AUGUST 01, 2011

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Economy
Wealth Gaps Rise to Record Highs Between Whites, Blacks and Hispanics
As noted previously in CNtelligence, the gap between wealthy and non-wealthy Americans is widening. According to a recent analysis by Pew of newly available government data from 2009, the gap is even more pronounced when whites are compared to blacks and Hispanics. Pew found that the median wealth of white households is 20 times that of black households and 18 times that of Hispanic households, the largest gaps seen since the government began publishing such data a quarter century ago. Pew places most of the blame on the meltdown of the housing market for the erosion of household wealth across all groups, but states that minority households were hit disproportionately harder than white households. Pew’s report defines household wealth as the accumulated sum of assets (houses, cars, savings and checking accounts, stocks and mutual funds, retirement accounts, etc.) minus the sum of debt (mortgages, auto loans, credit card debt, etc.). In 2009, the typical black household had just $5,677 in wealth; the typical Hispanic household had $6,325 in wealth; and the typical white household had $113,149.
So what? These numbers are astounding. Marketers need to have a realistic view of consumers if they are to connect with them in meaningful ways.
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Communication
What Makes Online Content Go Viral? Part 2
We know more than 750 million people actively use Facebook and 200 million tweets are sent each day. But what exactly motivates the frenzy of online sharing? As a follow up to last week’s CNtelligence article on the emotional drivers of online content virality, an alumnus of Condé Nast Research & Insights, Brian Brett (now at the New York Times), has attempted to answer that question in a recently released study. The study finds five basic motivations for why we share information, all of which are based on our desire to shape or maintain relationships with other people: altruism, self-definition, empathy, connectedness, and evangelism. The study then uses these motivations and other factors to identify six types of personas who do the sharing; from “Altruists” who want to help others by spreading the word about good causes, to “Boomerangs” who want to get a reaction by starting a debate and generating lots of comments, positive or negative. The implications of these findings serve as a virtual road map for how a brand can increase sharing activity.
So what? The more we know about what drives people to share online content, the more we can get them to share ours.
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Culture
Could India Become The World’s First Truly Mobile Digital Society?
As noted in a previous CNtelligence article (see 5/9), India’s potential to be a powerhouse in the digital revolution is enormous. Just 7% of India’s population is connected to the web (out of a total population of 1.2 billion), compared with 32 percent in China and 77 percent in the United States. 31% of Indians living in rural areas don’t even know the internet exists (more people than the population of Brazil). The key question: can India transform itself from an internet laggard into a world leader? A recent McKinsey paper says YES. According to McKinsey, India has the opportunity to become the world’s first truly mobile digital society. All the elements are in place: the cost of network access and handsets is going down, wireless networks are going up, and Indian consumers already display an insatiable appetite for digital services. Even though typical Indian consumers have no internet access, they consume an average of 4.5 hours of digital content daily across offline channels such as TV, DVDs, and CDs. And while they use mobile phones predominantly for voice services, a whole segment of business has grown around retailers essentially operating as physical iTunes stores, charging fees to load music and other content onto mobile devices. In addition, bypassing the personal computer—moving straight to widespread mobile access—simply makes sense. It would sidestep a host of hurdles associated with delivering affordable internet services to a population that is geographically dispersed and relatively poor, in a country where infrastructure development can be problematic. If India’s latent digital demand is unleashed, McKinsey forecasts that the total number of internet users will increase fivefold, and revenues from total digital consumption could rise fourfold, to $20 billion- twice the expected growth rate of China.
So what? This warrants repeating: As is true for China, India represents an enormous growth market for global media companies like Condé Nast.
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Lifestyle/Luxury
Caution: Study Finds Drop In Affluent Consumer Demand In July
According to a study by luxury marketing firm Unity Marketing, consumer confidence among the affluent is at its lowest since the depths of the Great Recession. Unity’s quarterly Luxury Consumption Index (LCI), which measures confidence and behavior of consumers with an average income of $301,800 and a net worth of $856,000, dropped 16.8 points to reach 66.0 points; significantly lower than the previous quarter’s 82.8. “If those at the top income levels feel stressed and unwilling to spend, imagine what it says about people living in middle-income households. We stand on the precipice of a double-dip recession, if the affluent consumer's confidence doesn't turn up in the next quarter," warns Pam Danziger, president of Unity Marketing. News is not all bad, however. The stock market has shown relatively firm, almost counter-intuitive strength as many organizations report high earnings. Healthy stock portfolios translate into greater discretionary spending, especially for high net worth individuals. In this way, net worth, and not income, can be a better barometer of spending power among the affluent. According to the study, higher net worth individuals were significantly more confident about their financial status than lower net worth individuals, regardless of income. “In the current economy many high-earning households are living pay check to pay check just like those in the middle-income brackets… Once the monthly expenses are met, the lower net worth affluents don't have much left over with which to indulge in luxury," Danziger concludes. The study suggests that it will be key for luxury marketers to target high net worth affluent consumers in order to succeed in the second half of 2011.
So what? Although this is but one study, it can serve as a signal to companies catering to the affluent population that the recession mindset has not gone away.
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Retail/Shopping/Commerce
Kantar: Mixed Outlook for Global Retail in 2012
A recent analysis by Kantar Retail finds that as the global economic headlines seesaw from the debt problems in Europe to the United States, a broader global story is emerging for the retail outlook. The good news is that inflationary pressures driving up prices of food, clothing, and other products should begin to ease through the end of the year. The bad news is that easing price pressures are a result of weaker expectations for global demand by China and other emerging markets. Kantar highlights several mixed short term implications. Among them: household spending online will persist at an exceptionally strong pace across a broadening array of categories regardless of whether macroeconomic conditions start to hurt spending in brick-and-mortar stores. However, shoppers will most likely curb spending on discretionary categories (particularly homegoods and apparel), with lower income households getting hit the hardest. Encouraging news is that Kantar predicts spending by upper-income households will hold up much better as long as a significant drop in the stock markets can be avoided in the months ahead.
So what? As noted in other studies cited here, consumer uncertainty persists. For the moment, higher income consumers are the brighter part of the picture.
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Quick Takes
Amazon Sales Growth Is At A 10 Year High
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Gartner: Apple To Dominate Tablet Market Through 2015
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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