So we find ourselves approaching the time of year of supposed goodwill to all men and the like. I’m particularly fond of this despite the overt consumerism that seems to dominate everything. However, far more annoying than the endless rounds of festive piped music in the stores or the delirious fervent of some poor parent trying to find the soon to be forgotten “hot” toy of the season (a guinea pig this year apparently), is the advertising that so many companies undertake.
Perhaps even more so when the economy sucks, but every year it seems that most marketers seem to feel that the only way to get their message heard is to yell louder than the last. When they all do this together at this time of year, spouting one supposed deal after another; the cacophony is deafening. Literally.
Also it is quite pointless, despite what the common (but wrong) wisdom may tell us every year. It actually turns off the highest spending of consumers (the New Economic Order) and appeals only to the Traditionals, who are focused upon price and nothing else. Inevitably it can bring some short term success but always leads to the wrong long term question: Instead of “how do you get people to pay full price again after such heavy discounting”, the real challenge, is “how do you attract the less price focused consumers when you have previously done everything in your power to drive them away?”
I had the misfortune to wander into an Eddie Bauer store yesterday, attracted by a jacket they had on a display. The moment my toes crossed the threshold I was assailed by a fiendishly motivated “sales guy” who proceeded to tell me about the discounts and what great deals they had. I wanted to run away but he wouldn’t relent from grabbing random things off of the shelf (none of which even remotely interested) me and explaining what a great deal they were. I never did look at the jacket.
On Planet Traditional (for that is what it is) this is seen as aggressive salesmanship and “giving the consumer what they want”, but is it really that? No matter how many times I read that consumers have changed I can’t help noticing that they really haven’t. Sure, those who shops primarily on price are getting ever more accustomed to better deals, to such an extent that they will not buy without one. But what about the rest of us, who really don’t care what the deal is until we know if we want the bloody thing! Or as the research shows us, the 24% of the population that dominate the big spending category? Well, we can’t hear you because you are shouting to loud.
In all the noise and deal making, the biggest opportunities for your business are covering their ears and heading for the exits. You won’t notice they have gone. At least not until you cash up at the end of the day!
Monday, December 7, 2009
Tuesday, November 17, 2009
The Strategy for Individual Real Estate Agents
Since we launched Fingerprint Strategies we have had a consistent flow of questions from individual real estate agents asking us how this applies to their business. It seems as if many of you are finding that no matter how hard you work you get caught in the trap of lots of people looking but very few deals. Nothing surprising there, as the vast majority of what we have all been trained to do is targeted towards Traditionals who aren't buying, rather than NEOs who are.
This can be really eye opening once you come to see the world through the filter of NEO vs. Traditional and know that they view the world completely differently and respond to different things. I have had this conversation over and over again with people inside the industry over the last few months and time and again it is like a light finally goes on for them. The fishing analogy that you can't catch salmon by fishing in a trout pond seems to nail it for many.
88% of the people who plan to buy a home in 2010 are NEOs
So, rather than try and talk to every real estate agent who doesn't want to slide into oblivion one by one, we have put together a comprehensive training program on who NEOs are, why they will dominate real estate over the coming years and the skills you need to learn in order to attract them to your business.This is now available under a new venture called the Advanced Marketing Institute. If you are a real estate agent of any shape, form or color and you want to have a business that thrives rather than just struggles to survive, I urge you to go an take a look at it immediately. (Click Here)
Chris
This can be really eye opening once you come to see the world through the filter of NEO vs. Traditional and know that they view the world completely differently and respond to different things. I have had this conversation over and over again with people inside the industry over the last few months and time and again it is like a light finally goes on for them. The fishing analogy that you can't catch salmon by fishing in a trout pond seems to nail it for many.
88% of the people who plan to buy a home in 2010 are NEOs
So, rather than try and talk to every real estate agent who doesn't want to slide into oblivion one by one, we have put together a comprehensive training program on who NEOs are, why they will dominate real estate over the coming years and the skills you need to learn in order to attract them to your business.This is now available under a new venture called the Advanced Marketing Institute. If you are a real estate agent of any shape, form or color and you want to have a business that thrives rather than just struggles to survive, I urge you to go an take a look at it immediately. (Click Here)
Chris
Thursday, October 1, 2009
The Power of the Deal
The amazing thing about understanding the world through a NEO/Traditional filter is that almost every day something comes along that just demonstrates the point perfectly.
I haven't posted for a while as I have been focusing on building a video based training product for people in the real estate field to be able to understand the importance of building your business around the people who are actually going to buy over the coming years, rather than banging your head against the wall selling to a market that has disappeared. We should be ready to launch this in a couple of weeks.
Unfortunately the government didn't get the memo!
The Cash For Clunkers program was a perfect piece of Traditional marketing, unfortunately it also highlights the reality of trying to get Traditionals to spend money when it doesn't feel safe to them to do so. The set up was perfect: A once in a lifetime offer for a very limited period of time, of what basically was free money. Of course Traditionals responded, they can't help themselves sometimes, as the love of the deal is just built into their DNA. Auto sales spiked, not of Subaru's, Mini's and Audi A3's (they were all selling pretty well anyway) but of Chryslers and GM cars - little "TDWs" - Traditional Deal Wagons - never bought for the experience, always for the deal.
Men in clip-on ties rejoiced as deal hungry buyers flocked back in to their domestic dealerships. Everything was well with the world again.
But then....
The deal stopped and with it so did the buying. In fact today it was announced that auto sales slumped in September, particularly for Chrysler and GM who dropped 42% and 45% respectively.
However before you go all Rush Limbaugh on me this does not mean the program was a failure. These people did not just bring forward the purchase of a vehicle they would have bought anyway - most of them were driving cars built when Monica was still going down on Bill in the Oval office! They were not buyers until they got a deal they just couldn't refuse.
This highlights the real difficulty of trying to sell to Traditionals in anything other than the best of times. The deal has to be irresistible and as soon as the deal ends, so do the sales. The only point of a sale or promotion is to beat the last one. It has to become breathless. Cut prices, offer guarantees and then cut prices again.
If you want to build your business on the mainstream Traditionals in 2009 you need to cut so far that what little blood that is left in your body oozes out of every available orifice. As and when $8,000 tax incentives or real estate foreclosures dry up and the "deal of the century" appears to have passed, the same will happen with low priced homes marketed to Traditionals. It is inevitable, sadly.
Thankfully it isn't my job is rescue entire ailing industries. I get to show people that another type of person exists out there. 59 million of them who have the spending power and mindset to buy when they find something that fits their own personal values. It means relookng at the whole way you do business and think about who your buyers are, which takes some effort. But if even the Federal government can't buy their way back in to Traditionals wallets, what are your other options?
Chris
I haven't posted for a while as I have been focusing on building a video based training product for people in the real estate field to be able to understand the importance of building your business around the people who are actually going to buy over the coming years, rather than banging your head against the wall selling to a market that has disappeared. We should be ready to launch this in a couple of weeks.
Unfortunately the government didn't get the memo!
The Cash For Clunkers program was a perfect piece of Traditional marketing, unfortunately it also highlights the reality of trying to get Traditionals to spend money when it doesn't feel safe to them to do so. The set up was perfect: A once in a lifetime offer for a very limited period of time, of what basically was free money. Of course Traditionals responded, they can't help themselves sometimes, as the love of the deal is just built into their DNA. Auto sales spiked, not of Subaru's, Mini's and Audi A3's (they were all selling pretty well anyway) but of Chryslers and GM cars - little "TDWs" - Traditional Deal Wagons - never bought for the experience, always for the deal.
Men in clip-on ties rejoiced as deal hungry buyers flocked back in to their domestic dealerships. Everything was well with the world again.
But then....
The deal stopped and with it so did the buying. In fact today it was announced that auto sales slumped in September, particularly for Chrysler and GM who dropped 42% and 45% respectively.
However before you go all Rush Limbaugh on me this does not mean the program was a failure. These people did not just bring forward the purchase of a vehicle they would have bought anyway - most of them were driving cars built when Monica was still going down on Bill in the Oval office! They were not buyers until they got a deal they just couldn't refuse.
This highlights the real difficulty of trying to sell to Traditionals in anything other than the best of times. The deal has to be irresistible and as soon as the deal ends, so do the sales. The only point of a sale or promotion is to beat the last one. It has to become breathless. Cut prices, offer guarantees and then cut prices again.
If you want to build your business on the mainstream Traditionals in 2009 you need to cut so far that what little blood that is left in your body oozes out of every available orifice. As and when $8,000 tax incentives or real estate foreclosures dry up and the "deal of the century" appears to have passed, the same will happen with low priced homes marketed to Traditionals. It is inevitable, sadly.
Thankfully it isn't my job is rescue entire ailing industries. I get to show people that another type of person exists out there. 59 million of them who have the spending power and mindset to buy when they find something that fits their own personal values. It means relookng at the whole way you do business and think about who your buyers are, which takes some effort. But if even the Federal government can't buy their way back in to Traditionals wallets, what are your other options?
Chris
Tuesday, August 11, 2009
The Economy of One
I had fully intended to write the second piece about the Case Schiller price index changes last week, but there has been so much information and opinion to absorb that I wanted to take the time to read other people's opinions, particularly on the excellent Housing News Live site.
There has been a fair degree of triumphalism, particularly from the realtor community, that all the problems are behind us and we can now see evidence that things are going to return to normal. Take a look at this historical chart of house prices and it gives some perspective to the outlandish effect that the securitization growth of the early part of this decade had upon prices,even more so when you note that there was really no income growth during this period. Note this chart is adjusted for inflation, which makes it even more stunning.
There is undoubtedly sales growth, as people who have been holding off buying have been jumping in to the market and taking advantage of the low interest rates for insured mortgages and the tax incentives (which are due to end in November). As the proportion of total sales made up by short sales and foreclosures drops this automatically means that average prices go up. But this is not house prices rising! Go back to grade school math and it is easy to realize this.
What we are seeing is a pattern that is likely to play out for years to come. A reasonable number of sales in the part of the market that the Federal government can stimulate through incentives, loan modifications and the new major player in the market Ginnie Mae. This will lead to some degree of price stabilization nationally, but in the areas with the biggest problems, both in residential and soon commercial real estate (due to effect upon the local banks) it can still get worse, much worse.
But where is the growth going to come from?
One argument is inflation, left unchecked by a Federal Reserve looking to inflate its way out of deficit. This could lead to rising asset prices and interest rates kept low to stimulate growth. The people who believe this are trying to get you to load up on gold, buy a shot gun and move to a cabin in Montana! The way to convince yourself of this is to believe that the money supply is 100% under the control of the government and that they are printing money to bail out the economy. Lots of people are getting rich off of this theory. The only problem is that it completely ignores the way that the private sector effects and creates money supply through loans and securitization. When Morgan Stanley leverages its positions in the market by 25 to 1 using derivatives, aren't they also creating a monetary effect? With the cataclysmic shrinking of the market for securitized debt products (not because the banks don't want to make them, but because the buyers don't want to buy them) the growth in effective money supply (even if you believe Milton Friedman) just isn't there. I honestly believe Ben Bernanke is up at night worrying more about deflation than inflation.
The market is not going to rush back. It can't even if we all want it to. The wall of money just isn't there any more. Look at this chart again and you see the future of housing prices, they are basically just going to go back to trend unless someone (private or public) does something to distort their value again. For all the Fox News prophecies of doom every night, the Federal government alone cant do this and the banks have to pay attention to their balance sheets if they can't ship the loan off to someone else.
What does this mean for your home or project? Well it means different things if you own a house in a suburb where everything looks the same, or if you live in a unique property in a great urban or unique community. If you live in the mainstream, your market is dominated by those we have come to call Traditionals. Price is their deity and it will be a long time before they are ready, willing or able to chase prices up. The bruises are still there and will be for years to come. So, while liquidity will return in terms of the number of transactions, prices will be stuck in a pretty narrow range for some time. If you want to sell, you have to be the best deal or it will sit on the market.
If you live or have developed a property in a community that attracts NEOs, who value uniqueness and individuality then there is hope. Research shows us that these people are less orientated around price than other factors, such as design, individualization and sustainability. Price matters but it isn't everything. For a NEO what they own is a representation of who they are; never more so than the home they live in.
Our latest data indicates that 82% of people who plan to buy a home over the next 12 months can be classified as NEO or their lower earning Evolver brethren. If you are in the real estate business, if this data doesn't make you pay attention you are as smart as the foundations of your houses.
Of course, none of this matters though if you continue to promote your product in the manner that only appeals to the Traditionals - by focusing upon features, slick marketing messages and claims of luxury and lifestyle - this just makes it like everything else and so ultimately, all about price. It is only when you understand that there are 59 million markets of one out there AND you learn to talk their language that you can start to move beyond the ugly economics of many and into the far more optimistic economy of one.
NEOblogger
There has been a fair degree of triumphalism, particularly from the realtor community, that all the problems are behind us and we can now see evidence that things are going to return to normal. Take a look at this historical chart of house prices and it gives some perspective to the outlandish effect that the securitization growth of the early part of this decade had upon prices,even more so when you note that there was really no income growth during this period. Note this chart is adjusted for inflation, which makes it even more stunning.
There is undoubtedly sales growth, as people who have been holding off buying have been jumping in to the market and taking advantage of the low interest rates for insured mortgages and the tax incentives (which are due to end in November). As the proportion of total sales made up by short sales and foreclosures drops this automatically means that average prices go up. But this is not house prices rising! Go back to grade school math and it is easy to realize this.
What we are seeing is a pattern that is likely to play out for years to come. A reasonable number of sales in the part of the market that the Federal government can stimulate through incentives, loan modifications and the new major player in the market Ginnie Mae. This will lead to some degree of price stabilization nationally, but in the areas with the biggest problems, both in residential and soon commercial real estate (due to effect upon the local banks) it can still get worse, much worse.
But where is the growth going to come from?
One argument is inflation, left unchecked by a Federal Reserve looking to inflate its way out of deficit. This could lead to rising asset prices and interest rates kept low to stimulate growth. The people who believe this are trying to get you to load up on gold, buy a shot gun and move to a cabin in Montana! The way to convince yourself of this is to believe that the money supply is 100% under the control of the government and that they are printing money to bail out the economy. Lots of people are getting rich off of this theory. The only problem is that it completely ignores the way that the private sector effects and creates money supply through loans and securitization. When Morgan Stanley leverages its positions in the market by 25 to 1 using derivatives, aren't they also creating a monetary effect? With the cataclysmic shrinking of the market for securitized debt products (not because the banks don't want to make them, but because the buyers don't want to buy them) the growth in effective money supply (even if you believe Milton Friedman) just isn't there. I honestly believe Ben Bernanke is up at night worrying more about deflation than inflation.
The market is not going to rush back. It can't even if we all want it to. The wall of money just isn't there any more. Look at this chart again and you see the future of housing prices, they are basically just going to go back to trend unless someone (private or public) does something to distort their value again. For all the Fox News prophecies of doom every night, the Federal government alone cant do this and the banks have to pay attention to their balance sheets if they can't ship the loan off to someone else.
What does this mean for your home or project? Well it means different things if you own a house in a suburb where everything looks the same, or if you live in a unique property in a great urban or unique community. If you live in the mainstream, your market is dominated by those we have come to call Traditionals. Price is their deity and it will be a long time before they are ready, willing or able to chase prices up. The bruises are still there and will be for years to come. So, while liquidity will return in terms of the number of transactions, prices will be stuck in a pretty narrow range for some time. If you want to sell, you have to be the best deal or it will sit on the market.
If you live or have developed a property in a community that attracts NEOs, who value uniqueness and individuality then there is hope. Research shows us that these people are less orientated around price than other factors, such as design, individualization and sustainability. Price matters but it isn't everything. For a NEO what they own is a representation of who they are; never more so than the home they live in.
Our latest data indicates that 82% of people who plan to buy a home over the next 12 months can be classified as NEO or their lower earning Evolver brethren. If you are in the real estate business, if this data doesn't make you pay attention you are as smart as the foundations of your houses.
Of course, none of this matters though if you continue to promote your product in the manner that only appeals to the Traditionals - by focusing upon features, slick marketing messages and claims of luxury and lifestyle - this just makes it like everything else and so ultimately, all about price. It is only when you understand that there are 59 million markets of one out there AND you learn to talk their language that you can start to move beyond the ugly economics of many and into the far more optimistic economy of one.
NEOblogger
Thursday, July 30, 2009
Even a Dead Cat Bounces!
The latest Case Schiller Index published yesterday shows signs of a bottom in the US Housing market - this is great news. I am more than happy to put my fingers in my ears and cover my eyes so I can't see seasonally adjusted numbers, growing numbers of homes entering foreclosure after the early Obama moratorium expired in May or the still rising unemployment rate, as after over 2 years of falling prices in most U.S. markets, any news is good news.
However the really interesting thing is what happens now?
The numbers will probably be marginally positive for some time thanks to that dead cat. This financial market truism is that when something falls from a great height, once it bottoms it will bounce at least for a while, predominantly because of two reasons. The first is the comparative nature of statistics and our own innate ability to have them say whatever we want, so 27% lower than last year magically transforms into 1.5% higher than last month! In addition, and more importantly, it is a sign of a hangover of outdated rationality. By this I mean that there will always be some people in the world who believe that the economic crisis of the last couple of years is like a black cloud and that once it has passed over the normally sunny skies will resume and everything will go back to where it was before - i.e. nothing has really changed. These people are easy to spot, they are the ones with something to sell that they have been hanging on to for the last few years!
But something big did change this time. The drastic price rises in real estate over the 2002-2007 period have been pretty conclusively been proven to have been caused by radical changes in the availability and cost of credit. Banks were able to make as many loans as they liked, package them up and sell them off to some unwitting investor somewhere else. 50% of U.S. mortgage backed CDO's were sold to overseas investors! Not just sub-prime, but every other category of loan too, including prime loans, which have the fastest growth in the rate of default in the nation right now.
Now along the way we heard a thousand reasons why prices were going up, pretty much all of them now debunked. After all, there are just as many baby boomers today as there were in 2006, but why are all those resort homes in Palm Springs and Naples only worth 40cents on the dollar today?
The thing to understand about the financing market is that it has changed for a long long time to come. We may have been able to sell the treasurers of multiple small towns in Norway and Argentina a package of loans wrapped with a AAA rating and a guarantee from AIG once, but I highly doubt they are going to line up to buy them again. As a result banks are going to be a lot more choosy about who they lend to and how much, as they are going to have to keep a lot more of those loans on the balance sheet themselves. It is now 2001 all over again, why should prices not reflect this.
The biggest engine of real estate price growth this century has gone and until we go through at least another couple of generations of business school grads who decide to ignore history and that this time they really have come up with the ability to eliminate risk through mathematical confusion, this isn't going to come back.
So does this mean its all doom and gloom. That my friend depends on who you are,where you live and what type of property you own. Real estate isn't going away, but the concept of "the market" will have to be re-imagined. People still prefer to own their own place for lots of reasons, but we will see a massive division between Winners and Losers, driven primarily upon the type of real estate and who it appeals to.
More tomorrow.
NEOblogger
However the really interesting thing is what happens now?
The numbers will probably be marginally positive for some time thanks to that dead cat. This financial market truism is that when something falls from a great height, once it bottoms it will bounce at least for a while, predominantly because of two reasons. The first is the comparative nature of statistics and our own innate ability to have them say whatever we want, so 27% lower than last year magically transforms into 1.5% higher than last month! In addition, and more importantly, it is a sign of a hangover of outdated rationality. By this I mean that there will always be some people in the world who believe that the economic crisis of the last couple of years is like a black cloud and that once it has passed over the normally sunny skies will resume and everything will go back to where it was before - i.e. nothing has really changed. These people are easy to spot, they are the ones with something to sell that they have been hanging on to for the last few years!
But something big did change this time. The drastic price rises in real estate over the 2002-2007 period have been pretty conclusively been proven to have been caused by radical changes in the availability and cost of credit. Banks were able to make as many loans as they liked, package them up and sell them off to some unwitting investor somewhere else. 50% of U.S. mortgage backed CDO's were sold to overseas investors! Not just sub-prime, but every other category of loan too, including prime loans, which have the fastest growth in the rate of default in the nation right now.
Now along the way we heard a thousand reasons why prices were going up, pretty much all of them now debunked. After all, there are just as many baby boomers today as there were in 2006, but why are all those resort homes in Palm Springs and Naples only worth 40cents on the dollar today?
The thing to understand about the financing market is that it has changed for a long long time to come. We may have been able to sell the treasurers of multiple small towns in Norway and Argentina a package of loans wrapped with a AAA rating and a guarantee from AIG once, but I highly doubt they are going to line up to buy them again. As a result banks are going to be a lot more choosy about who they lend to and how much, as they are going to have to keep a lot more of those loans on the balance sheet themselves. It is now 2001 all over again, why should prices not reflect this.
The biggest engine of real estate price growth this century has gone and until we go through at least another couple of generations of business school grads who decide to ignore history and that this time they really have come up with the ability to eliminate risk through mathematical confusion, this isn't going to come back.
So does this mean its all doom and gloom. That my friend depends on who you are,where you live and what type of property you own. Real estate isn't going away, but the concept of "the market" will have to be re-imagined. People still prefer to own their own place for lots of reasons, but we will see a massive division between Winners and Losers, driven primarily upon the type of real estate and who it appeals to.
More tomorrow.
NEOblogger
Wednesday, July 22, 2009
Can I hang out with the cool kids?
So Microsoft is planning to open up stores right next door to Apple Stores. Do you remember the kid who was always trying to hang around at school but was completely devoid of personality - that's Microsoft.
It will be interesting to see what these stores are like. If they are like Windows you will be followed around by a security guard constantly asking if you actually wanted to do what you just did! In winter, will you get a virus just by going there? I am reliably informed however that rumors that Bill Gates is going to change his name to Cleve Bobs are wide of the mark.
This forms part of Microsoft's recent obsession with Apple. Their ads try to point out that you can get more features for your money with a PC (classic Traditional marketing). But despite massive marketing spend, their MP3 player (Zune) keeps being handed its ass by the iPod/iPhone juggernaut. Apple sales keep roaring without discounting while PC sales are in the tank and require huge price cuts to get them out the door.
Apple represents the sense of individuality at the core of the NEO typology. When the new economic order emerged as a force in 1991, a new social ‘wave’ began its ascendancy across the globe. It gathered up in its wake all the values and aspirations of NEOs and began shifting society from a traditional or institutional way of life to a decidedly individual focus.
Microsoft isn't going away but it represents a Traditional corporate model of the world that just really does not connect with the higher spending, more economically resilient NEO buyers.
My bet - discount posters in the window of Microsoft stores within 12 months.
It will be interesting to see what these stores are like. If they are like Windows you will be followed around by a security guard constantly asking if you actually wanted to do what you just did! In winter, will you get a virus just by going there? I am reliably informed however that rumors that Bill Gates is going to change his name to Cleve Bobs are wide of the mark.
This forms part of Microsoft's recent obsession with Apple. Their ads try to point out that you can get more features for your money with a PC (classic Traditional marketing). But despite massive marketing spend, their MP3 player (Zune) keeps being handed its ass by the iPod/iPhone juggernaut. Apple sales keep roaring without discounting while PC sales are in the tank and require huge price cuts to get them out the door.
Apple represents the sense of individuality at the core of the NEO typology. When the new economic order emerged as a force in 1991, a new social ‘wave’ began its ascendancy across the globe. It gathered up in its wake all the values and aspirations of NEOs and began shifting society from a traditional or institutional way of life to a decidedly individual focus.
Microsoft isn't going away but it represents a Traditional corporate model of the world that just really does not connect with the higher spending, more economically resilient NEO buyers.
My bet - discount posters in the window of Microsoft stores within 12 months.
Tuesday, July 21, 2009
Starbucks - One step forward, two steps back
Do you remember when Starbucks was cool? I will never forget the time I went into the original location in Pike’s Market in Seattle years ago. I had dodged the guy’s throwing fish over my head and really just stumbled across the place. I say stumbled but it was really the smell that drew me in – they had fresh bags of roasted coffee beans on the floor and the whole place just made you want to hang out (even though there were virtually no chairs back then).
When they came to New York and then London, I made a point of going to there, mostly because of the experience, as I have never really been a huge fan of their coffee. Howard Schulz is a great entrepreneur – I just wanted to see him succeed.
Then they grew and grew and grew some more. They were everywhere. Initially this was good, because they took coffee out of the bodegas and corner stores – it was definitely a step up. But while they grew into every airport, supermarket and even Target, little by little they lost their way. Interestingly they spurned a host of new coffee roasters and espresso bars, some of which are truly authentic and unique, such as Ink Coffee in Denver and JJ Beans in Vancouver. Now almost every urban area has somewhere like this.
Starbucks, although nobody will have ever told them this, lost their way because they abandoned the NEOs and Evolvers upon whom their success was based. It’s a pity because they are a great company, who are highly ethical to their suppliers and achieve an awful lot of good around the globe. However, uniform stores, lousy food, mediocre coffee and just being so damn ubiquitous, led the people who were always happy to pay a premium, off to other stores that just seemed more human. Not completely of course, we all still “grab a Starbucks” when it is convenient, but if you talk to NEOs; nearly all of them will have a great little coffee place they love.
Starbucks is now Traditional. It is the McDonald's of Coffee and is ironically fighting Big Mac for the discount latte market. They are in the process of further screwing it up by launching an instant coffee brand called VIA – it is all starting to look a bit desperate. They are even bribing people with a free pastry to follow them on Twitter! Revenues and same store sales are down – this is not the recession, this is a change in their customer base. They are now stuck competing on price - and that’s a pity for a company that did a lot right, but never really understood the NEO /Traditional world view.
Now they are trying to back up and reconnect with the NEO and Evolver audience by a new concept called “Fifteenth Avenue – Coffee and Tea “Inspired” by Starbucks”, which will have live music in the evenings and sell alcohol. It will be interesting to see how this works, but it is hard journey to re-establish authenticity once it is gone, especially while your Mom is drinking the instant stuff at home!
When they came to New York and then London, I made a point of going to there, mostly because of the experience, as I have never really been a huge fan of their coffee. Howard Schulz is a great entrepreneur – I just wanted to see him succeed.
Then they grew and grew and grew some more. They were everywhere. Initially this was good, because they took coffee out of the bodegas and corner stores – it was definitely a step up. But while they grew into every airport, supermarket and even Target, little by little they lost their way. Interestingly they spurned a host of new coffee roasters and espresso bars, some of which are truly authentic and unique, such as Ink Coffee in Denver and JJ Beans in Vancouver. Now almost every urban area has somewhere like this.
Starbucks, although nobody will have ever told them this, lost their way because they abandoned the NEOs and Evolvers upon whom their success was based. It’s a pity because they are a great company, who are highly ethical to their suppliers and achieve an awful lot of good around the globe. However, uniform stores, lousy food, mediocre coffee and just being so damn ubiquitous, led the people who were always happy to pay a premium, off to other stores that just seemed more human. Not completely of course, we all still “grab a Starbucks” when it is convenient, but if you talk to NEOs; nearly all of them will have a great little coffee place they love.
Starbucks is now Traditional. It is the McDonald's of Coffee and is ironically fighting Big Mac for the discount latte market. They are in the process of further screwing it up by launching an instant coffee brand called VIA – it is all starting to look a bit desperate. They are even bribing people with a free pastry to follow them on Twitter! Revenues and same store sales are down – this is not the recession, this is a change in their customer base. They are now stuck competing on price - and that’s a pity for a company that did a lot right, but never really understood the NEO /Traditional world view.
Now they are trying to back up and reconnect with the NEO and Evolver audience by a new concept called “Fifteenth Avenue – Coffee and Tea “Inspired” by Starbucks”, which will have live music in the evenings and sell alcohol. It will be interesting to see how this works, but it is hard journey to re-establish authenticity once it is gone, especially while your Mom is drinking the instant stuff at home!
Wednesday, July 8, 2009
Perfection
Some things really are so perfect that they can say more with images than a million words. This video from New Zealand Tourism embodies virtually every element of a perfect campaign that will appeal to NEOs. Note that in place of the usual travel standards of relaxation and luxury, it embodies a sense of discovery, simplicity and authenticity - all strong NEO appeals. There are no offers, but you are left wanting to learn more (with a URL to find it from) and a strange desire to jump on the first plane to Auckland!
NEOBLOGGER
NEOBLOGGER
Tuesday, June 23, 2009
Is your business a MINI or a Chevy?
Global auto sales have spiraled downward since last September’s economic reckoning. This is not surprising when you consider that, according to Henry Blodget, in 2007 30% of new car sales in California alone were financed from equity in people’s homes. That’s a pretty troubling statistic for those expecting a rebound in across the board consumer spending any time soon!
However, as ever the apparent “reality” hides stories within it of companies that are able to find buyers who will pay fair prices and allow them to continue to grow a profitable business. A great example is MINI, who expanded its market share in 2008 and is now expanding dealerships; all while thousands of those of their competitors are being closed down.
How can this be? Nobody is buying anything, right?
If you understand the NEO typology this is not only explainable but also highly predictable. Our consumer research shows us that over 60% of MINI owners are NEOs, which is amazing when you consider that they represent only 24% of the population. The majority of the remainder are Evolvers. This is not a Traditional car at all. It is expensive and small – everything that the price and perceived value conscious Traditional (over 50% of the population) hate. They like their cars big and cheap. Unfortunately they aren’t buying many of them now and are unlikely to do so for some time, which will lead to a lot of unsold Chrysler 300s.
MINI has built its success on the driving experience (they are tremendous fun to drive), design (beautiful interpretations of the original Alec Issigonis design) and being a little bit unusual (Union Jack roofs in North America). Both the content and the style of the marketing program to date, with the well-designed urban sales dealerships, directly appeal to the NEO car buyer looking for something different. The ability to personalize the vehicle in a myriad of ways was also a really smart move.
There is a warning though for MINI that should be heeded by anyone hoping to sell to high margin buyers in any industry, including real estate:
Unfortunately the MINI “marketing experts” seem to have decided that pricing is what is necessary to move cars right now. Look at their website today and they lead with a pricing offer. This is a mistake. The website is the first place that the highly research driven NEO will look when exploring their options. It is vital to get the syntax of the offering right upfront, as you can be dismissed as a potential fit with just one click of the mouse.
Do not lead with price unless you have already firmly established why your NEO/Evolver prospect should care. The website is a research tool not a direct sales tool. It should enable the prospects to sell themselves by falling in love with your product so that nothing else becomes an option. Price is then just the cost of that falling in love. By all means have a compelling offer to get someone to buy now, but it needs to be handled in the right order.
Most marketers treat the prospect like a hooker, where price is all that really matters and is negotiated right upfront. This is fine if you are selling to Traditionals, but MINI does not appeal to those consumers, whatever the economy. If you want someone to fall in love with you, then you are going to have to take a little time to show him or her why you are special and the only one for them. Before you close the deal!
There will always be cars that are cheaper than the MINI, (such as the Traditionally marketed Suzuki SX4) just as their will always be cheaper than you in your business. MINI needs to take their marketing “guy/girl” and lock him/her in a closet before they do too much damage. People buy a MINI because they are in love with it, then they want the best price for it. In that order!
Get this wrong and you cease to be able to make your case to be valued differently than everyone else in the market.
After all, who ever ended up marrying the hooker!
NEOBLOGGER
However, as ever the apparent “reality” hides stories within it of companies that are able to find buyers who will pay fair prices and allow them to continue to grow a profitable business. A great example is MINI, who expanded its market share in 2008 and is now expanding dealerships; all while thousands of those of their competitors are being closed down.
How can this be? Nobody is buying anything, right?
If you understand the NEO typology this is not only explainable but also highly predictable. Our consumer research shows us that over 60% of MINI owners are NEOs, which is amazing when you consider that they represent only 24% of the population. The majority of the remainder are Evolvers. This is not a Traditional car at all. It is expensive and small – everything that the price and perceived value conscious Traditional (over 50% of the population) hate. They like their cars big and cheap. Unfortunately they aren’t buying many of them now and are unlikely to do so for some time, which will lead to a lot of unsold Chrysler 300s.
MINI has built its success on the driving experience (they are tremendous fun to drive), design (beautiful interpretations of the original Alec Issigonis design) and being a little bit unusual (Union Jack roofs in North America). Both the content and the style of the marketing program to date, with the well-designed urban sales dealerships, directly appeal to the NEO car buyer looking for something different. The ability to personalize the vehicle in a myriad of ways was also a really smart move.
There is a warning though for MINI that should be heeded by anyone hoping to sell to high margin buyers in any industry, including real estate:
Unfortunately the MINI “marketing experts” seem to have decided that pricing is what is necessary to move cars right now. Look at their website today and they lead with a pricing offer. This is a mistake. The website is the first place that the highly research driven NEO will look when exploring their options. It is vital to get the syntax of the offering right upfront, as you can be dismissed as a potential fit with just one click of the mouse.
Do not lead with price unless you have already firmly established why your NEO/Evolver prospect should care. The website is a research tool not a direct sales tool. It should enable the prospects to sell themselves by falling in love with your product so that nothing else becomes an option. Price is then just the cost of that falling in love. By all means have a compelling offer to get someone to buy now, but it needs to be handled in the right order.
Most marketers treat the prospect like a hooker, where price is all that really matters and is negotiated right upfront. This is fine if you are selling to Traditionals, but MINI does not appeal to those consumers, whatever the economy. If you want someone to fall in love with you, then you are going to have to take a little time to show him or her why you are special and the only one for them. Before you close the deal!
There will always be cars that are cheaper than the MINI, (such as the Traditionally marketed Suzuki SX4) just as their will always be cheaper than you in your business. MINI needs to take their marketing “guy/girl” and lock him/her in a closet before they do too much damage. People buy a MINI because they are in love with it, then they want the best price for it. In that order!
Get this wrong and you cease to be able to make your case to be valued differently than everyone else in the market.
After all, who ever ended up marrying the hooker!
NEOBLOGGER
Thursday, June 18, 2009
So who are Evolvers then?
As mentioned before, the research behind the NEO typology identifies a world split in two. On one side we have the price centric Traditionals and on the other, the more individualistic, discovery orientated NEOs and Evolvers. At this point I normally go on a diatribe about how NEOs are this and that and conclude that if you are remotely interested in having a high margin business that you need to understand and target NEOs. However, as has been pointed out, there is never really much discussion about Evolvers.
This is true. So far the objective of this blog has been to contrast the concept of the Traditional, which most clearly understand, with the NEO as identified by Ross Honeywill’s analysis of the actual spending habits of over 800,000 consumers. A good question is then; how do Evolvers, who represent nearly a quarter of the population, fit into this?
The answer is partially in the name. Evolvers is actually short for “Evolving NEOs”, which implies they have all of the same characteristics as NEOs, just with less spending power. This is especially the case if your purchase price is relatively low.
An example is Larkburger, the outstanding Colorado hamburger company that makes delicious sandwiches, truffle and Parmesan fries, as well as the $5 Shake that are a huge hit with the mini-Neobloggers. The stores are as environmentally friendly as you can imagine and absolutely everything is recycled or compostable. Of course prices are significantly higher than the mainstream burger chains, but those who care about quality over price are clearly happy to pay the difference.
In this instance the difference between NEOs and Evolvers is essentially meaningless. Even though the price of the product is two to three times that of a mainstream alternative, in absolute terms it is only a few bucks. However as we rise up the price scale the distinction between the two groups becomes more vital.
Although Evolvers have many of the same instincts as NEOs, they are significantly more constrained by their wealth and income. If they had more money they would be NEOs in a heartbeat, they just can’t always make the jump. This does not mean however that they are not great potential customers if you understand them. No company does this better than Mazda. In fact the Mazda 3 is almost the official car of Evolvers! Allied with the Zoom-Zoom identity you get a car with great design, sporty characteristics and plenty of individuality at a great price. Interestingly though, they are consistently able to sell at a premium to the equivalent domestic models, that require big discounts to get them off the lot.
This is the crux of the Evolver typology. They want great design, personality and authenticity and they are often willing to pay for it. But reality bites and their ability to pay more can often take them out of the game. Get the balance right though and you will have a willing audience.
This is particularly obvious in the real estate development field. One of the most Evolver friendly types of projects are the mixed use “Lifestyle Centers”, combining condos, outdoor shopping and entertainment. These should be Evolver nirvana. Time and again developers get themselves in to trouble with the residential part of these concepts, basically because they don’t understand the Evolver typology. The homes either go to upscale, pricing the Evolvers out (but not appealing to NEOs), or to mainstream, by trying to appeal to everyone (and hence no-one). This latter approach usually means the designs are compromised and the homes are to large, making the price points to high for the Evolvers’ economic realities, taking out their best market.
This is what happens when you define you market on redundant segmentations based upon age, such as “Baby Boomers”, “Empty Nesters”, etc. It is attitude and behavior that are more important in determining who will actually buy.
Ironically what often ends up happening is that many of the homes get turned in to rentals, ironically leased out at affordable levels to the very Evolvers who they should have been built for and marketed to in the first place.
Don’t believe me? Go into the parking and count the Mazda 3’s!
NEOBLOGGER
This is true. So far the objective of this blog has been to contrast the concept of the Traditional, which most clearly understand, with the NEO as identified by Ross Honeywill’s analysis of the actual spending habits of over 800,000 consumers. A good question is then; how do Evolvers, who represent nearly a quarter of the population, fit into this?
The answer is partially in the name. Evolvers is actually short for “Evolving NEOs”, which implies they have all of the same characteristics as NEOs, just with less spending power. This is especially the case if your purchase price is relatively low.
An example is Larkburger, the outstanding Colorado hamburger company that makes delicious sandwiches, truffle and Parmesan fries, as well as the $5 Shake that are a huge hit with the mini-Neobloggers. The stores are as environmentally friendly as you can imagine and absolutely everything is recycled or compostable. Of course prices are significantly higher than the mainstream burger chains, but those who care about quality over price are clearly happy to pay the difference.
In this instance the difference between NEOs and Evolvers is essentially meaningless. Even though the price of the product is two to three times that of a mainstream alternative, in absolute terms it is only a few bucks. However as we rise up the price scale the distinction between the two groups becomes more vital.
Although Evolvers have many of the same instincts as NEOs, they are significantly more constrained by their wealth and income. If they had more money they would be NEOs in a heartbeat, they just can’t always make the jump. This does not mean however that they are not great potential customers if you understand them. No company does this better than Mazda. In fact the Mazda 3 is almost the official car of Evolvers! Allied with the Zoom-Zoom identity you get a car with great design, sporty characteristics and plenty of individuality at a great price. Interestingly though, they are consistently able to sell at a premium to the equivalent domestic models, that require big discounts to get them off the lot.
This is the crux of the Evolver typology. They want great design, personality and authenticity and they are often willing to pay for it. But reality bites and their ability to pay more can often take them out of the game. Get the balance right though and you will have a willing audience.
This is particularly obvious in the real estate development field. One of the most Evolver friendly types of projects are the mixed use “Lifestyle Centers”, combining condos, outdoor shopping and entertainment. These should be Evolver nirvana. Time and again developers get themselves in to trouble with the residential part of these concepts, basically because they don’t understand the Evolver typology. The homes either go to upscale, pricing the Evolvers out (but not appealing to NEOs), or to mainstream, by trying to appeal to everyone (and hence no-one). This latter approach usually means the designs are compromised and the homes are to large, making the price points to high for the Evolvers’ economic realities, taking out their best market.
This is what happens when you define you market on redundant segmentations based upon age, such as “Baby Boomers”, “Empty Nesters”, etc. It is attitude and behavior that are more important in determining who will actually buy.
Ironically what often ends up happening is that many of the homes get turned in to rentals, ironically leased out at affordable levels to the very Evolvers who they should have been built for and marketed to in the first place.
Don’t believe me? Go into the parking and count the Mazda 3’s!
NEOBLOGGER
Monday, June 15, 2009
A little more on Pricing
One concept that can help understand different types of consumers is Substitutability. Appreciating how NEO and Traditionals make buying decisions is in large part down to this simple concept, of how one thing can be replaced by another.
Traditionals tend to have high product substitutability. This means that they will readily move from one product to another, usually based upon price. This makes them highly susceptible to offer-based marketing, primarily around price, that dominates most campaigns and sales promotions. Traditionals will move from Budweiser to Coors, Ford to Hyundai, and even one home to another, if they can get a better deal. They tend to focus less on the product than the offer. Marketing to this group is not really complex; just have a better offer than the next guy and focus upon price, incentives, features, etc. It's not rocket science but your margins will be squeezed by everyone.
NEOs however often have much lower product substitutability - if they have found a something that really connects with them. For a NEO, price is just the cost of falling in love. Once they have found something that is right for them they will still want to pay the best price they can get for it, but they are very unlikely to be tempted away by a lower price for something else.
They tend to research their options in greater detail, usually on the web, as it gives them control long before they engage with the seller. They will usually look for something that is exactly right for them and not just like everything else. Design, personality and the environmental impact are just some of the things they typically consider.
This is why it is so vital to not only have a product or service that is authentic, but also to tell the whole story in a way that people can relate to. Unless you give the NEO the information they are looking for then they are never going to be able to completely understand your product. You are denying them that opportunity to fall in love. Similarly, leading your campaign with price will have the NEO feeling "Why would I care what the offer is, I haven't even decided it's for me yet!"
Marketing to NEOs is a lot about letting go. Not just of tired old marketing practices, but also control. The marketer and sales person need to understand that when working with someone from the “59 million markets of one”, it is not what you think is interesting or important that matters. It is the NEO prospect's that count and they are as different from one another as you could imagine.
Tell the truth, honestly and openly. You will be for more attractive for doing so.
Traditionals tend to have high product substitutability. This means that they will readily move from one product to another, usually based upon price. This makes them highly susceptible to offer-based marketing, primarily around price, that dominates most campaigns and sales promotions. Traditionals will move from Budweiser to Coors, Ford to Hyundai, and even one home to another, if they can get a better deal. They tend to focus less on the product than the offer. Marketing to this group is not really complex; just have a better offer than the next guy and focus upon price, incentives, features, etc. It's not rocket science but your margins will be squeezed by everyone.
NEOs however often have much lower product substitutability - if they have found a something that really connects with them. For a NEO, price is just the cost of falling in love. Once they have found something that is right for them they will still want to pay the best price they can get for it, but they are very unlikely to be tempted away by a lower price for something else.
They tend to research their options in greater detail, usually on the web, as it gives them control long before they engage with the seller. They will usually look for something that is exactly right for them and not just like everything else. Design, personality and the environmental impact are just some of the things they typically consider.
This is why it is so vital to not only have a product or service that is authentic, but also to tell the whole story in a way that people can relate to. Unless you give the NEO the information they are looking for then they are never going to be able to completely understand your product. You are denying them that opportunity to fall in love. Similarly, leading your campaign with price will have the NEO feeling "Why would I care what the offer is, I haven't even decided it's for me yet!"
Marketing to NEOs is a lot about letting go. Not just of tired old marketing practices, but also control. The marketer and sales person need to understand that when working with someone from the “59 million markets of one”, it is not what you think is interesting or important that matters. It is the NEO prospect's that count and they are as different from one another as you could imagine.
Tell the truth, honestly and openly. You will be for more attractive for doing so.
Wednesday, June 10, 2009
A word about Pricing
One of the things that often confuses people about this whole subject is pricing. People who are as Traditional as Mcdonald’s Apple Pie start to think they might be a NEO because they bought something pricey. Whereas someone else, who is as NEO as the Organic Apple Crumble at The Kitchen in Boulder, Colorado start to confuse themselves, just because they switched cable providers to save $30 a month.
Let’s try and clear this up. Traditionals spend money, lots of it. And NEOs often shop on price. In fact, (and this is really important) when price is the only differentiator, NEOs behave exactly like Traditionals.
Confused? Don’t be.
Consider telephone service. Does it really matter if you get it from the cable company or the local Telco? Not really. They are both huge corporate behemoths that are almost entirely indistinguishable. The product is basically the same – I pick it up, dial a number, talk, put it down – not much differentiation there! As a result, the only relevant factor between the services is price, so it is entirely logical that whoever offers the best price / bundle / deal is the one that both NEO and Traditional alike would chose.
This is the crux for marketers and entrepreneurs in all sorts of industries. If you are trying to sell something that is basically exactly the same as the next guy’s product or service (from the consumer standpoint not your VP of Engineering’s) then you must be the lowest price provider if you want to win. No list of features or inane lifestyle marketing imagery is going to save you (Sorry 99% of all real estate developers!)
I love Mark Wattles', the CEO of Ultimate Electronics angle on this. Their corporate tag line is “if you buy it somewhere else, you will pay to much.” Brilliant. This is price orientated Traditional marketing at its best. Lowest price, no effort. Of course it means they have very low margins and need to move a lot of inventory to make money, but that’s exactly who they are. Wal-Mart
I am in no way ever going to criticize people like the Wal-Mart or Mark Wattles and not only because they have great lawyers. These guys are rock stars, in that they have tapped into the psyche of the Traditional consumer and the undifferentiated NEO and Evolver and completely nailed it. They deserve their success.
However if your business goals aren’t defined in the millions of units, this poses a major problem. Almost every industry has a low price competitor. If you cannot meaningfully distinguish why you should be valued in a different way is obviously the king of this. No product differentiation, authenticity, design, provenance, or anything else to connect with on a personal level - just the lowest price. Guaranteed. AND understand how to connect with people who will pay the difference, then you are in a trap. Stuck in the middle between the price is everything crowd and totally missing the unique discovery higher margin group. This is not a good place to be.
After all, nobody ever got rich with a marketing plan that ran “Buy anywhere else and you will pay a little bit less than we charge.” Ask Circuit City!
NEOBLOGGER
Let’s try and clear this up. Traditionals spend money, lots of it. And NEOs often shop on price. In fact, (and this is really important) when price is the only differentiator, NEOs behave exactly like Traditionals.
Confused? Don’t be.
Consider telephone service. Does it really matter if you get it from the cable company or the local Telco? Not really. They are both huge corporate behemoths that are almost entirely indistinguishable. The product is basically the same – I pick it up, dial a number, talk, put it down – not much differentiation there! As a result, the only relevant factor between the services is price, so it is entirely logical that whoever offers the best price / bundle / deal is the one that both NEO and Traditional alike would chose.
This is the crux for marketers and entrepreneurs in all sorts of industries. If you are trying to sell something that is basically exactly the same as the next guy’s product or service (from the consumer standpoint not your VP of Engineering’s) then you must be the lowest price provider if you want to win. No list of features or inane lifestyle marketing imagery is going to save you (Sorry 99% of all real estate developers!)
I love Mark Wattles', the CEO of Ultimate Electronics angle on this. Their corporate tag line is “if you buy it somewhere else, you will pay to much.” Brilliant. This is price orientated Traditional marketing at its best. Lowest price, no effort. Of course it means they have very low margins and need to move a lot of inventory to make money, but that’s exactly who they are. Wal-Mart
I am in no way ever going to criticize people like the Wal-Mart or Mark Wattles and not only because they have great lawyers. These guys are rock stars, in that they have tapped into the psyche of the Traditional consumer and the undifferentiated NEO and Evolver and completely nailed it. They deserve their success.
However if your business goals aren’t defined in the millions of units, this poses a major problem. Almost every industry has a low price competitor. If you cannot meaningfully distinguish why you should be valued in a different way is obviously the king of this. No product differentiation, authenticity, design, provenance, or anything else to connect with on a personal level - just the lowest price. Guaranteed. AND understand how to connect with people who will pay the difference, then you are in a trap. Stuck in the middle between the price is everything crowd and totally missing the unique discovery higher margin group. This is not a good place to be.
After all, nobody ever got rich with a marketing plan that ran “Buy anywhere else and you will pay a little bit less than we charge.” Ask Circuit City!
NEOBLOGGER
Monday, June 8, 2009
Consumers AREN”T Changing!!!!!
If you consume any sort of media you probably have heard something along the lines that “Consumers are reacting to economic hardships by doing this or that…” Generally they take the line that conspicuous consumption is now out and those with money are now spending it in far more low-key ways. Look at this article from Australia’s Sydney Morning Herald titled “Luxury and Wealth Head Underground”
Without wishing to shout: THIS IS WRONG, WRONG AND BEYOND THAT…. ENTIRELY WRONG!!!
Consumers aren’t changing. However the make up of the market has. If you are smart you are going to want to adjust to this quickly as it will very probably be the line between success and failure over the coming years.
The research behind the Fingerprint Strategy clearly paints the picture of a world of consumers split in two:
On one side you have the Traditionals – price driven and brand orientated. When times are good they follow the herd and spend freely (especially if they get a deal) on homes in the suburbs, consumer electronics, cars and an array of high status “branded” products. However they react to economic stress by putting the wallet away, battening down the hatches and only making discretionary purchases if they get such an incredible deal (with a money back guarantee) that they just can’t stop themselves. Worse still, they stay in this mode for a long, long time - until it is clear that it is safe to come out. If you want to sell to these guys in the next 3 years, you have to give them the lowest price, then lower it and even then give them some way of reducing the risk of doing nothing.
On the other side of the equation we have the NEOs and their kindred spirits the Evolvers (who act and think like NEOs in almost every way but just don’t have the same income and purchasing power). These people are always on the lookout for products and services that connect with them on a personal level. This could be through design (iPhones), provenance (local artisan foods), or a whole range of other ways that create individualized personal solutions to daily life. Price is a factor for the NEO, but only one of many.
When economic stress hits, the NEO consumer has a very different reaction. Many see it is an opportunity. They remain entirely NEO, continuing to look for products and people that make their lives richer, easier and more authentic, especially if it involves jettisoning the mundane tasks of life. They may switch consumption patterns a little; such as forgoing the three $10 bottles of Red Truck they may have been buying each week. However in its place is likely to be the $35 bottle of 2005 Whitehall Lane Cabernet that scored 94 points on winespecatator.com. In the recession of the early part of this decade (yes we had one!) a Goldman Sachs’ study showed increase sales of premium wines while overall wine sales went down significantly. This is the NEO consumer at work and the same will be happening now.
What is occurring in the economy is far more complex than most commentators understand. Apple posts record revenue and profits while Dell, who are cheaper at every price point, sees sales crumble. Audi sales remain relatively strong (up 11.9% for 2008 in Canada) while GM and Chrysler slip into bankruptcy. Chipotle Restaurants have 5.8% growth in comparable restaurant sales, while Bennigans stores are shuttered. This subtlety gets explained (or ignored) as an anomaly but there are hundreds of similar examples of companies that appeal to NEO and Evolver consumers that are able to keep growing, making sales and flourish, while the Traditional mainstream withers.
This is the new consumer reality. Consumers haven’t changed one little bit. They are behaving exactly as we knew they would. All that has happened is that the Traditionals have pulled back, saving money, looking for deals as they always do when times are rough (and these are some of the roughest we have seen). The people you see now, who are out there buying unique, authentic goods and services; they haven’t changed one iota either. It’s just now that the masses have cleared out of the way and you can really see them. Get used to it, they are where the opportunity lies.
NEOs – learn them or lose them.
NEOBLOGGER
Without wishing to shout: THIS IS WRONG, WRONG AND BEYOND THAT…. ENTIRELY WRONG!!!
Consumers aren’t changing. However the make up of the market has. If you are smart you are going to want to adjust to this quickly as it will very probably be the line between success and failure over the coming years.
The research behind the Fingerprint Strategy clearly paints the picture of a world of consumers split in two:
On one side you have the Traditionals – price driven and brand orientated. When times are good they follow the herd and spend freely (especially if they get a deal) on homes in the suburbs, consumer electronics, cars and an array of high status “branded” products. However they react to economic stress by putting the wallet away, battening down the hatches and only making discretionary purchases if they get such an incredible deal (with a money back guarantee) that they just can’t stop themselves. Worse still, they stay in this mode for a long, long time - until it is clear that it is safe to come out. If you want to sell to these guys in the next 3 years, you have to give them the lowest price, then lower it and even then give them some way of reducing the risk of doing nothing.
On the other side of the equation we have the NEOs and their kindred spirits the Evolvers (who act and think like NEOs in almost every way but just don’t have the same income and purchasing power). These people are always on the lookout for products and services that connect with them on a personal level. This could be through design (iPhones), provenance (local artisan foods), or a whole range of other ways that create individualized personal solutions to daily life. Price is a factor for the NEO, but only one of many.
When economic stress hits, the NEO consumer has a very different reaction. Many see it is an opportunity. They remain entirely NEO, continuing to look for products and people that make their lives richer, easier and more authentic, especially if it involves jettisoning the mundane tasks of life. They may switch consumption patterns a little; such as forgoing the three $10 bottles of Red Truck they may have been buying each week. However in its place is likely to be the $35 bottle of 2005 Whitehall Lane Cabernet that scored 94 points on winespecatator.com. In the recession of the early part of this decade (yes we had one!) a Goldman Sachs’ study showed increase sales of premium wines while overall wine sales went down significantly. This is the NEO consumer at work and the same will be happening now.
What is occurring in the economy is far more complex than most commentators understand. Apple posts record revenue and profits while Dell, who are cheaper at every price point, sees sales crumble. Audi sales remain relatively strong (up 11.9% for 2008 in Canada) while GM and Chrysler slip into bankruptcy. Chipotle Restaurants have 5.8% growth in comparable restaurant sales, while Bennigans stores are shuttered. This subtlety gets explained (or ignored) as an anomaly but there are hundreds of similar examples of companies that appeal to NEO and Evolver consumers that are able to keep growing, making sales and flourish, while the Traditional mainstream withers.
This is the new consumer reality. Consumers haven’t changed one little bit. They are behaving exactly as we knew they would. All that has happened is that the Traditionals have pulled back, saving money, looking for deals as they always do when times are rough (and these are some of the roughest we have seen). The people you see now, who are out there buying unique, authentic goods and services; they haven’t changed one iota either. It’s just now that the masses have cleared out of the way and you can really see them. Get used to it, they are where the opportunity lies.
NEOs – learn them or lose them.
NEOBLOGGER
Thursday, June 4, 2009
A fast track intro to the world of NEOs
Part of the purpose of this blog is to start to introduce you to who and what NEOs are and the impact they are having on our society. This does not come from a “theory of the week”, but rather one of the most vigorous consumer behavior studies ever undertaken. It identifies how different types of people actually behave in terms of their spending and attitudes. It sits above all of the existing social segmentation concepts, based upon age, income, location, education or career choice.
The best way for you to start the process of educating yourself is to go to the source of the research itself, Ross Honeywill’s Social Intelligence Lab: http://www.socialintelligencelab.com/consumer-insights.html
Read this site and you will start to see that there is a world split in two. And it really is split, as the NEO world-view is radically different than that of the mainstream (known as “Traditionals”). NEOs do not process information, shop, work, vote or learn the same way as Traditionals do (most of the time). The gap between the two groups, particularly with the ever-greater importance of the web to change the way we live, is getting bigger every day. For anyone in the business of trying to influence the opinions of others, whether it is for commercial, political or any other purpose, this could be some of the most important information you will ever learn.
I am a NEO and it is often difficult to talk about the differences between the NEO view than the Traditional one without seeming patronizing to the more staid view of Traditionals. This is not my intention but I know I am going to do it so let’s just deal with it shall we. It’s not that Traditionals are some small minority that needs protection; they are the majority of the population! They have dominated our society for decades and still have massive influence.
The rise in influence and commercial importance of the individualistic NEO is increasing every day. Ever more so as the world needs the self confident, independent minded people to help it to recover from one of the biggest economic shocks in our lifetimes. While Traditionals typically retreat from the market, NEOs are currently scoring 20 points higher in measures of consumer confidence. And evidence from previous economic challenges shows that NEOs resume their spending significantly earlier in the economic cycle than their Traditional cousins. If you are hoping to make money anytime soon, you need to understand these people.
Also, you don’t need me to tell you about the Traditional view of the world – you can see it in every part of the media when they are talking about “consumers are doing this or that”. Apparently we all make decision based only on price, brand or prestige – but I don’t and know I know at least 59 million other people in America don’t either. Traditional marketing is dominant in many industries, whether it is the “price is everything” local car dealer, or the ubiquitous and increasingly ineffective “lifestyle” imagery of real estate or travel.
The NEO world is relatively simple to understand, especially if you are a NEO yourself. If you are a Traditional it may well seem like a load of bollocks. That’s fine. Be aware that most NEOs have been convinced you were full of it for the last thirty years to! The important thing to understand is that there are two sides to this discussion, with virtually no middle ground.
I don’t want to become an Evangelist about this and am certainly not trying to change anyone. We are born one way or another, with virtually no chance of moving from one side to another. There is evidence that it is tied to naturally occurring levels of serotonin and certain other hormones. That may or may not be the case, but having spent most of my life feeling like an alien in my own (Traditional) family and my business career trying to learn how to have my head overrule my heart, it is actually quite liberating to know I am not “weird” - just more economically significant!
NEOs are individuals and want to be treated as such. The whole corporatization thing that really took prominence in the 80’s and 90’s was complete anathema to them. There are 59 million NEOs in the USA alone and every single one of them acts as a market of one. This is the first and most important thing to understand. Treat a NEO like they are part of a group or demographic and you’ve lost them.
This requires a pretty significant rewrite of the “rules of the game” for communication specialist, business people and entrepreneurs. To some it will be alien; my guess is that to about a quarter of you, it will seem like coming home!
NEO BLOGGER
The best way for you to start the process of educating yourself is to go to the source of the research itself, Ross Honeywill’s Social Intelligence Lab: http://www.socialintelligencelab.com/consumer-insights.html
Read this site and you will start to see that there is a world split in two. And it really is split, as the NEO world-view is radically different than that of the mainstream (known as “Traditionals”). NEOs do not process information, shop, work, vote or learn the same way as Traditionals do (most of the time). The gap between the two groups, particularly with the ever-greater importance of the web to change the way we live, is getting bigger every day. For anyone in the business of trying to influence the opinions of others, whether it is for commercial, political or any other purpose, this could be some of the most important information you will ever learn.
I am a NEO and it is often difficult to talk about the differences between the NEO view than the Traditional one without seeming patronizing to the more staid view of Traditionals. This is not my intention but I know I am going to do it so let’s just deal with it shall we. It’s not that Traditionals are some small minority that needs protection; they are the majority of the population! They have dominated our society for decades and still have massive influence.
The rise in influence and commercial importance of the individualistic NEO is increasing every day. Ever more so as the world needs the self confident, independent minded people to help it to recover from one of the biggest economic shocks in our lifetimes. While Traditionals typically retreat from the market, NEOs are currently scoring 20 points higher in measures of consumer confidence. And evidence from previous economic challenges shows that NEOs resume their spending significantly earlier in the economic cycle than their Traditional cousins. If you are hoping to make money anytime soon, you need to understand these people.
Also, you don’t need me to tell you about the Traditional view of the world – you can see it in every part of the media when they are talking about “consumers are doing this or that”. Apparently we all make decision based only on price, brand or prestige – but I don’t and know I know at least 59 million other people in America don’t either. Traditional marketing is dominant in many industries, whether it is the “price is everything” local car dealer, or the ubiquitous and increasingly ineffective “lifestyle” imagery of real estate or travel.
The NEO world is relatively simple to understand, especially if you are a NEO yourself. If you are a Traditional it may well seem like a load of bollocks. That’s fine. Be aware that most NEOs have been convinced you were full of it for the last thirty years to! The important thing to understand is that there are two sides to this discussion, with virtually no middle ground.
I don’t want to become an Evangelist about this and am certainly not trying to change anyone. We are born one way or another, with virtually no chance of moving from one side to another. There is evidence that it is tied to naturally occurring levels of serotonin and certain other hormones. That may or may not be the case, but having spent most of my life feeling like an alien in my own (Traditional) family and my business career trying to learn how to have my head overrule my heart, it is actually quite liberating to know I am not “weird” - just more economically significant!
NEOs are individuals and want to be treated as such. The whole corporatization thing that really took prominence in the 80’s and 90’s was complete anathema to them. There are 59 million NEOs in the USA alone and every single one of them acts as a market of one. This is the first and most important thing to understand. Treat a NEO like they are part of a group or demographic and you’ve lost them.
This requires a pretty significant rewrite of the “rules of the game” for communication specialist, business people and entrepreneurs. To some it will be alien; my guess is that to about a quarter of you, it will seem like coming home!
NEO BLOGGER
Monday, June 1, 2009
Enquiring minds wanted!
The purpose of this blog is to challenge you to think about how you see the world and what is causing the things you read about every day. I am going to be unashamedly biased, as I want you to stop seeing the world in “on average.” To an enquiring mind the average information usually tells you absolutely nothing. If I am 220 lbs. and you are 180, on average we are 200.lbs – That doesn’t make me any slimmer!
In addition I want to help you see what is really going on in the world around you. Rarely is it any of the “new trends” that the media love to focus upon. Hopefully you know that if two friends of a journalist buy a packet of Marlboro Lights, it is less than 48 hours before this is identified as “people taking up smoking to deal with stress” story hits the headlines. Its not true, it isn’t backed up by any proof, it is just the flotsam and jetsam that passes for social commentary in a lot of our media and instantly forgotten when those same two friends join 24 hour Fitness the following week!
My goal is to give you a perspective upon what the world looks like when you aren’t looking at the average numbers, when you start to look for nuances so you can see things in a different light. Having spent the best part of the year understanding the research that Ross Honeywill of the Social Intelligence Lab in Australia has put together I have to tell you I have changed. It’s not just that I feel more educated, I actually feel vindicated. That the way I have always had a gut feeling about the world has suddenly been scientifically proven. I intend in this blog to shine a light on the impact of NEOs on all elements of society. We will look at business, politics, current events, finance, sport and anything else that comes up. I intend to give you a slant on things as if every one of us doesn’t think, act and do exactly the same.
I’m not average, you probably aren’t either!
The group that we have identified as NEOs is not just those with the highest propensity to spend money and are motivated by a whole lot more than most media and marketers understand. They are also more than just the people that will dominate the real estate market for the next 5 years. Significantly, they are politically and socially active, from every generation and are ever more important in society. They are leading the changes in every area of our life and hardly anyone recognizes it. Keep reading this blog and you will.
It doesn’t matter when you were born, that tells us nothing about you other than your age, everything beyond that is an assumption based upon labels others have created. Think about it for a second. Do all baby boomers play golf, complain about health care and want to sell their house and move into a condo? Plenty do, millions don’t. Are all 20 year olds the same – of course not! Some of them are having the asses shot at in the Army while others are snowboarding and drinking their body weight in beer every night – what really does age have to do with it?
We are interested in what you do and why you do it!
So if you are interested in seeing the world through a completely new filter then I encourage you to click on your bookmarks and add this blog. If you don’t know how to do this I think we can safely assume you are not a NEO!
I will do my part and keep it updated with thought provoking posts. All you have to do is come back and read it (and tell everyone else you know to do so as well!).
Come back soon and we will start exploring how 24% of the population is flying under the radar and influencing everything.
NEO Blogger
In addition I want to help you see what is really going on in the world around you. Rarely is it any of the “new trends” that the media love to focus upon. Hopefully you know that if two friends of a journalist buy a packet of Marlboro Lights, it is less than 48 hours before this is identified as “people taking up smoking to deal with stress” story hits the headlines. Its not true, it isn’t backed up by any proof, it is just the flotsam and jetsam that passes for social commentary in a lot of our media and instantly forgotten when those same two friends join 24 hour Fitness the following week!
My goal is to give you a perspective upon what the world looks like when you aren’t looking at the average numbers, when you start to look for nuances so you can see things in a different light. Having spent the best part of the year understanding the research that Ross Honeywill of the Social Intelligence Lab in Australia has put together I have to tell you I have changed. It’s not just that I feel more educated, I actually feel vindicated. That the way I have always had a gut feeling about the world has suddenly been scientifically proven. I intend in this blog to shine a light on the impact of NEOs on all elements of society. We will look at business, politics, current events, finance, sport and anything else that comes up. I intend to give you a slant on things as if every one of us doesn’t think, act and do exactly the same.
I’m not average, you probably aren’t either!
The group that we have identified as NEOs is not just those with the highest propensity to spend money and are motivated by a whole lot more than most media and marketers understand. They are also more than just the people that will dominate the real estate market for the next 5 years. Significantly, they are politically and socially active, from every generation and are ever more important in society. They are leading the changes in every area of our life and hardly anyone recognizes it. Keep reading this blog and you will.
It doesn’t matter when you were born, that tells us nothing about you other than your age, everything beyond that is an assumption based upon labels others have created. Think about it for a second. Do all baby boomers play golf, complain about health care and want to sell their house and move into a condo? Plenty do, millions don’t. Are all 20 year olds the same – of course not! Some of them are having the asses shot at in the Army while others are snowboarding and drinking their body weight in beer every night – what really does age have to do with it?
We are interested in what you do and why you do it!
So if you are interested in seeing the world through a completely new filter then I encourage you to click on your bookmarks and add this blog. If you don’t know how to do this I think we can safely assume you are not a NEO!
I will do my part and keep it updated with thought provoking posts. All you have to do is come back and read it (and tell everyone else you know to do so as well!).
Come back soon and we will start exploring how 24% of the population is flying under the radar and influencing everything.
NEO Blogger
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