JUNE 11, 2012

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Affluents Shift from Owning Luxury to Experiencing Luxury
A new study by the Boston Consulting group conducted in eight mature countries (U.S., France, Germany, Italy, Japan, South Korea, Spain, and U.K.) and four emerging BRIC countries (Brazil, China, India, and Russia) found that affluent people now spend more on luxury experiences than they do on luxury goods and automobiles. In aggregate, the 12 countries now use 55% of their luxury spend on experiences such as vacations, spa days and dining out; 20% is spent on luxury goods and 25% in spent on luxury automobiles. In the United States, luxury experiences represent a smaller piece of the pie (51%) than worldwide, but now hold the majority of all expenses; luxury automobiles are 35% of the spend and 14% of the spend is on goods. The BCG attributes this shift in goods to experiences to a few factors including: Those who drove the luxury boom of the 1990s are retiring and sit at a life stage where they no longer need or want new things. Also, there has been an attitudinal shift, led by younger generations, to be defined by experiences rather than belongings.
So what? The rising importance of luxury experiences has been cited in a number of recent studies and the findings from this BCG study confirm a shift in the luxury category that will affect the way a number of key advertisers approach strategy. Condé Nast should explore the growing opportunity in the experiential category, whether it is in travel or smaller scale experiences like spa treatments. While also serving as a reliable outlet for luxury goods and automakers to effectively promote their products in an attempt to buck this trend.
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Investing In Social Goodwill
Executives have struggled for years trying to understand the benefits (if any) that come from investing in ‘social goodwill.’ A 2009 McKinsey report finds that most CFOs are skeptical; they believe any link between investments in social goodwill and financial performance is ‘incidental.’ However, a new study by the MSI shows that, under the right circumstances, consumers who were aware of a company’s social efforts have a higher perception of the benefits of that company’s product. This implies that awareness of these efforts can impact the bottom line. The main caveat is that the benefits are lost if the efforts appear self-serving. For example, a sunscreen that is marketed as being created under environmentally-friendly conditions is not as attractive as a sunscreen that gives back 10% of profits to charity. Consumers were willing to pay more for the version where 10% of profits were donated because the environmental claim was seen as a marketing tactic.
So what? This important insight around perceptions of ‘self-serving’ claims can help both Condé Nast and Condé Nast clients make the right choices when investing in cause-related marketing. When brands promote their investments in causes, stories of direct monetary donations may create the biggest impact with consumers.
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More Bad News for Facebook
Following a month of stories about major companies pulling advertising from its site and a stock price sitting well below its much anticipated IPO level, Facebook now has to deal with the results of a poll by Ipsos/Reuters that paints the company as one that has lost some of its cachet. The study of Facebook users found that 34% are spending less time on the site than they did six months ago, while only 20% said they were spending more time. Perhaps most importantly, just 20% of Facebook users said they ever purchased a product or service because of advertising or comments on Facebook.
So what? The trouble Facebook has in its ability to demonstrate value in ad buys has already negatively affected its business, but that problem pales in comparison to the onslaught of negative press in recent weeks. As sentiment in many circles continues to sour toward the social network, now might be as opportune time as ever to outline why ad dollars should be spent with Condé Nast rather than social media.
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Trading Places
As consumer's desire for products and services change, they often can’t afford to buy all of the new things they want as well as the old things they are used to having. One tactic that consumers take to satisfy their appetites is to trade down in one category in order to trade up in another. A new report by Kantar Retail outlines this behavior for key consumer segments including all US consumers, Millennials and Moms. Key findings are: Recession minded consumers are more likely to be trading down then up in most product categories. The mobile phone category is the biggest winner with all consumer segments trading up more than down. The vacation destination category is the biggest loser with 24% more people trading down than up. Millennials are twice as likely as the average consumer to be trading up for apparel. Moms are more likely than the average consumer to be trading up for cosmetics and apparel.
So what? This report may be predictive of coming changes in advertising spend. As consumers trade up or down across categories, marketing budgets may rise or fall accordingly. Condé Nast brands should increase efforts against the ‘winning’ categories, as they may be trying to aggressively differentiate their brands and products. Furthermore, advertisers can reach consumer segments that are trading up in Condé Nast properties.
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Quick Takes
US May Automotive Sales Up 26% Over Last Year
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Games, Weather and Social Networking are Most Used Smartphone Apps
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Republicans and Democrats Have Grown More Partisan During the Past 25 Years
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Garth Brooks, The Beatles, Mariah Carey and Metallica are the Best Selling Artists Since 1991
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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

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