September 2013 TRENDS UPDATE Prepared for: AAI ADVERTISING SEMINAR Prepared by:

B&A CONTACTS: Neil Douglas (neil@banda.e) Behaviour & Attitudes, Milltown House Mount St Annes Milltown Dublin 6 Telephone: 01 - 2057500 www.banda.ie J.4885

What motivates people in Ireland? What makes them tick? What are their hopes and fears? How can we get their attention at a time when they are distracted by the impact of the Recession on the one hand and by the rapid increase in access to new communication channels on the other? This paper presents topline insights based on new research and suggests some of the ways we might proceed.

This is the big elephant in the room, we must begin with a look at the Recession. In the past 5 years people in Ireland have been hit hard. Incomes have reduced, taxes have increased, there is next to no job security. …..Some households club together to cover their bin collection charges. …..Some have cancelled their family medical insurance, despite fears about waiting lists. ……Some light a real fire instead of the central heating to save a bit of cash..

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20% now think of Aldi or Lidl as their main supermarket.

There has also been a profound shift in confidence. People are holding back – as David McWilliams suggested it is as much an ‘Anxiety recession’ as an economic one.

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Use at allMain Shop

Tesco

Dunnes

SuperValu

Any symbol group

Superquinn

Other

Lidl

Aldi

Any Aldi/Lidl Nov 12Nov 10

Shopping changed….

Source: B & A Barometer

4

Confidenceknocked

Nearly half do not book any

holiday

2 thirds go out less often

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Big spending and luxuries are the target of behaviour change for most households. Socialising and holidays have been hit too. But it is the grinding difficulty of making ends meet for 63% of the population that highlights the problems so many are facing.

……But we need to look at this state of anxiety a bit more closely to understand recent trends and motivations… People want a break from the doom and gloom.

Recession impacts….

Source: B & A Barometer

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Seeking release

Something new

Escape doom and gloom

Quality not status

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They search out new experiences, they are drawn to quality brands not just bargains and discounts. This is not quality for status or for show. This is quality as a guarantee of value. ‘I may not buy new as often as I used to, but when I do I want quality that will last.’

Innovative and distinctive experiences resonate. People respond to brands that entertain and engage their senses. We see this in reactions to new advertising where a simple discount message is not enough to convince.

They want brands to exude confidence, to draw them in and tell a unique story.

In the on trade where there has been a cataclysmic decline in drinking in pubs and clubs, we find some venues doing extremely well.

These are venues that present something special.

We may not go out as frequently as we once did, but when we do we want a distinctive experience.

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Something special

Brand confidenceEntertainment

Innovation

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Around the country the most successful venues present something unique.

Craft beers and whiskeys in Against the Grain in Galway.

An exclusive range of beers at Porterhouse in Bray.

Cool music and hip layout with the Big Blue Bus at the Bernard Shaw in Dublin.

A large selection of wines by the glass from vending machines in an old chemists shop in Cork (Arthur Maynes).

Upscale tapas and cocktails in Fade Street.

Consummate attention to detail with treacle tins for sugar and the perfect cappuccino in 37 Dawson Street.

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Trends: Quality and distinctive experiences are liked

Unique spaces

Attention to detail

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Although somewhat ‘counter culture’ many are now driven to find better quality

...To ensure a limited budget is not wasted

….And the product lasts longer

A quality platform has relevance, particularly when it is paired with improved value or the assurance of lower risk for the buyer.

In the latest figures we are seeing signs that the almost universal downward trends are bottoming out.

There is a tentative uplift, and cautious improvements. Is the anxiety beginning to ease?

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Green shoots?

Anxiety easing

Tentative uplift

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Qualityconfidence

Lasts longer

Less risk

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From a variety of sources we can see that things are picking up. Albeit from a low base and only in comparison with recent declines.

But nonetheless there are positive indicators. The media tend to focus on the hordes leaving the country, but actually the population is in growth and retail sales are up.

Punishing budgets slap into the market each winter. We see the impact on consumer confidence as is falters and dips back (just in time for Christmas each year). But there is growing awareness that the end is in sight. To date 85% of austerity measures have been implemented.

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Population Discretionary Income Retail Sales(INCLUDES MOTOR)

Motor Sales Property Prices (year to date)

20% on July 2013

1.2% Nationally

Source: CSO

Source: SIMI

10% on June

2013

6.1% on June

2013

7.7% despite net migration (c. 33,000)

1.7% Dublin

Source: CSO

0.5%

Employment

Unemployment

2012 Average = 14.7%2013 to date = 13.7%

(currently 13.5%)

Positive movements….

Source: B & A Barometer Source: CSO

Source: CSO

Or just a blip?Early indicators

Austerity nearly done….

Source: IBEC

Adjustments in public finances to date % GDP

July 2008-April 2009 €10.5 bn

Budget 2010 €4.3 bn 2.8

Budget 2011 €6.0 bn 3.8

Budget 2012 €3.8 bn 2.4

Budget 2013 €3.5 bn 2.1

Total to date €28.1 bn

Adjustments planned

Budget 2014 €3.1 bn 1.8

Budget 2015 €2.0 bn 1.1

Total planned €8.6 bn

TOTAL 2008-2015 €33.2 bn

85% austerity measures complete

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Ireland has regained some kudos internationally….perhaps People in Ireland have had it tough, and it seems austerity is nearly over….perhaps.

Various measures show that while things have not returned to the good old days the decline is slowing. The Health Insurance market has contracted by more than a quarter in 3 years. However this decline appears to have moderated significantly in 2013. There has been a reversal of the increase in medical card holding with 130,000 fewer medical cards in use compared with last year. Almost 1 million are now uncovered or self-funding.

Pfizer Index 2013

1,539,0002010

2011

2012

2013

1,255,000

868,000

1,419,000

1,470,000

842,000

1,250,000

1,573,000

968,000

2010

2011

2012

2013

2010

2011

2012

2013

Private Medical Insurance

Medical Card

Neither PMI nor Medical Card

1,220,000

1,474,000

947,000

Decline slowing….

Source:

PMI down by quarter but

slowing

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There has always been a gap between Consumer and Business confidence. We typically see a more optimistic assessment of the future from people in business. In part, this is a function of the entrepreneurial spirit of the business owner/manager, in part because he/she has a finger on the pulse of the economy. Consumer confidence has been hit harder and sunk lower. But it is only when consumers begin to believe in the resilience of the economy, that we can weather the downturn, that he/she can let go of this ‘recession anxiety’ and begin to spend again. These latest figures show an upward trend in both business and consumer confidence this year. While we can anticipate another dip following the budget, there is a promising underlying trend.

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Business Sentiment Consumer Sentiment

Confidence up….

Source: B&A confidence monitors

Moderate optimism

Reluctant recognition

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A stark analysis of Irish consumer spending comes from peering into our collective pockets. Since 2001 We have asked… About how much would you say you spend each week on things you buy for yourself including money spent on clothes, eating out, going for a drink, going to the cinema, gambling, sporting activities and so on? For the last 5 years we have been reporting a drastic decline. In effect discretionary income has halved in five years. .…But as you can see it looks like the decline has abated. It is too early to put out the bunting perhaps, but it looks like this trend is bottoming out too.

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Spare cash eased….

(Discretionary income for spending on self)

Source:

Stark decline

Abated now

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An economy that is only good in parts? When planning our marketing communications, there is always a danger that we just consider the ‘view from here’. Green shoots are growing, but not everywhere. South Dublin is awash with iPhones and rising house prices but in fact the pain still cuts deep in many households. Celtic Tiger Ireland expanded the middle class. It has shrunk again…. and divisions are deep. Perceptions are very different within different groups. Regional differences, differences by stage in life are more profound than they were.

All but unemployed are likely to be back on positive ground by 2014.

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Us and Them

…again

Economy just good in parts

Middle class shrinking

-6.1%

-0.2%

0.2%0.7%

-8.3%

2.6%

1.4%1.9%

-6.1%

-1.8%

-0.2%

0.5%

-2.3%

-0.8%

0.1%0.5%

-3.7%-3.1%

-1.6% -1.8%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

2011 2012 2013 2014

Average Mortgaged working Non-mortgaged working Retired Unemployed

Not all doing well

Source: IBEC

(Discretionary income)

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The level of fundamental impact of the Recession is diminishing, but there is massive age disparity: those aged 25-49 have been hugely impeded by the recession.

Salaries have been heavily impacted between 25 and 49. Impact is greatest by age (rather than by class). Indeed, life stage may be the greater determinant of recession impact than ‘background’ or class. This particularly impacts between 25 and 50 as so many bought houses.

One or other in family has had salary or

hours reduced or lost job (1,511,000)

U25 24%25-34 60%35-49 57%50-64 42%65+ 8%

Impact disparity….

(Overall recession impact)Source: Pfizer 2013

Trend not positive for 25-49s

Recession Impact

SEX AGE SOCIAL CLASS

Total Male Female -24 25-34 35-49 50-64 65+ ABC1 C2 DE F

Base: 1003 486 517 146 200 305 206 146 425 251 256 71

% % % % % % % % % % % %

Any of these (Job loss/reduced hours or salary)

43 46 39 24 60 57 42 8 44 48 40 28

Lost Job (self or spouse) 22 27 18 17 38 26 19 4 18 24 30 8

Reduced Hours (self/spouse) 23 26 20 12 36 31 21 2 22 29 22 13

Reduced Salary (self/spouse) 32 33 32 15 43 47 32 4 36 36 26 23

Someone in the home on reduced hours, salary or has lost a job

Source: Pfizer 2013

Life stage key determinant

Negative equity

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As a result we find even the most subtle elements of communications can trigger rejection.

We find that more hard pressed respondents sometimes read an unintended ‘social class message’ into advertising communications: – this is not my life it is someone who is much better off…

- this brand is not trying to help me… - this is a cynical offer not a real one…

It is critical we assess detail of communications with a cross-section of population

On shelves around the country we are reminded of the Irish provenance of products and

services. But many people are uncertain what is ‘real Irish’ and what is ‘Aldi Irish’. People simply don’t believe the hype. There is even resentment of using the green card as a proxy for charging more. In Ireland cynicism is rife. There has been a loss of faith. While people seek the latest offer they can be wary of overpromising deals. There needs to be a practical quality to deals and offers. They should be rooted in the everyday.

Not my life?

Are you helping me?

Hard pressed sensitised

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CynicismReal offers?

Real Irish?

Do I care?

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A major shift in recent times has been the adoption of new technology in lots of ways and on more occasions. Smartphones and tablets have taken off and ownership is growing ever more quickly. We all expect to be able to answer stupid questions anytime, anywhere. In effect Google has become our brain prosthesis. Smartphone and tablet ownership will plateau eventually.. But this is just the latest iteration of an accelerating pattern. As technology evolves its impact is not linear growth but exponential. Perhaps the best way to express this is using the old example of a chessboard and a grain of rice. If you multiply the number of grains by itself on each consecutive square at first the growth seems reasonable, but by about halfway across the board the exponential nature of the growth becomes clear. Soon you realise there is not enough rice in the world to complete the task. In terms of the speed of technology change we are entering the second half of the chessboard. Growth looks exponential. It is hard to predict the implications of what we currently see developing – never mind where we will be in a few years. For example:

• Is it possible that employment will never return to pre-recession levels as technology takes more jobs out of the equation?

• With so much data, with so much choice, we will need help making decisions. Already it seems that there are too many choices in many markets. People despair when they are presented with 100s of options. Through online services, apps and bundles we are offered:

- Intelligent filtering - Intuitive choices

With exponential change it is likely that services that simplify will be more compelling. Services that can interact with your day in a seamless way will be more attractive. it is not just about the latest kit, but smart ways to use it.

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Exponential Change

Smartphone ownership up

by 36% in one year

81% 16-24s own

smartphone(53% pop)

Tablet ownership up 15% in one

year(25% pop)

Source: eircom home sentiment survey

Too much choice?

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People are increasingly impatient with drawn out communications. News must be bite-sized. People are constantly connected. Fewer and fewer buy an actual newspaper, more and more scan headlines online. Is this to avoid the full price of a paper? Is this dumbing down? Or is it just that the freshest news comes this way? In fact the whole definition of news is changing. When we asked 20 somethings about recent events in groups they were as likely to mention a YouTube clip as a real news story. Half the population agree that the boundary between entertainment and news is blurring. So we need to reinforce and strengthen any marketing communications by co-ordinating a multitude of channels. We can’t expect to have their whole attention and we can’t expect to have it for long.

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News redefined

53% use Facebook

Half the population agree the

distinctions between real

news and entertainment

are blurred

41% of 16-24 year olds have shared a

video clip/news story in past week

Source: eircom home sentiment survey

Bite sized

Coordination key

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As we embrace this totally connected consumer world we should recognise that people are simultaneously there and not there We watch the match, text mates, and bet online. We try on a new outfit, WhatsApp friends to get their opinion, check Twitter. We record what we can’t watch. We refresh Facebook like a nervous tick so as not to miss anything. So are we paying as much attention to anything? Are we actually ‘in phase’ with where we are sitting? Isn’t the real world already augmented and intersected by the online?

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Out of phase?2 in 3 parents

allow 5-12 year olds access to portable

online device

74% of 16-24 year olds

Facebook or Tweet while TV viewing (52% pop Aug 2013)

46% of parents give mobile device

to child to keep them quiet

67% of 16-24 year olds have

walked into something while checking mobile

Source: eircom home sentiment survey

Training kids to do it too?

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With so many choices of media and so much more content coming at us all the time…. How can we stand out from the crowd and leave a lasting impact? With any type of vibration if you get the right frequency suddenly things begin to resonate and there is a much bigger impact. We need to develop an approach to communication where resonance between a number of channels is the goal. Where quite separate and distinct message elements form a cohesive and amplified effect. So the question is….what kind of messages can make an impact?

We are used to sifting through the crap to find something real Something we can believe in. But actually we don’t really care if it is ‘really real’ or if it is a convincing bit of ‘theatre’ so long as it is done with confidence. We saw that increasingly people seek a unique experience in the off-trade.

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ResonatingFrequencies

2 in 3 skip through ads on

recorded TV 35% use portable device to

watch TV in household

Source: eircom home sentiment survey

Each channel unique?

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Authenticity 2.0

We want to believe

Confidence can convince

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But they also respond to authenticity (even if it’s recently manufactured and they recognise this conceit). Here are a few examples:

Supermarkets can effectively ape the look and feel of a traditional bakery with point of sale theatre. A little whiff of freshly baked bread… The creak of wicker baskets and we are transported to a better place… In recent times Lidl has neatly eclipsed established rivals with their freshly baked quality and bakery props. We suspend disbelief and join the queue.

Hiut Denim Boutique company in North Wales Family business investing in skilled local workers Quality in every aspect of production

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A bit of theatre

Sensory impact

Suspend disbelief

28Storytelling

“There is a deep desire in people to know where things have been and where they come from. Products tell stories.” David Hiett

Product life story

Convincing mythology

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You are asked to register your jeans at HistoryTag.com to see pictures of your jeans being made. You are invited to post pictures of your jeans to continue the story… Perhaps a bit over the top for the Irish market? Perhaps, but Hiut Denim are selling a lot of their jeans (€270 a pair). This is convincing storytelling that links customers to their brand mythology. They have 5 week waiting list for their uniquely premium product.

Ummera Smokehouse A family business over two generations in West Cork Quality in every aspect of production A micro enterprise producing high quality smoked products Practical and effective environmental procedures to minimise impact on the local valley Authentic and convincing sense of connection to a real place.

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“Ummera understands that it has a potential impact on the environment in a number of ways and commits itself to using all reasonable means to minimise negative impact.” Anthony Cresswell

Connect

Place and community

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We all now participate in a constantly reinvented world of content that is created by ourselves and others. We respond more strongly to things that have the patina of real places and real people. YouTube heroes can be admired for their amazing physical stunts or jaw-dropping stupidity… Flashmob tactics have emerged as effective for both above-the-line and online campaigns (Jaffa Cakes ‘Buds’, Carlsberg mate in trouble or the Coke Zero Bond promotion). These campaigns place the viewer in the position of ‘knowing’ observer and effectively subvert consumers’ expectation that they are being targeted. At the same time they deliver huge entertainment value. Participation is key. With the Coke example – as many people viewed the failed attempts as the original ‘successful’ participants’ edit. Connect with and surprise your audience. They will build your campaign by showing it on your behalf.

30Coke Zero- 007 challenge

Subvert….Participation

What is real?

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People are slowly recovering but the country is more divided than it was. Technology has changed everything and will go on changing everything even more quickly. So there is a need for simplification and intuitive tailoring to fit into our lives. We need to recognise we don’t have anyone’s whole attention. People are increasing out of phase with where they are. So we need to co-ordinate messaging to create resonance which amplifies the overall effect. No one gives their attention for long but people still want to be told good stories. In fact they want to be enchanted and involved. We find that people are happy to be complicit in suspending disbelief if the story conjures something unique and believable. They want brands to be confident and real not just cheap.

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Implications?

Storytelling

Confidence

Resonance

Enchantment

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