1. Report
Consumer Sentiment 2011
Navigating the New
Consumer Realities

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mation, please visit www.bcg.com.

3. Navigating the New
Consumer Realities
Consumer Sentiment 2011
Catherine Roche
Patrick Ducasse
Carol Liao
June 2011
bcg.com

4. © The Boston Consulting Group, Inc. 2011. All rights reserved.
For information or permission to reprint, please contact BCG at:
E-mail: bcg-info@bcg.com
Fax: +1 617 850 3901, attention BCG/Permissions
Mail: BCG/Permissions
The Boston Consulting Group, Inc.
One Beacon Street
Boston, MA 02108
USA

5. Contents
Executive Summary 5
New Directions in Spending 7
New Markets: The Great Rebalancing 10
Redrawing the Global Map of Consumption 10
The Emerging Middle Class in Developing Markets 12
Implications for Companies: Catching the Consumption Wave 12
New Demographics: Older, Female, and Urban 15
The Silver Segment 15
Women: From Influencers to Decision Makers 16
A Shift to Urban Centers 19
Implications for Companies: Know Your Customers 19
New Shopping Channels: The Digital Revolution 20
Technologies Driving Behavior Changes 20
The Power of Advocacy 22
Implications for Companies: The Multichannel Imperative 24
New Values: From Conspicuous to “Conscientious” Consumption 25
Trading Up for the Right Reasons 25
New Sources of Trust and Comfort 27
Trading Down and Staying Down 27
Implications for Companies: Dare to Change 29
Appendix: Methodology and Product Categories Covered
in the BCG Consumer Sentiment Survey 30
For Further Reading 32
Note to the Reader 33
Navigating the New Consumer Realities 3

6. 4 The Boston Consulting Group

7. Executive Summary
D
espite assurances by many governments that as only 49 percent of respondents made that claim in
an economic recovery is under way, most 2010.
consumers continue to feel apprehensive
about the future—more so than they did be- ◊ In Europe, we found a 6 percentage point increase in
fore the downturn. The slight uptick in confi- the number of respondents saying they were affected
dence over the past two years has leveled off and in some by the downturn.
cases retreated, as a string of global crises—the massive
earthquake and tsunami in Japan and unfolding unrest in Anxiety is also on the rise in many countries.
the Middle East—drown out news of modest economic prog-
ress. Consumers have come to accept instability as normal, ◊ Almost 70 percent of Italians claim to feel anxious
and this attitude is affecting their feelings about spending about the future, up dramatically from 43 percent just
across most markets. Yet natural disasters and political tur- a year ago. Consumers are also feeling more anxious
bulence aren’t the only factors bringing about change in con- in India and China.
sumers’ spending habits. The emergence of a middle class in
developing markets and advances in digital technology are ◊ The only country with a significant decline in consum-
introducing new shopping behaviors that have significant im- er anxiety is Germany—from 50 percent in 2010 to 34
plications for both retailers and their suppliers. percent in 2011.
Over the past three to five years, The Boston Consulting Group Plans to contain spending continue to hold sway as con-
has been tracking four of the most important developments sumers fear that the worst may be yet to come.
in the consumer industry: the increasing relevance of new
markets, changing shopper demographics, the rise of new ◊ Approximately 90 percent of survey respondents in de-
shopping channels—especially the Internet—and, finally, veloped countries said that they plan to reduce or at
trading up and down and the shift from conspicuous to “con- best maintain their spending in the next 12 months.
scientious” consumption. This report brings hard data on
these new realities and their impact across markets and cat- ◊ A notable exception is the emerging markets. This is
egories.1 We also discuss how consumer companies can antic- especially true of China, where only 64 percent of re-
ipate changes to their business and so secure an advantage
from understanding new patterns of trading up and down 1. The latest edition of our annual consumer survey, taken in March
and serving new kinds of consumers. and April 2011, was based on original research to capture spending
trends in 21 countries around the world. As in previous years, we
tracked consumer behavior in Brazil, China, India, Mexico, and Rus-
Despite signs of economic recovery, more consumers sia, as well as in Canada, Japan, the U.S., and several European
are feeling the impact of the downturn in 2011. countries (France, Germany, Italy, Spain, Switzerland, and the U.K.).
New to the survey this year are the markets of Australia, Denmark,
Finland, Greece, Norway, Sweden, and Turkey. After adjusting our
◊ In the U.S., 57 percent of survey participants said they data to exclude the bottom quartile of income, we surveyed ap-
have been personally affected by the downturn, where- proximately 24,000 consumers.
Navigating the New Consumer Realities 5

8. spondents to our survey said they plan to reduce or ◊ New Demographics. As more and more women control
maintain spending. the family budget, as the world’s population of active
consumers over the age of 55 increases, and as the
The importance of getting value for one’s money re- number of urban dwellers grows, the entire value
mains a top priority—even in luxury purchases in the chain, from product and service innovation to market-
U.S. and much of Europe. ing and sales, is being transformed.
◊ Consumers are looking for good deals before making ◊ New Shopping Channels. In most developed countries,
a purchase, and they are continuing to spend on pri- more and more consumers are accessing the Internet
vate-label products. on their phones. More than 50 percent of U.S. consum-
ers use the Internet to get information on travel ser-
◊ Consumers are trading down not just out of necessity vices, computers, and financial services. And social me-
but because finding a good deal gives them an emo- dia are changing how consumers select, purchase, and
tional boost. even use products.
Four powerful trends in addition to the recession ◊ New Values. “Conscientious” as opposed to conspicu-
(and, in some cases, accelerated by it) are ushering in ous consumption is on the rise, with a marked and
new spending behaviors. continuing shift away from luxury and status and to-
ward financial prudence and stability. Consumers are
◊ New Markets. Much of the global growth in consump- also looking for products that have health, safety, and
tion will come from emerging markets over the near environmental benefits. And they are seeking informa-
term. These developing economies are showing tion on products from friends and family, rather than
strong growth and positive consumer sentiment. But from manufacturers and retailers, which they’ve come
companies need to be wary of significant differences to distrust.
across and even within consumer segments in these
countries.
6 The Boston Consulting Group

9. New Directions in Spending
L
ast year, in our 2010 worldwide survey on con- months have told a different story. In many countries,
sumer sentiment, we found reason for cau- anxiety about the future is approaching or surpassing lev-
tious optimism. Job losses had begun to stabi- els seen only in 2009, at the height of the downturn. The
lize in many key markets and GDP growth economy may indeed be coming back to life in many af-
had improved from the previous year. Plans to fected markets, but it doesn’t feel that way to many con-
cut spending and defer major purchases were down in sumers in Europe, India, and China, where anxiety has
the U.S. and in many European countries, and the inten- risen. In Italy, almost 70 percent of respondents to our
tion to trade down had fallen from peak levels. survey said they feel anxious about the future—up dra-
matically from 43 percent just a year ago. (See Exhibit 1.)
It may have seemed reasonable to expect a continuing, if The only significant decline in anxiety was found in Ger-
gradual, recovery of confidence in 2011. But the past 12 many—from 50 percent in 2010 to 34 percent in 2011.
Exhibit 1. Consumer Anxiety Is Still Rising in Many Countries
Respondents who agree or strongly agree with the statement,
“I am anxious about the future” (%)
84
77 77
69
63 62 62
58
54 52 54 53
50
47 47
42 44 42 43 43
40 39
36
33
30
26
U.S. U.K. Spain Italy India China
2007 2008 2009 2010 2011
Source: BCG Consumer Sentiment Barometer, Spring 2011.
Note: The bottom income quartile was excluded and the sample reweighted to represent real income distribution in each country.
Navigating the New Consumer Realities 7

10. No doubt the crisis in Japan, economic turmoil in Ire- in 2011), as more and more European governments an-
land and Greece, and unrest in the Middle East have nounce austerity plans for near-term spending.
taken a toll on consumers’ peace of mind. When we
asked consumers around the world whether they These impressions are taking a toll on the intention to
thought that Japan’s nuclear disaster would affect their spend. In the U.K., 53 percent of respondents believe that
country’s economy, more than 85 percent of respon- the economy will worsen over the next year, which is
dents in Europe, the U.S., and Australia said they making them reluctant to commit themselves to spending
thought it would have at least a minimal, if not a signif- more. We had similar results in most developed coun-
icant, impact. tries, where approximately 90 percent of respondents (in
most countries, an increase) said they will maintain or
Taking a macroeconomic perspective, industrial output even reduce their level of spending over the next 12
and global GDP are up compared with 2010 in many months, especially for nonessentials. (See Exhibit 2.) But
parts of the world, but it is hard to claim a genuine recov- it is a different story in emerging markets, where many
ery in most developed countries. In some regions, unem- consumers plan to spend more this year: 36 percent of
ployment remains stubbornly high, real estate markets Chinese respondents and 19 percent of Indians said that
are expected to fall further, and many of the factors that they plan to increase their spending. This reflects an in-
contributed to the financial crisis of 2008 are still very creasingly wide gap between the developed and emerg-
much in place. As a result, in the U.S., for example, the ing economies.
proportion of survey participants who said they have
been personally affected by the downturn increased In this year’s survey, we looked more closely at four grow-
8 percentage points (from 49 percent in 2010 to 57 per- ing trends in consumer markets, several of which we’ve
cent this year). In Europe, we found a 6 percentage point been tracking for the past ten years. These forces, which
increase in the number of respondents who feel affected are likely to shape spending behavior in powerful ways
by the downturn (from 41 percent in 2010 to 47 percent in the near term, are the backdrop against which the new
Exhibit 2. The Intention to Maintain or Reduce Spending Is Widespread
Respondents’ discretionary-spending plans over the next 12 months
25 19
30 27 26 Reduce
35 34 33 spending
44 44 40 42 44 42 42
48 50 47 48 (%)
53
38
66 Maintain
57 63 59 spending
54 39 (%)
56 58 45
46 45 42 55 50
41 46 45 51
43
36
19 Increase
11 11 10 13 12 13 15 15 14 spending
6 9 9 7 7 8 8 4 5 (%)
U.S.
U.K.
Canada
Australia
Japan
Germany
Spain
Italy
Switzerland
Denmark
Norway
Finland
Sweden
Greece
Turkey
China
India
Russia
Mexico
France
Developed countries, Europe, Big 5 Europe, other Emerging markets
non-European
Source: BCG Consumer Sentiment Barometer, Spring 2011.
Note: The bottom income quartile was excluded and the sample reweighted to represent real income distribution in each country. Some totals do not
add up to 100 because of rounding.
8 The Boston Consulting Group

11. realities of the consumer market are emerging. They in- ◊ New Values. Consumers continue to favor a more con-
clude the following: scientious, rather than a conspicuous, style of con-
sumption.
◊ New Markets. Middle-class spenders are emerging in
developing countries. By focusing their business strategies on these shifting dy-
namics, retailers and consumer product makers can equip
◊ New Demographics. Tomorrow’s consumers are increas- themselves to navigate the uncertain seas of consumer
ingly older, female, and urban. spending in the months ahead.
◊ New Channels. The digital revolution is transforming
shopping behavior.
Navigating the New Consumer Realities 9

12. New Markets
The Great Rebalancing
O
ne of the most significant effects of the re- spending over the coming year. That’s down only slightly
cent economic crisis has been the reduced from the 46 percent of consumers who made the same
role of Western consumers as drivers of claim back in 2010.
growth in global consumption. Today, U.S.
consumption makes up 17 percent of Many economists anticipate that, because of the reces-
global GDP, and since 2000, consumers have accounted sion, household debt levels will retreat from the precipi-
for 74 percent, or $3.5 trillion, of U.S. GDP growth. By tous brink that they reached in some countries. U.S.
2020, U.S. consumers are expected to account for 35 per- households have indeed been slowly decreasing their
cent of global discretionary spending, compared with debt, with levels now at “only” 146 percent of disposable
40 percent today, and China will account for 22 percent, income, down from a peak of 162 percent in 2007. And
up from just 9 percent today. The economic downturn credit growth has likewise slowed in the U.K. and in some
hurt both the willingness and the ability of many con- European countries. Still, household deleveraging has yet
sumers in the developed economies to spend. This to happen in many developed regions, such as Canada,
stands in strong contrast to the emerging markets, where Australia, and the Nordic countries, where debt levels re-
attitudes toward spending are much more buoyant, re- main at all-time highs. A decrease in net new debt over
flecting consumers’ outlook on the economy. the next few years could put further downward pressure
on consumer spending.
Developed markets will continue to play a significant role
in the world economy because of their absolute size. But As the engine of spending growth in the developed world
over the next few years, growth in consumption will pri- decelerates, the developing world (especially China and
marily occur in the emerging markets, such as China and India) is taking up an increasing portion of the slack. Chi-
India, where it is expected to exceed 50 percent in five na is already the world’s largest market for automobiles,
years. (See Exhibit 3.) and it is poised to rapidly take a leading position in many
other categories. Thirty-six percent of Chinese survey
participants said they expect to spend more or much
Redrawing the Global Map more on discretionary items in the next 12 months, com-
of Consumption pared with only 8 percent in the EU and 11 percent in
the U.S.
Developed-market economies may be performing a bit
better than they were in 2009, but the economic hang- Consumer spending in other emerging markets has also
over continues to linger, and shoppers are behaving ac- remained comparatively robust throughout the downturn
cordingly. Without easy access to credit and with de- and is expected to continue growing more rapidly than in
pressed property values bringing a diminished sense of the developed world. These developing economies, show-
wealth, consumers in the U.S., Spain, and the U.K. are re- ing strong growth and positive consumer sentiment, are
luctant to spend as they once did. Fully 44 percent of con- ripe to lead the growth in global consumption over the
sumers in the U.S. said that they plan to reduce their near term. (See Exhibit 4.) However, many of them are
10 The Boston Consulting Group

13. Exhibit 3. More Than Half of Projected Consumption Growth Will Occur in Developing
Economies
Projected growth in household consumption, 2010–2015
Country size proportional to
projected growth in 1
household consumption
(2010–2015)
$750 billion
$500 billion
$100 billion
$10 billion
Emerging and Growth in
developing Advanced consumption
economies2 economies2 (2010–2015)
x More than 75% growth
50%–75% growth
25%–50% growth
0%–25% growth
Source: BCG GeoAnalytics.
Note: Where absolute consumption change is zero, the country is not represented.
1
Based on Economist Intelligence Unit estimates; for countries outside the EIU’s data set, growth was modeled using a combination of World Bank
data, IMF data, and data from the CIA’s World Factbook.
2
International Monetary Fund, World Economic Outlook, April 2011.
Exhibit 4. Consumers in China, Russia, and India Are the Most Optimistic
Sentiment toward the economy and spending
% of respondents
80
60
40
20
0
The downturn has I don’t think the economy Plan to spend less
changed the way will improve, at least not in the next 12 months
I buy and spend for several years
U.S. EU 51 India Russia China
Source: BCG Consumer Sentiment Barometer, Spring 2011.
Note: The bottom income quartile was excluded and the sample reweighted to represent real income distribution in each country.
1
EU 5 = France, Germany, Italy, Spain, and the U.K.
N  N C R 

14. also grappling with inflation, which is eroding consumers’ to trade up in specific categories, such as consumer elec-
spending power and may somewhat distort the picture of tronics, than middle-class shoppers in developed econo-
real spending growth. mies. (See Exhibit 5.) And in India, middle-class consum-
ers are twice as likely as consumers in the U.S. and the EU
Whether consumers are trading up, trading down, or to say that they increasingly value education and see it as
looking to find a compromise in the middle, the recovery an area for disproportional spending. Addressing these dif-
is clearly taking different paths and occurring at different ferences will require insight into the values and needs of
speeds—determined, in part, by differing specific segments of consumers.
starting points in consumer sentiment The emerging middle
around the world—thus underscoring the Although the emerging middle class is of-
class is often viewed as
importance of de-averaging consumer seg- ten viewed as homogeneous, it can differ
ments. For a more detailed discussion of homogeneous, but it considerably across markets. And even
the multispeed recovery as it affects spe- can differ considerably within countries, there are very diverse
cific markets, see Consumer Dynamics in subsegments. Middle-class consumers in
Flux Around the World on bcgperspectives. across markets. China’s smaller cities, for instance, tend to
com, a supplement to this report that looks be more optimistic than their counter-
at the 21 markets we surveyed in terms of four distinct parts in large cities. And because the cost of living is low-
groups, described as follows: er in small cities, consumers there have greater purchas-
ing power and are willing to spend more than consumers
◊ Getting Brighter. In these countries, which include Bra- in larger cities, where a higher cost of living and the
zil, China, and India, growth rates are relatively high greater impact of the downturn have meant less enthu-
and consumer sentiment is buoyant. siasm for spending.
◊ Modest Growth. In Australia, Canada, Russia, and most Yet there are also some commonalities among emerging-
of the countries of Europe, expectations of growth are market consumers. As the middle class becomes more af-
lower, though consumer sentiment is rebounding. fluent, success is increasingly valued. Consumers in Chi-
na, India, and Brazil are more than twice as likely as
◊ Question Marks. Here, economic and consumer signals consumers in the U.S. and Germany to say that profes-
are mixed, and there are significant questions about sional success and status are more and more important
future growth trajectories; these countries include to them. By understanding the emotional drivers of con-
Italy, Japan, Mexico, and the U.S. sumers’ attitudes across these markets, companies can
identify and leverage commonalities where they exist.
◊ Still Struggling. In Greece and Spain, no return to (See the sidebar “Retail in India” on page 14.)
growth or consumer optimism can be detected so far.
Implications for Companies: Catching
The Emerging Middle Class in the Consumption Wave
Developing Markets
The heterogeneity of emerging middle-class markets and
Approximately 125 million households in emerging- the rapid changes they are undergoing pose significant
market cities will enter the middle class between 2010
and 2015, an increase of more than 70 percent.2 However, 2. Emerging markets here refer to Brazil, China, Indonesia, Mexico,
companies should not assume that these new consumers Russia, South Africa, and Turkey. Middle-class households are those
will spend in the same ways or have the same aspirations with an annual income of more than $5,000 in all countries except
India and Indonesia, where a middle-class income is more than
as middle-class shoppers in the developed world. Their $10,000 per year. See Winning in Emerging-Market Cities: A Guide to
starting points in terms of disposable income, constraints the World’s Largest Growth Opportunity, BCG report, September 2010;
on their daily lives, and spending priorities are often very Economist Intelligence Unit; IBGE; INEGI; BCG China population
and income forecast database, 2010; and Rajesh Shukla, S.K. Dwive-
different. Consumers in China, for example, are more di, and Asha Sharma, “The Great Indian Middle Class,” National
likely to trade up in general and significantly more likely Council of Applied Economic Research, 2004.
12 The Boston Consulting Group

15. Exhibit 5. Plans to Trade Up and the Top Trading-Up Categories Differ Across Markets
Top four trading-up categories for middle-class consumers by country
% of consumers saying they
trade up across categories
60
40
20
0
EU 51 Brazil Russia India China
Travel and vacations Home or apartment Kids’ clothing Shoes Consumer electronics
Cars Athletic shoes Personal clothing Large home appliances Luxury products
Source: BCG Consumer Sentiment Barometer, Spring 2011.
Note: Middle class includes those who self-identify as lower-middle class, middle class, and upper-middle class.
1
EU 5 = France, Germany, Italy, Spain, and the U.K.
challenges to multinational companies, especially at a ◊ Understand how the “take up” curves play out in your cat-
time of anxiety about inflation. Although the emerging egories. Consumption won’t take off at the same time
markets represent a large and growing customer base, it in all categories. Consumer electronics, for example,
is critical that companies entering them develop a keen will start early, while premium yogurts and niche hair-
understanding of how consumption trends will play out care products may come later. Make sure to develop
in their categories, as well as of the differences among scenarios of economic growth and consumption rates
consumers across regions and demographic segments. for different markets, and know the trigger points and
thresholds in your category.
Four tactics are particularly critical in winning over the
emerging-market middle class: ◊ Walk in consumers’ shoes. Get to know consumers’
unique constraints, such as unstable incomes, small liv-
◊ Carefully pick your spots. Know the markets, segments, ing spaces, and unreliable access to utilities, as well as
and cities you want to target. Allocate resources ap- the priorities of specific segments—for example, mid-
propriately and “refresh” them frequently to stay dle-income and affluent consumers in cities of differ-
ahead of trends. Choose a clear methodology for pri- ent types and size. Then adapt and customize your of-
oritizing expansion across markets, including integrat- fering, products, and brand experience to the specific
ing markets into clusters to create greater economies market. Consider, for example, offering fewer SKUs
of scale. and a limited mix of middle- to high-end products in
N  N C R 

16. Retail in India
An Interview with Anand Raghuraman, BCG Partner and Retail Expert
How would you describe the retail sector in India to- open their own multibrand stores. They can enter the
day? market through cash-and-carry shops or through franchis-
ing. Single-brand retailers, such as Gucci or adidas, are al-
Indian retail is characterized by two types of participants. lowed to have a 51 percent stake in a joint venture with an
On the one hand, we have the mom-and-pop stores (also Indian partner.
known as “traditional trade” or the unorganized sector),
which make up 90 to 95 percent of sales. That shows you What opportunities do you see for the retail food
how nascent the market is. On the other hand, we have a category?
number of large Indian business houses (“modern trade”
or the organized sector). Most of them have tie-ups with The retail food sector—which is the largest category in the
large international retailers such as Tesco and Wal-Mart. overall retail market and accounts for approximately two-
They represent the direction that the industry will most thirds of the total retail market—poses some interesting
certainly head toward. We have about eight of these na- challenges. About five years ago, organized retailers
tional players and also a handful of regional players that placed a large bet on the assumption that Indian consum-
are looking to become more national. ers were deeply unhappy with the store experience and
service levels in mom-and-pop stores and that they would
What are the growth prospects for the market? flock to their organized retail stores. But that hasn’t hap-
pened as rapidly as they expected. This is partly because
The Indian retail market is very interesting for both Indi- they underestimated consumers’ loyalty to the mom-and-
an and international retailers to enter, primarily because pop stores, which have very close relationships with the
of growth opportunities but also because of the absolute customers who live near them. And because there are so
size of the market: approaching $400 billion and growing many mom-and-pops, any consumer can find one around
at double digits. Organized retail is actually growing at the corner. They also provide free services, such as deliv-
20 percent, and market share is shifting away from unor- ery and credit, that organized retail cannot match in a
ganized to organized retail. International retailers find cost-efficient way. Unorganized retailers, however, can’t
this very attractive and want to get into the market for match the product assortment and selection or the shop-
that reason. ping experience that organized retailers can offer. Org-
anized retailers in India are also rising to a scale where
How easy is it for international entrants? they can more effectively negotiate with suppliers and get
better terms. This will increase their pricing power over
There are some very strong regulatory restrictions for in- unorganized retailers and thus increase their appeal to
ternational retailers—for instance, they are not allowed to Indian consumers.
smaller cities, and offering a full selection and more global product portfolio and when you should adapt
choices in larger cities. Find innovative ways to educate products to meet local needs. Explore opportunities to
consumers about products, such as on-site sales service use emerging-market R&D facilities to encourage local
and grassroots campaigns, especially in smaller cities. adaptation. Drive “boomerang” innovation by leverag-
ing emerging markets as a hotbed for innovation on a
◊ Strike the right balance between global and local efforts. global scale.
Determine when you should leverage the existing
14 The Boston Consulting Group

17. New Demographics
Older, Female, and Urban
F
or the past several decades, the needs and (compared with 52 of all respondents), down from 53
shopping habits of the baby boom genera- percent two years ago. Older consumers are a diverse
tion (people born between 1946 and 1964) group, varying across markets, ages, income levels, and
have driven the evolution of products, servic- lifestyles. Marketers need to understand these differenc-
es, and shopping channels. As the baby es and revisit their assumptions as the consumer market
boomers enter their fifties and sixties, they continue to evolves. For example, today’s retiring baby boomers in
be a powerful force in the market. But other demo- developed economies will be much more open to tech-
graphic groups are also making a mark. The increasing nological innovation than their parents were. Indeed, in
dominance of women in purchase decisions, especially the U.S., more than 80 percent of consumers over the age
high-ticket ones, and the trend toward urbanization are of 50 say that they use the Internet. Today’s seniors are
creating a new profile of the “average” consumer. also healthier and more active than previous genera-
tions. They are particularly eager to travel, in search of
new experiences and adventures. (See the sidebar “Tar-
The Silver Segment geting Seniors.”)
By 2050, the share of the world’s population over the age Still, many companies have been slow to recognize the
of 55 will have nearly doubled, from 15 percent to 28 per- needs of this increasingly important segment. Our survey
cent. In the U.S. alone, there are expected to be 2.2 mil- identified five specific themes that have particular reso-
lion more people over 55 every year between 2010 and nance for these consumers.
2020. And in China, the population over 55 will grow
from 18 percent to 38 percent during that period. The ag- ◊ Aging Gracefully. Even as they grow older, baby boom-
ing of the population is driving a massive change in con- ers aren’t about to give up their focus on an active and
sumer markets. In the developed world, the “silver seg- youthful lifestyle. Seventy percent of female respon-
ment” is expected to contribute 50 to 80 percent of the dents in the U.S. cited “aging gracefully” as an impor-
growth in total spending over the next 20 years. tant challenge. Undoubtedly, these consumers will wel-
come products that help them meet this goal.
Yet the recent downturn has put pressure on the retire-
ment savings of older consumers by eroding property val- ◊ Shopping Smart. The silver segment will be particularly
ues and investment portfolios. As the population pyra- focused on value, given uncertain retirement savings
mid becomes increasingly “age heavy,” some countries in a volatile stock market. Indeed, 56 percent of pre-
have been forced to raise the retirement age or weaken retirement respondents in the U.S. said they are wor-
the social safety net. And in China, the one-child policy is ried about financing their retirement. In addition, be-
starting to place a significant burden on only children and cause this segment has had a lifetime of shopping
their elderly parents. Despite this, seniors are increasing- experience, they know value when they see it. Smoke-
ly confident. In the U.S., only 38 percent of respondents and-mirrors features or glib advertising won’t work
over the age of 55 said they feel anxious about the future with this crowd.
Navigating the New Consumer Realities 15

18. Targeting Seniors
Seniors value products that are ergonomically designed, ◊◊ Large, easy-to-see, and easy-to-
easy to use, safe, and healthy. The telecommunications in- operate buttons
dustry has been exceptionally innovative in developing
products specifically for seniors—who, unlike their grand- ◊◊ A familiar dial tone
children, are mainly interested in using mobile phones as
actual phones and who appreciate features such as larger ◊◊ Hearing-aid functions and volume
buttons. Telecommunications companies are also mar- controls
keting these products in new channels, such as at travel
agencies and on bus tours that focus on seniors. A num- ◊◊ Padded ear pieces for external-sound
ber of companies now offer mobile phones and services reduction
with features such as these:
◊◊ Large display screens and voice-
activated commands
◊◊ Text- and e-mail-reading functions
◊◊ One-touch Internet access to topics of interest to
seniors
◊◊ In-store classes on using mobile and Internet net-
works
◊◊ Limited-use service plans suited to seniors’ needs
◊◊ Live, 24-hour operators who will help with calls
◊ A Sense of Community. Many consumers over 55 place ing to this need. From can openers to hedge trimmers
a significant premium on personal relationships. In to snow shovels, these products—with their ergonom-
France, friends and family were cited by 87 percent of ic handles, good balance, and light weight—are at-
respondents as a source of happiness. Products and tracting seniors (as well as younger consumers).
services that help maintain strong social networks will
be particularly in demand.
Women: From Influencers to Decision
◊ Tailored Travel. Consumers over 55 who have the time Makers
and money are hitting the road in search of adventure,
and they are willing to trade up for travel and vaca- Women have always had a big role in managing house-
tions a little more often than younger travelers. Many hold expenses. As they joined the workforce, they gained
of them have already seen the major tourist sights of economic power and became the primary decision mak-
the world, so now they seek trips that put them in new er regarding the family’s budget. Women now control
environments, call on new skills (such as a foreign lan- about $12 trillion in global spending and 70 percent of
guage or sailing), and provide ways to pursue their household spending, on average, in developed countries.
hobbies and interests. Although their influence is greatest in the developed mar-
kets, where women’s participation in the workforce tends
◊ Ease of Use. Many older consumers will pay a premium to be greater, the rise of a middle class in emerging mar-
for products that are easier to use and more conven- kets will turn even more women into wage earners and
ient. Oxo, the maker of Good Grips cooking utensils, decision makers in household spending. Worldwide,
office products, and gardening tools, among other working women are expected to increase global income
products, is one company that is successfully respond- by more than $1 trillion per year. (See Michael J. Silver-
16 The Boston Consulting Group

19. stein and Kate Sayre, Women Want More: How to Capture willing than men to trade up in some high-involvement
Your Share of the World’s Fastest-Growing Market, Harper categories, such as shoes, if they have a compelling rea-
Business, 2009.) son to do so, and they are active participants in the luxu-
ry segment. In fact, more than half of the French women
Most women who enter the workforce aren’t able to fully in our survey claimed to have purchased a luxury product
offload their family responsibilities, and that has made in the past three years. Yet despite women’s clear attrac-
them increasingly time-pressured multitaskers. Of course, tiveness as a consumer group, many in our U.S. survey
this is especially true of women with children, who claim said they feel underserved in a number of key areas—
to spend almost four hours a day on household tasks. especially financial services. (See Exhibit 6.) (This con-
Women are also more prone than men to say that they firms a trend that we identified back in 2009 and was dis-
feel responsible for stretching the household budget, and cussed in Women Want More.)
they are less likely to spend on themselves before meet-
ing the needs of their family. More than half of the U.S. Women in the U.S. also trade down more actively than
women who responded to our survey said that they never men, especially in categories that lack a compelling val-
have enough time, 44 percent said they feel stressed, and ue proposition or involve minimal emotional involve-
28 percent said they aren’t appreciated enough at home. ment. (See Exhibit 7.) Women in our survey told us that
Not only do women actively look for ways to save time, they derive a sense of purpose and power from spending
they also appreciate affordable products and services that money wisely for their families, and this has made them
offer a respite from stress—a way to give themselves a especially discriminating shoppers. In the recent down-
treat within their limited schedule and budget. (See the turn, “treasure hunting” became the norm. Women have
sidebar “The Female Consumer.”) become expert at meeting their family’s needs on a lim-
ited budget. In our U.S. survey, they gave as their prima-
Other factors, in addition to their growing spending pow- ry reasons for trading down the enjoyment of saving
er and influence over the household purse strings, make money (74 percent) and saving in order to spend else-
women an attractive segment. They are, on average, more where (67 percent).
The Female Consumer
Judith’s story
“My partner and I are both 33 years old and live in Ger- Not enough time
many with our three-month-old son. I’m a dentist and will
be opening my own practice this summer.” ◊◊ “When I have my own practice, I’ll work at least four full
days a week and also care for my son. Unfortunately, I’ll
Earning her own money “gives her permission” to have little time for friends.”
spend on luxury
◊◊ “Our biggest challenge is to be happy
◊◊ “We keep our incomes separate.” and have time for each other.”
◊◊ “I enjoy shopping more when I can Conflicts and tensions
reward myself for working hard.”
◊◊ “Men’s lives remain much the same
A cautious spender, but family and when their wives join the workforce.
health are reasons to trade up But women must be responsible for
both the children and their job.”
◊◊ “I’m a more conscientious spender
because I have a child and a busi- ◊◊ “Our relationship might not last for-
ness, not because of the crisis.” ever. I don’t want to end up without
my dream job and worrying about
◊◊ “We buy fruit at the farmer’s market, finances.”
not at a discount store.”
Navigating the New Consumer Realities 17

20. Exhibit 6. Women in the U.S. Want More, Especially in Financial Services
Which categories should focus more on understanding and meeting the needs of your gender?
% of respondents
50
40
30
20
10
0
Life Banking Car Investments Physicians Credit Shoes Cars Hospitals Work
insurance insurance cards clothes
Women Men
Source: BCG Consumer Sentiment Barometer, Spring 2011.
Note: Full data set weighted to represent real income distribution in the U.S. This graph shows the 10 worst-ranked categories (out of 58) among female
respondents, with the corresponding rankings by male respondents.
Exhibit 7. Women in the U.S. Are Consistently More Open Than Men to Trading Down
Top categories in which consumers trade down
Average % of respondents who claim to trade down
80
71 70 69 69 68 67 67 66 66 65
60 59
60
55 53 55 54
53 53
50
48
40
20
0
Paper Toys and Jewelry Mobile- Household Luxury Fast-service Personal Consumer Hair care
products games and phone cleaners products restaurants clothing electronics services
accessories contracts
and services
Women Men
Source: BCG Consumer Sentiment Barometer, Spring 2011.
Note: Full data set weighted to represent real income distribution in the U.S.
 T B C G

21. A Shift to Urban Centers are 20 percent more likely to value luxury products—in-
deed, the value of luxury for consumers in rural areas has
In 1980, approximately 40 percent of the world’s popula- been declining. Urban dwellers typically have greater ac-
tion lived in cities. That number is expected to rise to cess to networks that can develop their interest in new
more than 60 percent by 2030. Almost 180,000 people products and services, and their high-density neighbor-
move to cities daily, which means there are more than hoods can make distribution easier. But the urbanizing
60 million new urbanites each year. Overwhelmingly, to- trend also poses challenges: greater competition for the
morrow’s consumers will be city dwellers. attention of consumers, space and privacy
Understanding constraints, pollution, and the difficulty of
More than one-third of the world’s popula- knowing which cities to target. Determin-
tion—2.6 billion people—live in emerging-
the metropolitan ing how products and services can im-
market cities. Up to 717 of those cities have mindset has become prove the lives of tomorrow’s city dwellers,
populations of 500,000 or more, yet most and how to reach them, will be critical to
increasingly important
are unknown to consumer companies. thriving in the next decade.
Their growth rates are even more impres- for marketers.
sive: by 2030, there will be an additional
1.3 billion urban dwellers in emerging markets, and a to- Implications for Companies: Know Your
tal of 1,088 cities with populations exceeding 500,000. The Customers
growth of urban centers is increasing both the number of
middle-class spenders and their spending power. There are three critical steps to understanding how the
demographics of your targeted consumer segments are
Understanding the metropolitan mindset has become in- changing and how to serve their needs:
creasingly important for marketers in recent years. Life
for consumers in major cities tends to be fast paced, with ◊ De-average your consumers. Pay special attention to the
a constant barrage of information on numerous product growing silver segment, adapting your marketing mes-
options. The urban consumers in our survey were more sages (promise health rather than youth) and product
likely than rural consumers to say that they increasingly features and services (such as accessibility, safety, and
value change. personal assistance) to serve them better than your
competitors are doing.
Large cities, with their diversity of cultures and lifestyles,
expose consumers to a broad range of choices and opin- ◊ Refresh your understanding of the female economy. Ex-
ions. Categories such as fashion, media, and entertain- plore how relevant subsegments have changed in the
ment are strongly influenced by local trendsetters, and past few years. Identify new dissatisfactions and un-
urban dwellers greatly value being in the know. Many are met needs. Find ways to help women meet their need
also fiercely proud of their city—a theme that Chrysler for more time, money, convenience, variety, ease of
effectively tapped into in its much-talked-about Super use, and product information.
Bowl commercial, “Imported from Detroit,” featuring
singer Eminem playing on Detroiters’ city pride. ◊ Develop a thorough understanding of the urban consumer.
Upgrade your insights to take into account the unique
The trend toward urbanization is a boon for marketers. needs of these consumers. Tap into emotional bene-
For instance, our research shows that the importance of fits—such as security, privacy, and city pride. And most
“wellness” has grown 25 percent more among urban con- important, do not underestimate consumers’ willing-
sumers than among rural consumers. In addition, 10 to ness to spend on offerings that address these needs.
50 percent more urban than rural respondents to our sur-
vey said that they like to pamper themselves. And they
Navigating the New Consumer Realities 19

22. New Shopping Channels
The Digital Revolution
M
obile technology is dramatically chang- 8.) In China, more than 40 percent of the population is
ing the way consumers shop and gath- accessing the Internet with a mobile phone or a smart-
er information on products and servic- phone. In India, where more than 90 percent of the popu-
es. The implications for marketers are lation has access to a mobile phone but less than 20 per-
profound, as consumers increasingly cent has access to a computer, mobile phones are well
research products, compare prices, tap into the opinions positioned to be the technology of choice for accessing
of other users, and solicit advice from friends at all the Internet.
points in the shopping process (sometimes even while
shopping at a brick-and-mortar store). New sources of Empowered “netizens” are becoming increasingly
trusted information are emerging as more and more us- widespread. Nearly everyone has searched for infor-
er-generated content makes its way onto the Web, and mation on Google or another search engine, and near-
the conversations among consumers and companies are ly half the world’s population has searched for prod-
shifting from one-way to multidirectional, including uct reviews online. Although the number of store
direct exchanges among consumers. The pace of change shoppers who claim to have used their mobile phones
is overwhelming, especially for established businesses. to compare prices (16 percent in the U.S.) or to access
Many companies are struggling to respond. product information (12 percent in the U.S.) is still
small, these practices are expected to grow quickly. In-
deed, it won’t be long before consumers are on aver-
Technologies Driving Behavior Changes age better informed about a retailer’s products than
the retailer’s staff. (See the sidebar “Foursquare’s Lo-
An array of accessible technologies is dramatically chang- cation-Based Mobile Platform.”)
ing the daily lives of consumers around the world. With
mobile phones becoming both ubiquitous (76 percent of Of course, spending behavior and product usage vary sig-
the world’s population uses one) and smarter (smart- nificantly across product categories, price points, and
phones are expected to account for 70 percent of mobile countries. Our survey indicated that more than half of
penetration within the next five years), the Internet has U.S. respondents use the Internet to search for informa-
become available and affordable to just about anyone, tion on travel, computers, and financial services, whereas
anywhere, anytime. This has led to an explosion in mo- considerably fewer people do so for groceries and house-
bile commerce, which allows transactions to be conduct- hold products. (See Exhibit 9.) And while 27 percent of
ed using a smartphone or other mobile device. Germans told us that they use their mobile phone to
check prices while shopping, only 6 percent of Danish re-
Our 2011 survey showed that mobile phones and smart- spondents made that claim. There are, however, some
phones are almost as common as computers. This phe- commonalities across countries and categories. For exam-
nomenon is even more pronounced in the developing ple, consumers everywhere are seeking new ways to em-
world: in many emerging markets, more people have ac- ploy the Internet to help them make purchases: 28 per-
cess to a mobile phone than to a computer. (See Exhibit cent of those consumers in the BRIC countries (Brazil,
20 The Boston Consulting Group

23. Exhibit 8. Mobile-Phone Penetration Surpasses Computers in Many Emerging Markets
Consumers with mobile phone and computer access
% of respondents
100
80
60
40
20
0
Mobile PC Mobile PC Mobile PC Mobile PC Mobile PC Mobile PC Mobile PC
phone phone phone phone phone phone phone
U.S. EU 51 Japan China India Russia Brazil
Have access to a mobile phone or PC, Have access to a mobile phone or PC
but do not use it to access the Internet and use it to access the Internet
Source: BCG Consumer Sentiment Barometer, Spring 2011.
Note: Mobile phone includes regular mobile phones and smartphones; PC includes desktop and laptop computers. Full data sets weighted to represent
real income distribution in each country except India and Brazil, where data were not collected from the bottom income quartile.
1
EU 5 = France, Germany, Italy, Spain, and the U.K.
Foursquare’s Location-Based Mobile Platform
Foursquare is a tool for consumers who love to explore cit- Foursquare was launched in March 2009 and grew
ies. By “checking in” with their smartphones, users can rapidly
tell their friends where they are while collecting points
and virtual badges according to where, when, and how of- ◊◊ 9 million users today and more than 3 million check-ins
ten they check in. They can see how many points they rack each day
up in any given month and keep track of their stats at
Foursquare.com. And they can bookmark information ◊◊ 30,000 new users every day
about the places that they want to visit and collect sugges-
tions about nearby venues they might want to try. Mer- ◊◊ More than 250,000 businesses using the merchant
chants and brands leverage the Foursquare platform with platform
a large set of tools to obtain, engage, and retain customers
and audiences. For example, in a recent promotion at The platform serves as a new marketing channel for
Pizza Hut, the Foursquare network offered the designated businesses
“mayor” of each store (the
person who has visited ◊◊ Many tools to engage and retain customers
most often by way of Four-
square) a free order of ◊◊ “Specials” include mobile coupons, prizes, and
breadsticks. Foursquare discounts
also enables developers
to build applications that ◊◊ Consumers directed to other businesses in the neigh-
interact with the Four- borhood
square platform.
Navigating the New Consumer Realities 21

24. Exhibit 9. More Than Half of U.S. Consumers Search the Internet for Information on Travel,
Computers, and Financial Services
Information Price Purchase Retailers Promotions
search comparison and availability
Travel and vacation 61 50 12 5 18
Computers (e.g., PCs and laptops) 52 49 21 20 17
Financial products and services 51 22 5 6 5
Cars 47 41 3 19 7
Insurance products and services 44 29 5 5 4
Out-of-home entertainment (e.g., cinema tickets) 41 18 11 23 15
Media (e.g., music, movies, and video games) 40 28 31 15 14
Mobile phones (basic and smartphones) 40 36 10 11 11
Mobile-phone contracts and services 39 37 7 12 9
Medicines and vitamins 39 21 17 12 21
Books, newspapers, and magazines 38 27 36 12 15
Home or apartment search 38 28 3 8 5
Large home appliances (e.g., dishwashers and refrigerators) 38 34 7 19 7
Toys and games (excluding video games) 37 32 29 18 16
Restaurants 36 18 7 34 33
Sports equipment 35 27 14 20 10
Home repair and renovation 35 22 6 15 7
Furniture 34 31 11 19 10
Luxury products 31 30 9 12 11
Personal clothing 31 32 25 16 16
Personal and skin care products and cosmetics 30 24 14 11 18
Groceries and beverages 25 25 6 14 39
Household products (e.g., detergents and cleaning supplies) 20 17 4 7 20
% of U.S. respondents who use the Internet in the shopping process
Source: BCG Consumer Sentiment Barometer, Spring 2011.
Note: Full data set weighted to represent real income distribution in the U.S.
Russia, India, and China) who are not already doing so are beginning to question the value of retailers’ advice
say that they’re interested in using their mobile phone to and often to bypass it altogether.
check prices, and 28 percent and 22 percent, respectively,
of consumers in the EU and the U.S. agree. The penetration of the Internet and of social media cre-
ates huge opportunities for consumer companies, but it
also creates risks that need to be actively managed. Com-
The Power of Advocacy panies can’t control “consumer advocacy,” but they can
use recommendations from shoppers to develop relation-
Social media, too, are affecting how consumers select, ships that give them a long-lasting competitive advan-
purchase, and even use products. Social-networking sites tage. Cultivating advocates through blogs, forums, and
such as Facebook, whose growth has exploded from mobile applications has become a critical way for compa-
12 million users in 2006 to 500 million in 2010, are con- nies to deepen their relationships with customers. (See
vening communities of consumer advocates and replac- the sidebar “What Gets People Talking? An Interview
ing traditional information sources. Despite the growth of with Steve Knox on Advocacy Marketing.”) And in addi-
social media, however, our research shows that consum- tion to promoting products, an advocacy marketing pro-
ers are more likely to trust recommendations from peo- gram can generate ongoing exchanges between compa-
ple they know than from strangers online. Seventy-three nies and customers that can result in ideas for new
percent of U.S. consumers and 67 percent of EU consum- products.
ers said that they trust recommendations from people
they know, whereas only 32 percent and 29 percent, re- Companies should be aware, however, of what we call the
spectively, said that they trust reviews from unknown “reciprocity dilemma”: since far more consumers read on-
people on social-networking sites. Nevertheless, as con- line product and service reviews than post them, the
sumers gain the ability to share increasing amounts of in- opinions of the average customer are underrepresented
formation with each other and with manufacturers, they in reviews. For example, whereas half of U.S. respondents
22 The Boston Consulting Group

25. What Gets People Talking? An Interview with Steve Knox on Advocacy Marketing
Steve Knox is a senior advisor with The Boston Consulting Why is advocacy marketing particularly critical for
Group and the former CEO of Tremor, Procter & Gamble’s consumer businesses now?
word-of-mouth marketing capability.
The erosion of consumer trust in brands and marketing
What is advocacy marketing? has been a big factor in the recent surge in the power of
advocates. Another equally powerful driver has been the
It’s a form of marketing that harnesses the power of rec- rapid spread of digital media, which serve as a booster
ommendations from third-party individuals who are not shot for the viral transmission of messages. Thanks to dig-
affiliated with the brand. It taps into trusted social net- ital connectivity, scale is now possible in the use of advo-
works to disseminate and amplify messages that are rel- cacy marketing.
evant to consumers. When done right, it also allows con-
sumers to participate in the development of products and What kind of impact can advocacy marketing have?
services and to provide feedback on new products and
marketing campaigns. Our research shows that it has the potential to double the
revenues for new products over traditional marketing alone.
How do you create messages that will get advocates It can also help companies lower their marketing budgets.
talking?
How can a company succeed in advocacy marketing?
Advocacy marketing is actually grounded in cognitive sci-
ence. The core concept is called a schema disruption. In sim- Advocacy strategy should align closely with the business’s
ple terms, schemas are mental models of how the world strategic goals and should complement, rather than re-
works. They allow us to process information using a set of place, the current marketing program. But it also requires
unconscious assumptions or expectations. Advocacy re- new ways of thinking—away from traditional reach-based
sults when we encounter a variance from these expecta- marketing models to a new relationship-based model. And
tions, and our brains naturally want to talk about the expe- what makes this such a rich approach is that there are so
rience: on blogs, around the coffee machine, at dinner with many sources of advocacy. (See the exhibit below.) Com-
friends. Significant disruption calls for significant conver- panies that are implementing advocacy marketing are
sation—and that’s the secret of advocacy marketing. winning in today’s marketplace.
Sources of Advocacy
Provide information
and affiliation
Organizations
and networks
Provide advice and Provide information
functional support and expertise
Professionals Blogs and
forums
Consumers
Provide information
Provide credible on complementary
information Goods and services products and services
Influential providers
personalities
Provide information and Provide advice based
advice based on personal on relationship of trust
experience with product Apostles Friends/family
Source: BCG analysis.
Navigating the New Consumer Realities 23

26. have checked reviews online, less than one-third have try to engage habitual reviewers in a dialogue that
ever posted one of their own. Furthermore, reviews are might give them more reliable information about your
often written by people who are habitual review posters products.
but whose judgments don’t necessarily reflect the experi-
ence of most customers. Companies can’t control online ◊ Remember the reciprocity dilemma. While many con-
reviews, but they can try to get to know and influence the sumers make use of user-generated content, such as
opinions of these so-called power users, while also re- product reviews, far fewer actually contribute to it.
membering that they need to look beyond blogs and on- Therefore, this content may not represent the opinions
line reviews to understand their main customer base. of your target consumers.
◊ Leverage the power of advocacy. Find the right people
Implications for Companies: The and get them talking about the right things in the right
Multichannel Imperative places. This requires insight into whom your customers
trust most and an advertising message that offers
By actively participating in the digital revolution in shop- something unexpected.
ping, consumer companies can both manage the risks
and leverage the opportunities associated with mobile ◊ Choose the right metrics to assess your success in digital
technology and mobile commerce. Here are some guide- media. New media have brought with them a wealth
lines: of new ways to measure success (for example, the
number of “tweets” or Facebook “likes” that a product
◊ Be where your customers are. Understand the roles that gets), but it is essential to make sure that the link be-
the new communication channels play in your catego- tween these measures and the real business result is
ries today. Leverage mobile applications, social net- clear. Some companies have determined what 100,000
works, and location-based marketing to communicate likes are worth by measuring how many turn into an
with customers in real time while you increase your actual purchase.
reach and effectiveness.
◊ Stimulate two-way conversations. Make it easy for satis-
fied customers to post reviews online and, if possible,
24 The Boston Consulting Group

27. New Values
From Conspicuous to “Conscientious” Consumption
T
he recent economic downturn catalyzed posting healthy earnings increases—more than 20 per-
(and, in some cases, accelerated) a shift in cent over the results for 2009.3
what matters most to consumers. These
changes are continuing to have an effect on However, the results of our longitudinal survey on trading
how consumers think about spending and up, which goes back to 2002, suggest that the reasons to-
saving. Despite increasing economic stability in some day’s consumers trade up are different from the reasons
key markets over the past year, the world is experienc- they had in the past. Only 10 percent of consumers in
ing heightened levels of uncertainty stemming from a Germany gave “visibility of the brand name” as their pri-
torrent of political unrest, natural disasters, corporate mary reason for purchasing a luxury product; many more
scandals, and product scares. (See the sidebar “Shifting cited the importance of authenticity, product heritage,
Priorities.”) and quality or craftsmanship. Consumers are becoming
less attracted to brands as status symbols and more inter-
Below, we examine three important shifts in consumer ested in getting value for their money in the form of af-
values and how they will affect markets in the years to fordable emotional or functional benefits.
come.
Consumers in emerging markets are even more open to
trading up than they were in the past. Indeed, China is
Trading Up for the Right Reasons expected to become the world’s largest luxury market in
the next five to seven years. (See The New World of Luxu-
Especially in today’s economy, perceived value lies not ry: Caught Between Growing Momentum and Lasting Change,
only in the ability of a product or service to deliver on an BCG White Paper, December 2010.) Although categories
advertised promise but also in the worth of that benefit. such as clothing, shoes, and consumer electronics remain
Is it emotionally meaningful? Will it offer a sense of shel- important categories for trading up, we’ve seen a grow-
ter or a respite from stress, if only temporarily? Will it be ing interest in trading up for dairy products, juices, and
good for the environment, for the family, and for the com- fresh foods, as consumers in emerging markets become
munity? When so much of the world is going without, more aware of the connection between the sources of
consumers need to feel justified in spending the money foods and their quality. Interestingly, these consumers
that they have. Companies that connect their value prop- are also much more likely than their developed-market
ositions with these feelings will fare much better in the peers to cite brand name as their reason for trading up
marketplace than those that do not. (especially in China and India) or to give “I deserve it” as
a key reason (especially in Brazil). (See Exhibit 10.)
Even in a tough economic climate, many consumers re-
main keen to trade up, especially in emerging markets
like China and India. With the global economy showing 3. LVMH’s total revenue went from €17,053 million to €20,320 mil-
lion, and Hermès’s sales were up 25.4 percent (18.9 percent at con-
signs of improvement in 2010, luxury sales got a strong stant exchange rates). See LVMH, 2010 Annual Report, and http://
boost, with sector leaders such as LVMH and Hermès finance.hermes.com/en/2011/2010-Results.
Navigating the New Consumer Realities 25

28. Shifting Priorities
Ioanna’s story
“I’m a middle-class mother in Greece Spending priorities are family and
with three children and a husband. I health
also work full time in the public sector.”
◊◊ “I think I’m a rational spender: de-
Impact of the crisis spite the crisis, we trade up for fresh
organic food, but only for basics.”
◊◊ “My salary has been reduced, and it
has affected me emotionally—I feel ◊◊ “I believe in quality over luxury: I dis-
insecure.” like fancy things, but I won’t buy
something on sale if I don’t know the
◊◊ “With the recession, we have had to brand.”
become much more conscientious
about spending.” Lasting changes in spending behav-
ior
Family is the first priority
◊◊ “It’s not just a question of having less money—cautious
◊◊ “My dream is a bigger house for my family. But my first spending has become a habit. We’ve become accus-
priority is to see that my children grow up healthy.” tomed to thinking twice before buying anything.”
◊◊ “We want to give our kids everything they need—includ-
ing a good school. We don’t cut back when it comes to
our kids.”
Exhibit 10. When Trading Up, Consumers in China and India Value Brand Name More Than
Consumers Elsewhere
U.S. EU 51 Japan Brazil Russia India China
Reasons for trading
up (% of respondents)
Give better results 63 51 41 71 66 55 65
Meaningful 52 45 66 70 60 61 67
technical differences
Healthier 49 38 32 73 68 65 67
Category more 44 34 52 76 63 57 53
important to me
Can afford to 34 30 27 63 44 58 51
Enjoy the 32 34 17 69 59 62 54
feeling of using
Brand name 30 19 24 60 26 64 70
Enjoy the 26 27 14 68 54 55 46
feeling of buying
I deserve it 26 26 22 77 59 60 47
Top two reasons
Source: BCG Consumer Sentiment Barometer, Spring 2011.
Note: The bottom income quartile was excluded and the sample reweighted to represent real income distribution in each country.
1
EU 5 = France, Germany, Italy, Spain, and the U.K.
26 The Boston Consulting Group