility for their own health.

“Economists Carmen Reinhart and Kenneth Rogoff, in studying hundreds of financial crises, found that the period of stagnation after a crisis was usually as long as the exuberance which preceded it” The Futures Company, March 2011

Forces affecting consumers’ lives

• Digital is mainstream: online and digital spaces are becoming seamlessly integrated into consumers' everyday lives - and are no longer confined by location. • Television is still the key medium: but TV is only one of the screens used for multichannel brand storytelling and engagement. • Going mobile: wireless internet and smartphone technology mean people are permanently connected to the online world and each other. • Three-screen viewing: media consumption of video content is taking place interchangeably - and even concurrently - on TV, mobile and computer screens.

“Cisco predicts the transfer of information via wireless handsets will rise 26 times over - or by 92% annually - between now and 2015, hitting 6.3 exabytes a year, equivalent to the data capacity of 19bn DVDs” Warc News, February 2011

The impact on consumer behaviour: key trends

The impact on consumer behaviour: key trends

• Maximising: the post-recession consumer will remain pricesensitive and value-conscious. • Soft power and community: online interactions are breaking down power structures. • Play ethic: gaming is now mainstream, mobile and deeply embedded in people’s lives (also known as “gamification”). • Quantified self: consumers are looking for healthier choices and using technology to monitor and measure their lives.

The impact on consumer behaviour: key trends

Maximising • Rise of the maximisers: recession-hardened, price sensitive and value-driven consumers will continue to seek out the best deals. • Price and value perceptions: A McKinsey survey in March 2011 reported 61% of Americans had cut their outgoings in the last six months. An AlixPartners study found 50% believed private label products were of equal quality to national brands. • New approach to consumption: savvy shopping is the "new normal", even among the better off - skills developed during recession will not be forgotten in the 2010s. • Sharing best practice: vouchers, tips and routes to the best deals will increasingly spread through word of mouth, with behaviour driven strongly by online and mobile media.

“A US shopper confirmed that there is no shame in the bargain basement any more - he never liked using coupons, since they made him feel poor - now he likens them to his 'best friend’” ESOMAR Insights Conference, February 2011

The impact on consumer behaviour: key trends

Soft power and connectedness • The concept: soft power is the notion – well-established in diplomacy - that greater and more sustainable success is achieved by using openness, warmth and honesty.

“Trust is critical to brand health because consumer scepticism is so pervasive … simply put, a company and its brand can't fake it”

• Expectations: digital media and online networks have broken down old barriers and power structures - consumers expect brands to admit mistakes and engage in open dialogue.

ANA Magazine, August 2010

• Authenticity and trust: companies must be transparent and value-led, what IBM CMO Jon Iwata calls an "authentic enterprise".

The impact on consumer behaviour: key trends

Play ethic • Growth of games: many people now use gaming technologies in their daily lives, beyond the traditional (male) demographic.

“One in five Americans who spend time online play social games” Warc Exclusive, May 2011

• Games are changing: gaming is no longer a simple and solitary pastime (e.g. Wii), and gaming-on-the-go using mobile phones is becoming a popular leisure activity. • Brands and games: a new relationship between brands and consumers will emerge, with brands embedding entertaining play mechanics into offers and communications.

The impact on consumer behaviour: key trends

Play ethic • Mobile - Quick Response (QR) codes: mobile phone QR codes are enabling consumers to interact with brands and advertising, for example via print and out-of-home executions. • Mobile - Augmented Reality (AR):  Computer webcams or smartphone cameras can superimpose additional information on real-world images.  The example (left) shows an image of the old Berlin Wall superimposed on a real view of the city as it now looks (see slide 26 for brand examples).  Juniper Research expects nearly 1.4 billion annual downloads of augmented reality apps globally by 2015, up from just over 11 million in 2010.

The impact on consumer behaviour: key trends

Quantified self • Self-awareness: an acceptance that consumption habits, particularly calories, have a direct impact on health and wellbeing (obesity, diabetes, heart disease etc).

“There is a profound shift from the consumer-citizen being the unwitting generator of data … to being a collector and user of their own information”

• Consumer reaction: a move towards healthier choices, fresh foods and a rapid growth in self-monitoring and measurement of personal behaviour, driven in part by smartphone technology.

ESOMAR Insights Conference, February 2011

• Enduring: The quantified self is a long term trend that will become formalised across more and more areas of consumers lives.

The impact on consumer behaviour: key trends

Quantified self: TED video Click here to watch American journalist and proponent of the Quantified Self trend, Gary Wolf, address the TED conference, Cannes, in June 2010, on using mobile apps and gadgets to track and analyse your body, mood, diet and spending. Additional information at: quantifiedself.com.

Changes to the environment: media & retail

Changes to the media environment

• Branded content: lines between advertising and content will continue to blur. Online games like Farmville (pictured right) are already being leveraged by major brands. • Tablet growth: nearly 15m iPads were sold in the nine months after launch. McKinsey predicts that tablets will become the "control point" for consumers' media use at home. • Addressable TV: the emergence of web-connected IPTV will enable addressable content, tailored to specific localities and, potentially, right down to the level of the individual viewer. • Media meshing: three-screen viewing trends (TV, web and mobile) and tablet use will continue to drive interactions between media. The graphic on the next slide shows how the 2011 Super Bowl ads drove trending topics on Twitter

Changes to the media environment

Changes to the retail environment

• Price appeals: retailers will continue to reach consumers through price appeals and maintain pressure on suppliers to fund promotions.

“The share of global value sales secured by own-label products in the packaged food sector is set to double by 2025” Warc News, March 2011

• Private labels: major retailers such as Wal-Mart will sustain investment in private label brands, driven by new and updated ranges, as well as using it as a means to put pressure on branded product manufacturers to keep prices low. • Convenience retail formats: major retailers will seek to drive growth by opening smaller convenience stores in urban metropolitan areas (e.g. Wal-Mart plans to open 30-40 outlets in 2011). • Cost containment: Raw material pricing will remain under pressure as climate and political turmoil tests security of supply in food and energy markets.

Opportunities to win

Opportunities to win

Shopper marketing: brand owners' marketing communications must embrace the entire purchase journey to engage consumers. Innovation: drive growth in mature markets by continual innovation in all aspects of the business - e.g. products, pack formats, communications, target consumers. Emotional engagement: connect with consumers on an emotional level to protect brand equity from private label and discounting.

Opportunities to win

Shopper marketing • Communications under pressure: the gap between consideration and purchase is lengthening and marketing is competing for influence over a longer period and against more factors. •The rise of shopper marketing: brand owners must address the full shopper journey, from inception through in-store and point of purchase, in partnership with retailers. • Lead with insights: Begin with an insight about the brand, shopper and retailer and understand why your brand isn't being bought and at what point the purchase is being lost. • Embrace technology: leverage online social media to engage consumers; look to integrate mobile into the shopping experience (e.g. with QR codes and apps).

“The best CPG partners develop a distinct unity between their brand and that of the retailer that together creates shopper relevance greater than either might have achieved alone” Admap, May 2011

Opportunities to win

Innovation • Health and wellbeing: meet consumer concerns about health, diet and lifestyle with new products and pack formats (e.g. fresh and chilled foods in convenient formats).

“Hispanic Americans currently constitute 16% of the US population and, perhaps more importantly to future-facing marketers, 22% of millennials”

• Distribution: identify new distribution opportunities such as WalMart's smaller stores and non-traditional outlets (e.g. the Walgreens pharmacy chain is expanding its food offerings).

Warc Exclusive, November 2010

• Target new consumers: innovate to target and cater for the niche tastes of America's increasingly multi-cultural population.

Opportunities to win

Emotional engagement • Involve consumers: utilise consumer connectedness and the play ethic to engage them with your brand (Walkers potato chips used social media for UK consumers to devise and decide new flavours – an agenda-setting campaign).

"We need to move out of the business of just selling products into the business of improving lives…it's a shift from marketing to customers to targeting them as people“ (Marc Pritchard, global cmo, P&G)

• Be open: the soft power trend means that brands will need to be increasingly open, understanding and to admit they are not perfect.

Warc Exclusive, October 2010

• Be useful: grasp opportunities to entertain and help consumers in their everyday lives – e.g. Kraft’s iFood Assistant app suggests meal and ingredient ideas and now includes an educational dimension for children.

Opportunities to win

Maximising: brands ahead of the curve • Sara Lee used digital couponing for its Jimmy Dean brand that rewarded social media sharing - a $1 discount increased to $2.50 when shared with others (pictured right). • Walmart connected with US moms by leveraging the insight that the presence of the retailer in the local community saved families up to $3,100 per year. • Sainsbury’s, the UK supermarket chain, implemented a “Feed your family for a fiver” campaign, offering meal ideas with pregathered ingredients in-store for £5 (c.$8). The campaign ROI was 5:1.

Opportunities to win

Soft power: brands ahead of the curve • IBM’s “Smarter Planet” campaign positioned the technology company as a group of people with a shared concern for and commitment to solving global problems. •Domino’s “Pizza Turnaround” recovery campaign led with a public apology in which the restaurant chain openly admitted to a reduction in quality.

“The phrase 'Doing a Domino's' has insinuated itself into popular culture as shorthand for contrition and reinvention” ARF Grand Ogilvy winner, March 2011

• Frito-Lay refocused its entire production and manufacturing processes around sustainable innovations to reposition Sunchips as a leading green brand.

Opportunities to win

Quantified self: brands ahead of the curve • Nike+iPod epitomises this nascent trend, by embedding two brands at the centre of consumers daily exercise rituals. • Nike's Training Club app applies involves the brand in women's gym work outs, suggesting drills, recording results and offering rewards. • BMW has launched an app enabling US drivers to analyse their driving habits ahead of its 2013 electric vehicle launch.

Opportunities to win

Play ethic: brands ahead of the curve • AirWalk offered consumers an AR app that sent them to specific locations in New York and LA, where they could see a limited edition shoe on their phones (pictured right). •Tsingtao beer in China included QR codes on the bottle label that interacted with webcams to depict basketball cheerleaders dancing around the bottle on drinkers’ computer screens. • Volkswagen used an app download that enabled consumers to “test drive” the new Passat model using their smartphones in conjunction with a print ad (pictured below/right).

Sources, references and reading

Sources, references and reading •10 global consumer trends in 2011, Admap, May 2011 •Augmented Reality: a new dimension to marketing, Warc Best Practice, April 2011 •Augmented reality: what is it and how do you use it?, Warc Exclusive, April 2011 •BMW looks to the crowd, Warc News, 21 April 2011 •Brand consistency: Get ahead, get in-store, Admap, May 2011 •Brand trust in the post-recession era, ANA Magazine, August 2010 •Domino's: Pizza Turnaround, ARF David Ogilvy Awards, 2011 •Engage consumers throughout the shopper journey, Warc Best Practice, May 2011 •General Mills: Marketing to Hispanic audiences, Warc Exclusive, November 2010 •Global Village, Global Jungle, ESOMAR Insights conference, February 2011 •Kraft utilises social media, Warc News, September 2010 •IBM – Let’s build a smarter planet, Jay Chiat Awards, 2010 •Marketing and social gaming, Warc Exclusive, May 2011 •Nike: Letting the consumer decide, Warc Exclusive, October 2008 •Mobile data use to surge, Warc News, 7 February 2011

Sources, references and reading •Own label food sales to double, Warc Exclusive, 30 March 2011 •Own label still gaining ground, Warc News, 20 September 2010 •P&G: A purpose for every brand, Warc Exclusive, October 2010 •Personalised targeting: addressable TV, Admap, March 2011 •Quantified self, Gary Wolf, TED, Cannes, June 2010 (external link to TED.com) •Reaching 309m people through the US Census, Warc Exclusive, September 2010 •Retailer profiles, Euromonitor company profiles, 2011 •Sara Lee: Social networking meets couponing, Warc Exclusive, May 2011 •Sainsbury – Feed your family for a fiver, IPA Effectiveness Awards, 2010 •Sunchips – building a pre-eminent green brand, Warc Prize, 2010 •Tablets take central role, Warc News, March 2011 •The World in 2020, The Futures Company, March 2011 •US shoppers remain frugal, Warc News, 7 March 2011 •Walkers: Embracing the unfamiliar, IPA Effectiveness Awards, 2010 •Winning with Mom during the great recession – WalMart, ARF Ogilvy Awards, 2010

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