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Ledbury Research - How understanding the few can predict the behaviour of the many
1. How understanding the few can predict the behaviour of the many
11 March 2015
Prepared for MRS
2. 2
The wealthy provide an ideal testing ground to
predict what trends, products, or services will be
popular in the future
Introduction
3. 3
• Number of models to explain diffusion
• 2 Step Hypothesis
• Trickle-Down effect
• Everett Rogers Theory
• Malcolm Gladwell's Tipping Point, etc.
• All these models have in common a starting
point of small group of influential individuals,
variously called opinion leaders, innovators,
visionaries, or early adopters
• The earliest and most effective way to evaluate
the success of a product, service or trend is by
understanding the impact amongst this minority
of early adopters
Quantifying the process by which a new trend, product or idea is
adopted by the market
Innovation adoption cycle
4. 4
2 broad characteristics that define them:
1) A knowledge or interest in the subject area
2) Means to participate – typically financial means if relevant to a product
or service
So how do we identify them?
5. 5
Proxies for
• knowledge: education (highest level), readership
Knowledge & interests
23
28
12
8
30
51
A Level University
degree
Postgraduate
degree
UK population as a whole UK wealthy (£500k+)
At least degree-qualified:
40% cf. 82%
Base: UK population: nat rep sample of n=300; UK wealthy: £500k+ investable assets, n=304; £750k+ assets, n=345
62
93
Read a newspaper
UK population as a whole UK wealthy (£750k+)
6. 6
Proxies for
• knowledge: education, readership
• interests: travel & hobbies
Knowledge & interests
61
13
77
22
4+ hobbies 8+ hobbies
UK population as a whole UK wealthy (£1m+)
64
53
98
70
1+ foreign holiday pa Travel as a hobby
UK population as a whole UK wealthy (£500k+)
Base: UK population: nat rep sample of n=300; UK wealthy: £500k+ investable assets, n=306; £1m+ investable assets, n=102
7. 7
The wealthy are more likely to be early adopters
Education Travel
Readership Activities
Interest &
knowledge
Financial
means
Early
Adopters
8. 8
The wealthy
• are more likely to be early adopters
• have more choice given their financial means
• more likely to make a more refined choice
Why the wealthy are better early indicators
9. 9
The wealthy are more likely to make refined choices
Interest &
knowledge
Financial
means
Early
Adopters
+
wider choice
and experienced
decision-making
=
Refined
choices
10. 10
1) Their peers are more likely to turn to them for advice
The wealthy are more influential
“People I know often refer to me for advice
about products and services”
42
58
% agree
UK population as a whole UK wealthy (£1m+)
Base: UK population: nat rep sample of n=300; UK wealthy: £1m+ investable assets, n=200
11. 11
2) Their knowledge and wealth drives aspiration from the rest of the population
The wealthy are more influential
$
Wealth
distribution
$$$
12. 12
The wealthy have a faster, more accurate and greater influence
Early
Adopters
+
broad influence amongst network
and population
Refined
choices
+
wider choice and experienced
decision-making
Predictive
behaviour
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Editor's Notes
2 step hypothesis: The two-step flow of communication or Multistep Flow Model, says that most people form their opinions under the influence of opinion leaders, who in turn are influenced by the mass media. So according to this model, ideas flow from mass media to opinion leaders, and from them to a wider population.
The paper is a useful reference for looking at the role of influence in decision-making, and Zuckerberg’s argument that “nothing influences people more than a recommendation from a trusted friend”. (2007). It explores the link between the mass media and our social networks in developing public opinion, particularly the role of opinion leaders as the conduit of ideas from mass media to individuals – Katz’s “two-step” flow of ideas.
The trickle-down effect is a marketing phenomenon that affects many consumer goods. Initially a product may be so expensive that only the wealthy can afford it. Over time, however, the price will fall until it is inexpensive enough for the general public to purchase.
When applied to fashion, this theory states that when the lowest social class, or simply a perceived lower social class, adopts the fashion, it is no longer desirable to the leaders in the highest social class.
Everett Rogers - Diffusion of innovations theory
Malcolm Gladwell's Tipping point
Some of Malcolm Gladwell's analysis as to why the phenomenon of the "tipping point" occurs (particularly in relation to his idea of the "law of the few") and its unpredictable elements is based on the 1967 small-world experiment by social psychologist Stanley Milgram.[16] Milgram distributed letters to 160 students in Nebraska, with instructions that they be sent to a stockbroker in Boston (not personally known to them) by passing the letters to anyone else that they believed to be socially closer to the target. The study found that it took an average of six links to deliver each letter. Of particular interest to Gladwell was the finding that just three friends of the stockbroker provided the final link for half of the letters that arrived successfully.[17] This gave rise to Gladwell's theory that
Identifying this group is difficult, but there are two broad characteristics that define them:
A knowledge or interest in the subject area
This group need to be aware of developments in the area, so must be knowledgeable about it, as well as keep a keen interest
Means to participate – typically financial means if relevant to a product or service
Though there are exceptions, in most scenarios new products and services command a price premium, especially as initial demand is low. As the offering becomes more successful demand and supply increases with lower price points available
Wealth or income are common to both interest and means. The wealthy have greater means, ipso facto, and it can also be shown they have greater knowledge and interests too.
The wealthy are more influential than the population as a whole.
This can be seen in two ways:
Their peers are more likely to turn to them for advice
Their knowledge and wealth drives aspiration from the rest of the population
Travel – the original jet set
Travel destinations
Fractional ownership models
Cruising
SUVs
Automotive technology
Mobile telephony
Flat screen television
In-home entertainment
Organic and premium foods
Children’s parties
Average cost of a children's birthday party soars to £214 as competitive parents admit to giving out ever more lavish goody bags - just to trump their peers
Third of parents splash out to guarantee party is better than friend's party
9% spend at least £800
Gift bags can even contain iPod, make-up and gift cards
Ideal party would be at theme park with lunch at Nandos, say children
Ideal celebrity guests are David Beckham and One Direction