The two speed economy — what does the NEO consumer look like and how can we connect with them?
The current economic environment is making many consumers rethink and pull back on their spending. Yet, this isn’t necessarily true for New Economic Order (NEO) consumers. Bucking the trends of frugality and motivated by a desire for premium brands and experiences, NEOs are driving discretionary spending and creating a fast lane in the two speed economy.
At A.H. Beard, NEOs are at the heart of our business and for the last 123 years we’ve been committed to mastering the art of Premium Sleep. During this period, the global and local economy has changed — and our compass for navigating shifting business and consumer cycles has been understanding NEOs and delivering on their wants, desires, and expectations.
What is a NEO?
To understand how we’ve tapped into the NEO consumer, we need to first understand what makes a NEO. According to our Roy Morgan research, we operate in a two-speed economy defined by ‘NEOs’ and ‘Traditionals’ with very different mindsets.
NEOs are socially progressive, high-spending consumers that spend more than 300% more than their traditional counterparts. Traditionals, on the other hand, are guided by logic and a propensity for saving and considered spending. But don’t be fooled — NEOs aren’t a small subset of our market. In fact, they make up nearly a quarter of the population.
NEOs, like the average consumer, spend on ‘essential’ items however are set apart by their high levels of discretionary spending on the latest technology, travel experiences, discovering new places to dine, premium drinks, progressive financial options and services that ultimately elevate their lives.
And for this group, wellness is a key part of their lives — especially in a post-COVID era. This is contributing to a rise in luxury health tourism, increased spending on health foods and supplements and gym memberships, as well as health technology and aids.
This is where sleep fits into the equation, as a key pillar of health. And the demand for Premium Sleep amongst NEOs is clear, with the global market for sleeping aids projected to reach $168.98 billion within the next decade.
NEOs and Premium Sleep
When we think of sleep aids, many of us will think of wearables, which don’t just track our activity but our sleep too. But the foundation to unlocking Premium Sleep quite literally is the bed we’re lying on — a fact which is increasingly recognised and welcomed by NEOs.
An example of this is our growth and success in China. A decade ago, we observed strong NEO behaviours in China’s economy, including a focus on wellness and preference for premium brands. It’s for this reason that we focused on expanding A.H. Beard’s brand presence in the China market and delivering Premium Sleep to its growing population. As one of the globe’s largest bedding markets with 1.4 billion consumers, China’s sleep landscape is currently showing the most engagement.
While NEOs exist across the world, their consumer mindsets and behaviour will be influenced by the local landscape. Our leading partner, Shanghai Green, helps us understand the local market conditions and trends affecting NEOs in China so that we can better relate to them.
For example, the consumer market is traditionally price-led — with sales and discounts often shouted at the consumer. While these tactics are likely to work on a traditional consumer, they’ll have the opposite effect on a NEO. So being aware that NEOs want to self-discover, we’re very conscious about how we engage with our audience and opt for a more experiential process.
Speaking of the China market specifically, as an indication of success — A.H. Beard now has 50 stores across China, plans to open 50 more and a best-selling product retailing at $75,000. There’s no doubt that this is a reflection of the level of exceptional quality, performance and personal service that NEOs desire and expect.
There’s no doubt we’re operating in a two-speed economy. And the fast lane is being driven by a premium brand of recession-busting consumers known as NEOs. As our highest spending consumers in the economy, it’s their mindset that’s shaping the future. And if history is any guide, businesses who follow them will discover a more successful future.
What is a Neo-consumer?
Described as «super consumers», Neo-consumers are a powerful group of spenders who make up one quarter of the population, but represent half of all discretionary spending.
After more than five years of research, Ross Honeywill and Verity Byth of the Centre for Customer Strategy, pinpoint two distinctive social types in Australia: Neo-consumers and Traditionals. Neo-consumers aspire to own things that are better than they have now. They are spenders, not savers, and are comfortable with buying luxury goods. They like to purchase on impulse and, for them, style is more important than price. Cynical of big business, media and governments, Neo-consumers believe in the power of the individual and insist on making connections that are relevant and intensely personal. The Neo-consumer prefers to eat out, will fly more often and buy twice as many books as their Traditional counterpart. Traditionals prefer large-scale shopping malls and are always on the lookout for a good bargain. Traditionals and Neo-consumers perceive brands in completely different ways. To a Traditional, a brand is a short-cut to certainty and confidence. A Neo-consumer by contrast delves behind the brand to understand its origins and authenticity — no Tom Foolery going on here. Neo-consumers are changing the face of business and understanding the forces that drive a Neo-consumers can give a valuable window into the needs and wants of the high-margin, discretionary goods consumer.
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Neo Consumers
Neo Consumers constitute 24% of developed societies. They know more, read more, demand more and are changing the world. This blog is a place for them to discover themselves and others just like them. This is where we explore what it is to be Neo!
Monday, February 10, 2003
Are you a Neo-Consumer™?
Neo-Consumers™ are very individualistic, but although they make up 24 per cent of the population in Australia and the USA, they do not fit traditional demographic or slice of life descriptions like Generation X, and Baby Boomers (see below). They can be identified across all age and gender groups by a range of spending, attitudinal, behavioural and psychological characteristics including a desire to be in control of their own lives, a passion for authenticity, an urge for the edge, a desire for change, an appetite for technology to accelerate slow-time and continuous, high-margin consumption.
Why are Neo-Consumers™ important?
Neo-Consumers™ consume constantly. They will buy new technology -all those mobile phones, laptops, personal digital assistants, MP3 music devices, digital cameras and scanners — but they’ll also spend their hard-won rewards on home extensions and renovations, travel, eating in and out, drinking, banking, investing and an entire range of products and services that make their lives easier, more individual and more controllable.
By now you may be drawing a picture in your mind of an upscale, elite group with more money than practical sense. That is a mistake. Remember they are far from some small niche market — they a quarter of the entire population of the developed world and have political, social and economic clout.
Why are Neo-Consumers™ the way of the future?
Neo-Consumers™ are driving the post-corporate, post-institutional, neo-modern era in which individual power replaces institutional power. By 2010 half the population responsible for two-thirds of all discretionary spending will exhibit NEO™ characteristics.
On any day in the great cities of the world, Neo-Consumers™ are actively rejecting the influence of the traditional gatekeepers of authority such as bureaucrats, bank managers and doctors. Instead, they are putting authority back in individual hands and, while this has implications for government at all levels, it is business that will be most affected by this seismic social activity.
This is the new world and the rules that applied in the past have to be thrown out.
Why is ‘Baby Boomer’ and ‘Generation X’ a hoax?
Given society’s fascination for labels or pigeonholes into which we neatly place prominent and influential groups, it came as no surprise when the terms Baby Boomer and Yuppie came into prominence in the late seventies and early eighties, only to be followed by Generation X and Generation Y in the 1990s. Some of these labels become pejoratives — the term Yuppie for example — while others, such as Generation X and Generation Y, become badges of honour; rites of passage. But all are fundamentally misleading.
Generation X and Generation Y join the Baby Boomer label as part of the greatest behavioural hoax of the past century. Let’s look at the term Baby Boomer — technically anyone born between the end of World War II and the early 1960s. Business around the world bases decisions on predictions of the needs of Baby Boomers — as if an urban 53-year-old academic will behave in ways even vaguely similar to a 57-year-old middle-ranking sales manager in a global corporation who lives only two suburbs away. Why do we imagine that the two demographically similar people would like to read the same books, see the same movies, buy the same motor vehicles, vote for the same political party, believe in the same religious doctrines and eat the same food — just because they’re in a similar age group? Granted, age imposes certain common life-stage concerns like health, insurance, superannuation, and so on, but behaviours, attitudes, ambitions, tastes and aspirations will always differ across such a wide range of people. Accordingly, different Baby Boomers will buy completely different health cover, different insurance products, and will approach superannuation in vastly different ways.
Demographics, while useful, do not determine consumption behaviour.
There are blue collar NEOS™, young NEOS™, mature NEOS™, Baby Boomer NEOS™, and Generation X & Y NEOS™.
NEO consumers in today’s world
Consumers are classified into NEO consumers, aspiring NEO consumers and traditional consumers. NEO stands for “New Economic Order”.
Some of the characteristics of NEO consumers are:
• High discretionary choice
• Powerful social and business influence
• Most likely be in a professional or management occupation
• Extroverted and active on the internet
The following are the reasons for the increase in the number of NEO consumers in India:
• Increase in the number of affluent middle-class families
According to a survey conducted in 2015, the average of NEO populations comprised of 49% with an average of 39% of spending. This number since then is continually increasing. It is predicted that the number of people belonging to the affluent category will touch 40%.
• Increase in Urban population
Unlike other countries, India has shown diversified growth. It is the second most populous country and due to improvement in income, education and the quality of living, most of the rural class is migrating to Urban. By creation or new cities, it is estimated that by 2025, more than 40 percent of the population will live in the urban cities.
• Increase in nuclear family
The concept of joint families is slowly becoming thing of the past. People prefer to live in nuclear families due to varied reasons. It is observed that consumption and spending in a nuclear family are 20% higher as compared to joint families.
• Change in the mindset to live life king size
Who does not want to live a sophisticated life? After the fulfillment of basic amenities such as food, clothing, and shelter, people have shifted to a richer lifestyle. They spend their excess money on education, leisure activities, and digital media. Also, due to the increase in income, the price of the commodity which is brought has also increased.
• Digital India: Access to the internet
Our forefathers and even our fathers have very minimal knowledge of the digital world. We, the next generation, seem to be clueless without the internet. From doing our assignments, projects to searching jobs etc is just one click away. Our Prime Minister’s prime ideology is to make India digital. As a result, buying and selling, booking tickets and making payments are done online. As a result, it serves as a medium to enhance one’s livelihood.
• Access to products and services
In olden days, education was not complete without proper schooling and due to limit schools, people used to travel many miles to reach their school. But now knowledge is made available in our homes. People opt for online classes where a person in India is able to take classes from a British professor. Also, shopping sites such as Amazon and Flipkart have made goods from around the globe much more accessible.
The basic reasons are due to an increase in the income, purchasing power and access to products.
Consumer obligation/duties
Consumers should be familiar with the product. They should be aware of the uses and proper consumption of the product or services.
They should read the instruction manual and should be aware of the warnings. Seldom NEO consumers pay attention to the manual.
The consumer has the obligation to maintain the payment receipt and warranty card of the product for the after-sales services. NEO consumers often buy online and the receipts are stored online in the account.
Consumer protection
Central Consumer Protection Authority (CCPA) is set up in 2018, which will deal with unfair trade practices and misleading advertisements.
There has been a lot of misleading information or deceiving advertisements which have the potential to influence young people into buying, Deodorants, Fairness creams are good examples.
Also, there are chances of selling defected products or duplicate products which are dangerous to use. Cellphones with improper battery have caused harm to the consumer in the past.