Ledbury Research - How understanding the few can predict the behaviour of the many
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1) The document discusses how the behaviors and choices of wealthy individuals can predict future trends and behaviors of the general population. Wealthy individuals are more likely to be early adopters of new products and services due to their higher levels of education, knowledge, interests, and financial means. 2) Their refined choices and wider range of options, combined with experience making decisions, means the choices made by wealthy individuals can provide an accurate picture of what will become popular trends in the future. 3) Additionally, wealthy individuals tend to have broader influence over others through their social networks seeking their advice, and by driving aspiration in the general population through their wealth, knowledge and influence. Therefore, observing the behaviors of the wealthy
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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
- 13. 13 Examples
- 14. The information contained in this document has been compiled on a best efforts basis, and any opinions reflect the opinion of Ledbury Research Ltd at the time and are subject to change. Ledbury Research Ltd does not warrant the accuracy, completeness or exactitude, nor the merchantability or fitness of the product for a particular purpose, of the document, and cannot accept liability in that regard. Copying or reproduction in whole or in part without permission from Ledbury Research Ltd is strictly prohibited. Thank you torie.bold@ledburyresearch.com
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