JULY 18, 2011

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Economy
The “Great Divide” Gets Bigger
As noted in a previous CNtelligence article, the chasm between rich and poor in this country is far and wide and continues to grow (see “Is Mass Affluence A Thing Of The Past?”, 5/31/11). A recent analysis of May retail sales by WSL/Strategic Retail reinforces the point further. Retailers with strong same store sales were those that cater to more affluent Americans. Saks Fifth Avenue (+20.2%), Neiman Marcus (+12%), and Nordstrom (+7.4%) had the strongest results. Most other retailers, especially those that focus on lower income shoppers, e.g., JC Penny, Kohl’s, Target, and Walmart released uninspiring sales. WSL states that the affluence divide has moved from $75K to $100K. Shoppers on both sides of the affluence divide are shopping smarter today, looking for value, deals, and good prices. WSL maintains that it is the middle to lower income shoppers, however, that need the most help to survive and stretch their money further. Retailers must help shoppers make smart decisions by innovating often, and using all online and offline marketing channels to make their shopping experience relevant to their lives and worth spending their money.
So what? “In the end, what shoppers are telling us is more nuanced than just one more sale, one more deal. They are saying clearly, boldly, that if we want them to spend we need to build value into their total shopping experience if we are to help them manage the Great Divide.” – Wendy Liebman, WSL/Strategic Retail, 2011
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Media
What Kinds Of Online Ads Are Most Effective At Boosting Purchase Intent?
According to a recent study sponsored by the Marketing Science Institute, both contextually targeted ads that appear only on websites that are relevant (like a cruise ad on a travel site) and flashy obtrusive ads, like unsolicited pop-ups or characters that dance across the screen, are effective at raising purchase intent than standard display ads. According to the study, both types of ads were effective marketing tools in that they both boosted purchase intent by 3 to 4% compared to standard banner ads. Although people often complain about pop-up ads and their ilk, MSI found that these obtrusive ads work twice as well as standard banner ads. Importantly for Condé Nast, the study also found that ads designed to be both obtrusive and targeted actually are worse at encouraging purchases than ads designed to be one or the other. MSI found that combining obtrusiveness and targeting virtually nullified the positive effect that each type of ad had individually. Advertisers today spend an estimated $664 million on ads that are both targeted and obtrusive, and this finding suggests that they may be wasting their money on these dual-purpose ads. The study suggests that it is actually more effective to focus on one or the other rather than both.
So what? Since Condé Nast sites tend to be contextually relevant, this study implies that obtrusive ads would be less effective in our environment.
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Current App Pricing Strategies Differ Across Countries And Devices
The latest iMonitor report finds that regardless of the country analyzed, app issues are being priced lower than their print versions. However, differences do show up in subscription price strategies around the globe: US app subscriptions are priced similarly to print (either the same or slightly more expensive), UK subscriptions are priced lower, and Canada subscriptions are priced significantly higher. The report also found inconsistencies for pricing across devices in the U.S. For example, pricing for Apple and Android devices tends to be lower than those for Kindle, Nook, Next Issue Media or Zinio.
So what? It’s important for us to closely track how app pricing strategies evolve both in the U.S. and abroad.
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Lifestyle/Luxury
Study: Affluent Consumers Love A Bargain
The nation's most affluent consumers are shopping online more often than other consumers, but that doesn't mean they're heading to sites that appeal to only the wealthy. Who is Their favorite online retailer, hands down? Amazon.com. According to Unity Marketing's most recent survey of ultra-affluent consumers (those making more than $250,000 in annual income -- the wealthiest 2% of Americans), the most-visited online destinations by affluent consumers are Amazon.com [3] at 45 percent, followed by 14 percent at eBay.com [4], 10 percent at Groupon.com [5] and 8 percent at Craigslist.com [6]. Also attracting ultra-affluents are flash sale sites like Shopittome.com, Gilt.com, Hautelook.com, BeyondtheRack.com and Amazon's new entry into the category, MyHabit.com, for the bargain-hunting yet wealthy fashionistas and Buy.com for the wealthiest tech-oriented shoppers. "While ultra-affluent consumers may make purchases of top-end luxury items online, the data show that these consumers are also interested in finding great deals and perhaps selling a few of their own unwanted items online," says Pam Danziger, President of Unity Marketing. "It is important for marketers to realize that their wealthiest shoppers are keenly interested in value and bargains, particularly online. These deal-oriented sites attract those at the highest income levels."
So what? Consumers look for deals when they conduct online research, regardless of their income levels.
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Retail/Shopping/Commerce
Kantar: 1st Half Shopper Insights Review A Mixed Bag
Kantar Retail’s recent retail report on the 1st half 2011 showed that following three months of decelerating growth, May year-to-year government-reported retail sales growth was the strongest since 2006. Food inflation is supporting growth in supermarkets, the season’s extreme weather conditions are fueling growth in the home improvement sector, and non-store retailers lead all channels in growth. However, pockets of weakness are emerging as shoppers contend with higher gasoline prices, higher overall inflation, and sluggish job growth. Weakness is most evident in the retail channels that specialize in discretionary purchases—e.g., furniture, consumer electronics, and department stores—and are thus more closely correlated to spending intentions. Shoppers’ less than sunny spending outlook translates into positive signs for Amazon.com and other value-oriented online and offline retailers (Dollar Stores, Walmart, Target, etc). Although the report suggest consumers’ spending intentions are declining, the erosion seems to be leveling off, offering a glimpse of optimism as retailers gear up for the back-to-school season.
So what? A common theme in this CNtelligence issue is that consumers across all income levels continue to proceed cautiously during this time of “recovery.”
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Technology
BBDO/ Microsoft/Ipsos Study: The Mobile Device Is Like A “New Lover” To Consumers
BBDO Worldwide, Microsoft, and Ipsos recently unveiled results of a global study that explored consumers’ emotional connections with television, PCs, and mobile devices. Unlike other digital advertising multi-screen research that is driven by measurement, this study took a different approach, aimed at understanding what’s going on in people’s “psyches” and how they emotionally connect and interact with each screen on a personal level. The study applied Jungian archetypes to help put personalities to each device. Among the findings: TV is like an old, reliable friend that is consumed comfortably and passively at home; the PC is like an older sibling, someone to trust, learn from, and compete with; the mobile device is like a “new lover,” extremely personal and intimate, someone you want with you at all times. The study is meant to help marketers create messages that will resonate most with consumers on each platform.
So what? Studies in this tradition are speculative but interesting in the way they project potential consumer sentiment.
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Quick Takes
CHART OF THE WEEK: How Much Apple Is Making On The App Store
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Best 10 Luxury Branded Magazine Summer Print Ads
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Condé Nast
Feedback, questions, ideas for future issues? Please contact:

Phil Paparella
Condé Nast Research & Insights | Associate Director
1166 6th Avenue, 14th fl. | NY, NY 10036 | office 212.790.6044 | philip_paparella@condenast.com

Contributors:
Tamar Rimmon | Senior Manager, Digital Analytics
Robyn Hightower | Manager, Research & Insights