THE ECONOMIC    DIVIDE: HOWCONSUMER BEHAVIOR DIFFERS ACROSS THEECONOMIC SPECTRUM   SEPTEMBER, 2012
The Economic Divide:How Consumer Behavior Differs                                      Jeff Gregori, Vice President, Consu...
Highlights                                                         Purchasing BehaviorsTo better understand consumers acro...
Discussion                                                         Media Device PenetrationAlthough cautious consumers dia...
Fifty-eight percent of affluent consumers own a video game     The difference in viewing patterns for daytime TV by income...
The pattern reverses for game consoles, lower income               Facebook earns one of the leading spots on the favorite...
While fewer people in any income bracket possess a tablet             Income surfaces as a major driver behind the gap in ...
Shopper SpendingSpending on consumer packaged goods varies by income levelwith higher income households spending nearly $1...
Shoppers Choice                                                    Extreme RetailingAll shoppers patronize all channels, b...
Brand InfluenceDespite all the talk about the rise of private label goods, thebump in coupon redemption rates and general ...
ConclusionConsumers across the economic spectrum are coping witheconomic pressures in different ways. Marketers and advert...
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The economic divide how consumer behavior differs across the economic spectrurm sept 2012

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The Economic Divide: How Consumer Behavior Differs Across the Economic Spectrum - Nielsen Media

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The economic divide how consumer behavior differs across the economic spectrurm sept 2012

  1. 1. THE ECONOMIC DIVIDE: HOWCONSUMER BEHAVIOR DIFFERS ACROSS THEECONOMIC SPECTRUM SEPTEMBER, 2012
  2. 2. The Economic Divide:How Consumer Behavior Differs Jeff Gregori, Vice President, Consumer and Shopper Analytics-Retail USAcross the Economic Spectrum Peter Katsingris, Vice President, Industry Insights, Media and Advertising Analytics Overview Concerns over the U.S. economy remain in the forefront for many consumers with a lackluster recovery at a pace best described as “slow but steady”. Improvements on the economic front elevated U.S. consumer confidence to its highest level (92) in five years at the beginning of the year but have since declined by five points (87) in June. Consumers continue to be pessimistic about job prospects and are concerned that the economy is stalling again. Economic conditions have yet to return to pre-recession levels and are impacting various consumer segments differently. Economic forces have bi-furcated the great middle class that emerged following World War II, driving a wedge between the “haves” and “have-nots”. Consumers at the poles of the economy are experiencing different economic conditions, altering consumer behaviors and shifting consumer needs. The most affluent segment has exited the recession and re-established a level of financial equilibrium. Meanwhile the lower income segment, the hardest hit financially, continues to feel vulnerable and spend less. Today, these households collective buying power respresents 24% of consumer packaged goods (CPG) purchases. Over the next ten years, more people are going to be moving into the lower income group, which is expected to grow twice as fast as total households. As the economy remains sluggish, understanding consumers across the economic spectrum has become increasingly important as some of their behaviors in response to the recession have become more permanent. Consumers continue to rebalance their family budget staying pragmatic and value conscious, creating a new norm of purchasing behavior, turning channel proliferation, new media opportunities and promotional offers to their advantage.2 Copyright © 2012 The Nielsen Company.
  3. 3. Highlights Purchasing BehaviorsTo better understand consumers across the economic spectrum, One might expect that purchasing patterns across income groupsNielsen conducted an analysis of media usage and purchasing would be very, very different. Our analysis shows that whilebehaviors. Key findings revealed that media consumption there are differences between the groups, there are importantpatterns and delivery platforms vary dramatically across income similarities that must be understood if these groups are to belevels; however CPG shopping behaviors are not as different as reached and marketed to successfully.one might expect. For instance, branded products make up a fairly similar fraction of purchasing for both upper and lower income groups.Media Usage Consistent with this, share of private label products are more similar than different across income groups in most productReaching consumers at the economic polarities requires an categories.understanding of their media usage and adjusting marketing Also, although there are some differences in the retail channelstrategies accordingly. Income levels influence what media choice across income groups, the fact is that grocery and masspeople purchase and how they access content. While more merchandisers are the dominant channels, to similar degrees atincome corresponds to access to more devices and platforms, both ends of the income spectrum.economically-strapped consumers generally consume moremedia. Having said this, there are some differences between the groups that are important to note. First, higher income consumers do• With multiple media platforms, higher income consumers pose spend more in total. They tend to do this not by shopping more a challenge as to the best device(s) on which to reach them. often (they shop somewhat less often) but instead by spending Their media usage is quickly shifting through the rapid change more per shopping trip. in technology. Use of connected devices such as tablets and smartphones supplement traditional television and online Lower income consumers are in fact more likely to be found in usage. certain retail channels, like “dollar” stores, convenience stores, and deep discounters.• Higher income consumers own more digital video recorders, video game consoles, smartphones and tablet devices than any Upper income consumers, on the other hand, are much more other income groups, however penetration of these devices likely to shop in warehouse club stores than lower income is rapidly growing across all other segments. These devices consumers. are changing consumer behavior, leading to more anytime, anywhere consumption of media.• Higher income consumers are twice more likely to subscribe to premium cable packages and five times as likely to access television content via paid telecommunications services than lower income consumers, resulting in a multitude of choices available to the higher income group.While higher income consumers are distinguished in their accessto various devices and media types, lower income consumersare distinguished in their consumption of the media they do haveaccess to, including digital media.• Lower income consumers exhibit a huge appetite for media, logging almost 15 more daytime TV hours than middle income consumers and about 25 more hours than higher income consumers.• Lower income consumers’ heavy media usage goes well beyond TV. They spend more time online than their more affluent counterparts, almost 6 hours more per month. Additionally, they stream video in greater amounts and use social networks more often.• Facebook emerged as the most popular mobile application with very little difference between the usage of mobile social networking across all income groups. Copyright © 2012 The Nielsen Company. 3
  4. 4. Discussion Media Device PenetrationAlthough cautious consumers dialed down spending across the As might be expected, income levels determine what typesboard, shoppers appear to feel slightly more confident on a of media delivery people are willing to purchase. Upperrelative basis with grocery spending improving. In 2011, more income consumers subscribe to more pay cable servicesthan 50 percent of shoppers claimed to reduce grocery spending. such as premium HBO or Starz Network than lower incomeOne year later, only 29 percent of shoppers made the same consumers, 46 compared to 21 percent, and five times as manyclaim, a positive trend for retailers and manufacturers. telecommunications services such as AT&T U-Verse and Verizon FiOS, 16 compared to three percent. (Chart X)However, nagging long term unemployment persists, affectingvirtually every industry, occupation and age group. Over thenext ten years we expect total households in the U.S. to grow by8%; however, households closer to the poverty level will growtwice as fast at 17%. These lower income households representa growth segment that will require marketers and advertisersto adjust their current strategies in response to these economicshifts and their influence on shopping behaviors. Pragmatic behavior will continue, but less intense in the next year ACTIONS TAKEN IN ORDER DID WILL TO SAVE ON THIS CONTINUE HOUSEHOLD EXPENSES PAST YEAR TO DO Save on gas & utilities 62% 51% Reduce out-of-home entertainment 58% 26% Spend less on clothes 56% 29% Reduce take-out meals 55% 33% Reduce grocery spend 52% 29% Use car less 39% 21% Source: Nielsen Global Consumer Conversely, lower income viewers are more likely to have a cable Confidence & Opinion Survey 1Q’12 package that doesn’t involve premium channels and more likely to have broadcast only than any other income groups. Income levels also account for technology adoption patterns. Higher incomes lead to more rapid product adoption and greater device penetration. More than two-thirds of higher income consumers, 68 percent, own a digital video recorder (DVR) compared to 45 percent of the national average and 23 percent in the lower income bracket.4 Copyright © 2012 The Nielsen Company.
  5. 5. Fifty-eight percent of affluent consumers own a video game The difference in viewing patterns for daytime TV by incomeconsole compared to 46 percent of the national average or 34 strata is striking; persons within lower income households log apercent of lower income consumers. total of 41 hours 30 minutes of TV per month, taking in 15 more hours of daytime TV than middle income consumers and 25 more hours of daytime TV than higher income viewers per month.TV ViewsThe average American devotes 151 hours and 58 minutes to TVviewing each month. Persons in lower income households watchmore television (192 hours and 48 minutes per month) than There are many possible reasons why lower income consumersconsumers in middle income (148 hours and 49 minutes per are home during the day and available to watch TV: a highermonth) or higher income households (112 hours and 25 minutes unemployment rate, a higher propensity to work evening shifts,per month). a preponderance of stay-at-home parents or retirement. Time-shifted DVR viewing proves most popular among higher income consumers, likely a function of device ownership, monthly service charges and content preferences. Persons within the higher income range access their DVRs to view previously recorded content for 14 hours 32 minutes each month compared to 7 hours 40 minutes for lower income consumers. Copyright © 2012 The Nielsen Company. 5
  6. 6. The pattern reverses for game consoles, lower income Facebook earns one of the leading spots on the favorite onlineconsumers post 7 hours 15 minutes of use per month compared destinations roster, with lower income consumers allocatingto 5 hours 10 minutes among higher income players. Higher 9 hours 5 minutes monthly to this social networking site. Middlevolume game console use among the lower income strata may income folks carve out 6 hours 24 minutes per month for thebe indicative of greater reliance on streaming content such as site, while higher income users apportion 5 hours 16 minutes toNetflix or Hulu in lieu of paying for cable or telecommunication updating profiles and contacting friends.services content. Netflix is a popular site for online streaming of video content especially among the heavy user segment of lower income consumers who spend more than twice as much time (16 hours 24 minutes) video streaming as higher income consumers (7 hours 1 minute). Mobile Patterns Income plays a large role in the acquisition of still comparatively expensive smartphones and tablets. These devices will likely become the preferred tools for online access and economic transactions in the future due to their portability and ease of use. Although it is relatively early days for both devices, one-third of lower income consumers and almost 60 percent of higher income consumers already own a smartphone. (Chart X)Online ConnectionsThe average U.S. consumer spends 24 hours 51 minutes onlineeach month, with lower income consumers outpacing that timeincrement by about six additional hours. (Chart X )Online video streaming occupies 4 hours 30 minutes on averageper person each month, with streaming activity diminishing asincome levels rise. Lower income consumers account for thelion’s share of video streaming, viewing 6 hours 38 minutesmonthly. Middle income consumers jump online for 4 hours 26minutes per month and higher income consumers fit 3 hours 36minutes of streaming into their monthly schedules.6 Copyright © 2012 The Nielsen Company.
  7. 7. While fewer people in any income bracket possess a tablet Income surfaces as a major driver behind the gap in location-device, the general trend remains the same, with ownership based mobile service (LBS) and overall app usage on mobiletracking income. Thirty-one percent of higher income users, 12 devices. Income wields less influence on mobile video andpercent of middle income users and 4 percent of lower income TV viewing. Higher income subscribers tend to purchaseusers have a tablet device. more sophisticated smartphones, which enable an easier user experience. These wealthier consumers utilize additional payFacebook emerged as the top pick among mobile applications features on their mobile devices, accessing the widest variety offor every income group. The five most popular applications for media content.all income levels, albeit in a different rank order, were Facebook,Android Market, YouTube, Google Search and Gmail. Lowerincome consumers tend to patronize gaming or fun apps whileupper income consumers seem to prefer business and weatherchannels. Copyright © 2012 The Nielsen Company. 7
  8. 8. Shopper SpendingSpending on consumer packaged goods varies by income levelwith higher income households spending nearly $1200 moreper year than lower income households. Shopping behaviorsalso vary across income groups as lower income shoppers shopmore frequently and have smaller baskets, while higher incomeshoppers spend over $10 more per trip. As shopping strategiesdiffer across income groups, manufacturers and retailers musttailor offers to meet the needs of each segment.8 Copyright © 2012 The Nielsen Company.
  9. 9. Shoppers Choice Extreme RetailingAll shoppers patronize all channels, but certain formats attract Retailing may be evolving into an extreme sport thanks to thea disproportionately high percentage of shoppers from specific growing popularity of extreme value outlets. A review of howincome groups. Club stores and e-commerce skew toward grocery spending distributes across channels underscores thehigher income households (indexes =183 and 122 respectively) dichotomy between channel preferences at the higher and lowerwhile convenience and dollar stores draw from lower income ends of the economic spectrum. (Chart X)households (indexes=138 and 162 respectively). An index of100 suggests that an income group shops the channel at a rateconsistent with their incidence in the population. (Chart X) (Chart X)Perhaps the most significant finding is that in spite of the above Higher income shoppers over-index significantly (index=222)channel differences, grocery and mass merchandisers remain for specialty retailers such as Whole Foods and Trader Joe’sthe dominant delivery channels for CPG products regardless of while lower income households over-index moderately for valueincome level, accounting for a combined 69 percent of the total retailers (index=127), especially the extreme value segmentdollar spend. which includes grocers such as Aldi, Save-A-Lot and Bottom Dollar. Copyright © 2012 The Nielsen Company. 9
  10. 10. Brand InfluenceDespite all the talk about the rise of private label goods, thebump in coupon redemption rates and general popularity ofbuying on deal, the simple fact remains that branded productsappeal to all income strata.While it is true that lower income households tend to purchasemore private label goods in both edible and non-ediblecategories than the other two income brackets, it is also true thatnational brands still constitute the bulk of their market baskets.Savvy manufacturers such as Heinz addressed the brandedgoods/cost dilemma by introducing special product sizes atadjusted price points to attract budget-constrained shoppers.10 Copyright © 2012 The Nielsen Company.
  11. 11. ConclusionConsumers across the economic spectrum are coping witheconomic pressures in different ways. Marketers and advertisersneed to understand the media usage and shopping behaviorsunique to each consumer group in order to respond to theseshifting consumer needs.Lower income households represent a high-growth opportunitysector for retailers and manufacturers aware of emergingdemographic trends. Value will remain an operational by-wordfor the foreseeable future across all income strata. While productdevelopment and merchandising strategies for the lower incomesegment may alter slightly, affecting product sizes, channelchoices and price points, the bigger challenge will be decidinghow best to advertise to each income group in a fragmentedmedia setting.What consumers watch, how much they watch and howthey access content shifts with income levels, complicatingadvertising and overall promotion decisions. Higher incomeconsumers have multiple media platforms at their disposal,resulting in a more complex advertising environment. Differentstrategies will be needed to identify the most efficient methodsof reaching these multi-media consumers.Technology may prove to be the great economic leveler,advancing in new directions that will empower consumers,improve media access and device affordability, in turn facilitatingefforts to engage consumers across economic polarities.i “Food Desert”, United States Department of Agriculture. http://www.ers.usda.gov/ “Wal-Mart, Supervalu to Open More Stores in ‘Food Deserts’,” The Wall Street iiidata-products/food-desert-locator/documentation.aspx Journal, Business, Health Industry, July 20, 2011. http://online.wsj.com/article/SB1000 1424053111903461104576457950151307910.html “Healthy Food Financing Initiative,” Convergence Partnership, Fact Sheet. http://iiwww.convergencepartnership.org/site/c.fhLOK6PELmF/b.6183661/k.2DF1/Healthy_Food_Financing_Initiative.htmAbout NielsenNielsen Holdings N.V. (NYSE: NLSN) is a global informationand measurement company with leading market positions inmarketing and consumer information, television and othermedia measurement, online intelligence, mobile measurement,trade shows and related properties. Nielsen has a presence inapproximately 100 countries, with headquarters in New York,USA and Diemen, the Netherlands. For more information, visitwww.nielsen.com. Copyright © 2012 The Nielsen Company. All rights reserved. Nielsen and the Nielsen logo are trademarks or registered trademarks of CZT/ACN Trademarks, L.L.C. Other product and service names are trademarks or registered trademarks of their © 2012 The Nielsen Company. Copyright respective companies. 12/5152 11

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