Stay Ahead of the Curve

Marketing pundits have for decades urged us to identify the price customers are prepared to pay. But it’s a changed world. We need to stay ahead of the curve, and identifying the price customers are prepared to pay is not staying ahead of the curve.

We need to identify the customers prepared to pay the price.

The other golden nugget is the creation of a single view of the customer. Sure, why not? That’s necessary, but it’s not putting us ahead of the curve.

What we need to do is  create a view of the single customer.

Another rib-tickler is when a CEO says, we are in business for everyone. Priceless.

Not even Amazon or Apple, the world’s two biggest brands, are in business for everyone.

Apple changed the mobile telephony game when it introduced the iPhone in 2007. Now, 12 years later, 39 percent of Australians have an iPhone as their current handset. That means 61 percent don’t. And 77 percent of Australians don’t visit Amazon in an average month.

So, let’s stop talking about being in business for everyone.

If we take the world’s two biggest brands as a guide, at best we’re probably in business for between one quarter and one-third of the population.

But what does that mean? Does it mean there are brand acceptors and brand rejectors? Does it mean there are consumers passionate about a brand, and a whole bunch who couldn’t care less?

What it does means is that there are right customers and there are wrong customers. And not knowing which is fast becoming an existential threat.

The Right Customer

The right customer is one that’s aligned with your brand. That means their values and attitudes pretty much line up with your brand values.

The right customer is prepared to pay. And even prepared to pay a premium if you get them to fall in love with your brand.

The right customer wants to be communicated with as an individual, so you need to have a view of the single customer.

Apple has clear brand values: socially progressive, design-driven, edgy, individualistic, self-aware. It knows what it is and importantly, it knows what it isn’t. Apple never discounts. Apple stands for the individual – its mantra is, every thing we touch enhances each life it touches.

It’s easy to see who Apple’s right customer is. It’s someone who has progressive social values, who values design and beauty ahead of function and features, who takes the path less traveled, who is individualistic, who looks for products that enhance their lives, and for whom price is just the cost of falling in love.

Apple’s right customer is known as the new economic order or NEO.

In Australia, NEOs are 4.7 million markets of one. They spend more, more frequently, than anyone else. And while 37 percent of the population owns an iPhone, 60 percent of NEOs love their life-enhancing iPhones.

But not every customer is the right customer. Half the population is socially conservative, motivated by function and features, deal and discount junkies, mad about doing what their friends do, going where everyone else goes, and longing for symbols of status.

These are traditional consumers. If you’re Apple or an Apple aspirant, these are the wrong customers. If you chase them, they’ll put you out of business.

When did this occur?

According to American sociologist Immanuel Wallerstein,  all seemingly stable systems disrupt, and become unable to continue their upward trajectory.

Having reached a kind of stable equilibrium during the post-war boom, by the late 1980s the consumer economy became increasingly unstable and chaotic. The result? What Wallerstein would call inevitable bifurcation.

The world economic order bifurcated, split in two, creating the new economic order (NEOs) and the traditional economic order (Traditionals). This chaotic bifurcation correlated with the failure of communism in 1989, the replacement of the industrial age by the information age in 1991, the global recession that swept the globe between 1989 and 1993, and the overthrow in 1991 of post-modernity by neomodernity.

They could not be more different

And NEOs and Traditionals are so different they may as well be on two different planets.

Ninety-one percent of NEOs are in the Big Spender category, that’s the top third of elective spenders in the economy.

Their traditional cousins are reluctant spenders and passive investors. Regardless of their income or net worth, Traditionals are price-sensitive and more interested in the right deal than they are in quality and a premium experience. As a consequence, only 6 percent of Traditionals are in the top third of elective spenders.

Consistent with the 200-year-old traditionalist lineage, Traditionals are socially and politically conservative, more interested in the rational than the emotional. They wish the world would stop changing so fast and just slow down. Traditionals resist technological changes and don’t care that digital devices could give them more control over their lives. They would rather take the path most traveled, comforted by the certainty of crowds, and are happy to follow rather than lead.

 Powerful social and business influence

NEOs are far from some small niche in society — after all, they are a quarter of the population and have powerful social and business clout.  They will buy new technology — all those smartphones, tablets, WiFi devices, wearables, and implantables — but they’ll also spend their hard-won rewards on home extensions and renovations, travel, eating in and out, drinking premium wine and spirits, online banking, investing in shares, properties, welath products and an entire range of services that enhance their lives – making life more individual and more controllable.

They vote governments in and out, fill our universities, and take professional roles and executive positions.

There are 4.7 million NEOs in Australia and 64 million in the USA.

NEO Profile

To qualify as a NEO, a person must be:

• In the top 25% of elective spending AND …

• In the top 40% of the 82 defining attitudes and values that determine high spending AND…

• In the top 40% of the 100 distinctive behavioural factors that reveal where they go and how to reach them

A NEO is born a NEO and, depending on circumstances throughout his or her life, will always be either a NEO (24 percent of the population) or an evolving or Aspiring-NEO (26 percent).  A Traditional is born a Traditional and will die a Traditional (50 percent). There is no migration between one half of the population and the other.

Premium Audience

So, the Australian population is split into distinct consumer mindsets:

NEOs have a humanist leaning towards social justice. Typically well educated, they believe as much in learning a living as they do in earning a living. Great planners and architects of their own life outcomes, NEOs are optimistic about the future and juggle an intellectual bent with the desire to look and feel fashionable. Conspicuous activists, they are inconspicuous consumers.

NEOs are largely metropolitan dwellers, with more of them living in urbanized NEO cities like Melbourne, Sydney, Vancouver , San Francisco than anywhere else.

Fifty-four percent of NEOs are women and 46 percent are men; and while NEOs range over all age groups, they tend to be younger than Traditionals. NEOs exceed the national average in every age profile between age 20 and age 50, while Traditionals exceed the national average in every profile above age 50. That said, there are plenty of NEO Baby Boomers.

More than half (55 percent) of NEOs have a university degree, compared to 33 percent of the population or 19 percent of Traditionals.

Because NEOs are most likely to be in professional or executive roles, or to have started their own business, they earn more than the rest of society. Specifically, they dominate every income category above $50,000 pa and are five times more likely than Traditionals to earn in excess of $100,000 pa. But they earn more because they are NEOs; they are not NEOs because they earn more – how much someone earns doesn’t automatically determine how much they spend.

And NEOs spend more. Typically 300 percent times more than Traditionals.

Premium Wealth

NEOs are also significantly over-represented in Australia’s highest tier of wealth.

The top decile of net wealth is valued at $4.04 trillion – half of all net wealth in Australia. One in five NEOs (19 percent) are in the top decile, compared to only one in seventeen (6 percent) Traditionals. That 3:1 ratio directly aligns with NEO / Traditional consumer spending.

NEOs are 87 percent more likely than the average Australian to be in the top decile of net wealth, and 126 percent more likely than Traditionals to be in that top decile.

The new wealthy, NEOs are very active with their money, while Traditionals are typically very passive. NEOs are unafraid of debt to satisfy their desires. This is evidenced by the fact that NEOs account for almost half of all debt in the economy – $510 billion out of $1.2 trillion.

NEOs are 134 percent more likely than Traditionals to have an investment loan. And NEOs are 3 times more likely than Traditionals to have charge cards.

Premium Value

The NEO Economy is valued at $512 billion in Australia. The Traditional Economy is valued at $364 billion. Therefore, NEOs are 300% more valuable than Traditionals.

NEOs are inconspicuous consumers. Because they define themselves by who they are and what they stand for, they don’t need to surround themselves with overt luxury or symbols of belonging. They do however want beauty, design, quality, rich information, authenticity, flexibility, provenance and choice.

Guests to Clayoquot Wilderness Resort on Vancouver Island are, for example, responding to the wave started by Clayoquot’s John Caton, paying $US2,000 a night per person to stay in a tent. And Clayoquot’s NEO-powered bookings at the height of the global meltdown were 20 percent up on the previous year.

In Denver, Colorado during ‘Meltdown Christmas’ of the Great Recession (GFC), stores in the major shopping mall were all but empty … except that is for the Apple store where the line was so long a patient NEO shopper was expected to wait 35 minutes to be served. And to pay full price. NEOs are shopping and booking holidays, but only for products and experiences that make beauty linger.

Summary

NEOs are passionate, active, involved individuals. Australian marketers & entrepreneurs need to see them as 4.7 million markets of one. In seeking the path less traveled, NEOs still encounter mainstream culture (such as football), but it is their individual twist on the mainstream that distinguishes them and makes them a challenging audience for mainstream marketing approaches.

by Ross Honeywill

Data source: Roy Morgan Single Source: Oct 2015 – Sep 2020. n=250,705