Introducing the Connected Spender – Profile
This report was developed and published by the Demand Institute, a non-profit think tank jointly operated by The Conference Board and Nielsen.
Who are the Connected Spenders? The short answer: They are the new global digital consumers and the ideal consumer for a broad range of companies. They are young, urban, and confident, and over the next decade, they will lead the world’s consumer spending, both online and offline. These are the most highly engaged consumers, who are digitally savvy and willing to allocate extra cash to purchasing goods and services. Compared with other internet users, they purchase more across merchandise categories and services like vacations and dining than other internet users in their income groups.
For a complete description of the analysis presented in this chapter and the relevant countries, see the Research Methodology.
YOUNG, URBAN CONSUMERS
Nearly one-third of Connected Spenders around the world are between the ages of 25 and 34, compared with fewer than one-fourth of other internet users (see Exhibit 1). Most of them are Generation Y (or Millennials) and grew up with the internet. Only about 29% of Connected Spenders are over the age of 40, compared with 40% of other internet users.
More than three-quarters of Connected Spenders live in urban areas. In contrast, other internet users are twice as likely to live in a rural area.
In emerging and growth markets—where the share of Connected Spenders is rising fastest—these consumers are even more concentrated in urban areas. In those countries, 90% of Connected Spenders live in urban areas, compared with 51% in mature markets. This is the result of two demographic patterns:
- In emerging markets, incomes in cities have risen faster than in other areas.
- In rural parts of those same economies, internet access is often lacking.
Only 37% of consumers in emerging and growth economies have access to the internet today, compared with upwards of 90% in mature economies. Even in China, which is known for its rapidly developing online industry, internet penetration is barely above 50%.
As incomes rise in rural areas and internet access follows, Connected Spender populations will be distributed more evenly. In the next decade, however, the Connected Spenders in emerging markets will be in urban areas.
HIGHER INCOMES, BUT NOT NECESSARILY RICH
By definition, Connected Spenders must have sufficient income to spend in discretionary ways. Therefore, even though Connected Spenders can exist in any income cohort, they are more likely to be found in higher income brackets. However, not all Connected Spenders are rich, and not all rich consumers are Connected Spenders, as shown in Exhibit 2.
Incomes of Connected Spenders. Connected Spenders come from all income groups. Across countries, 35% of Connected Spenders are in the highest-income group of their respective countries, compared with 17% of other internet users. Among internet users who are not Connected Spenders, more than half are in the lowest-income group in their country, versus less than one-third of Connected Spenders. Roughly two-thirds of consumers in the highest-income households, and one-third of the lowest-income households, are Connected Spenders.
As would be expected, in less wealthy economies, Connected Spenders are more concentrated in a narrower range of higher-income groups. In wealthier economies, Connected Spenders are distributed across more income groups. Thus, in mature economies, Connected Spenders have above-average incomes, but not as far above average as Connected Spenders in emerging economies.
More than money. It is important to look beyond income alone to understand Connected Spenders. Much of what defines a Connected Spender is the consumer’s attitude—an enthusiasm for shopping and confidence in the ability to spend in discretionary ways. Connected Spenders in lower-income households can be as engaged as wealthier Connected Spenders, and consumer-facing business would be remiss to ignore them. Although these consumers may not be prime consumers for all product categories (most cannot afford any luxury products, for example), they represent a large population of eager consumers.
The Connected Spender concept identifies the most eager consumers in every economy and income group—the most willing and able consumers at every price point. Thus, some higher-income consumers are not Connected Spenders, because despite having substantial discretionary income, they lack the necessary engagement with the consumer economy.
For a more complete analysis of income dynamics, and a comparison of how Connected Spenders compare with income-based consumer groups, see Why Not Focus on Income?
HIGH CONSUMER CONFIDENCE
Not surprisingly, Connected Spenders are more positive about the future than other internet users. Nielsen tracks consumer confidence each quarter across more than 60 countries, asking consumers how much improvement they expect in their financial situations, job prospects, affordability of important products, and other measures of economic well-being. Connected Spenders consistently score higher on consumer confidence measures than other internet users, as shown in Exhibit 3. In 2015, Connected Spenders had a consumer confidence score of 115, versus 85 for other internet users. This pattern holds across all economies where the survey is conducted.
Connected Spenders are universally more confident, but their confidence levels vary by market:
- In countries such as Malaysia, the Philippines and Thailand, differences in confidence between Connected Spenders and other internet users are less than 15 points. This narrow spread is a result of strong economic growth that has benefited a wide range of consumers.
- At the other extreme, in Western European countries such as Belgium, Germany, Italy, the Netherlands and the United Kingdom, gaps in confidence scores are more than twice as large, exceeding 30 points. In some of these economies, such as Italy, economic growth has been tepid since the global financial crisis. In others, economic gains have gone disproportionately to the highest-income consumers, causing large gaps in confidence between income groups.
While high consumer confidence correlates with income, the confidence of Connected Spenders is greater than income alone would suggest (see Exhibit 4). On the whole, Connected Spenders—including those from the lowest-income households—are more confident than the highest-income internet-using households are. Moreover, even the lowest-income Connected Spender households have more confidence than the highest-income non–Connected Spender, internet-using households.
Again, this shows how the Connected Spender concept identifies the most eager and confident consumers across all income levels. Among high-income households, there are many low-confidence consumers. And among low-income households, there are plenty of high-confidence consumers. The Connected Spender concept isolates these groups, creating a more useful consumer grouping than can be accomplished with simple income-based approaches.
PURCHASERS IN MORE CATEGORIES
Across a wide variety of categories, including clothing, entertainment and food, Connected Spenders are more likely than other internet users to spend some extra money each month (see Exhibit 5). For example, Connected Spenders are likelier to be buyers of vacations, entertainment, dining out and electronics. Further, relative to other internet users, they allocate a larger share of their incomes to those categories.
Manufacturers and retailers of discretionary goods and services can use knowledge of Connected Spender behavior to identify what could be their best prospects in all types of markets. Connected Spenders will tend to gravitate toward the newer, trendier versions of products (Exhibit 6). This is true even within basic categories, such as groceries and housing. Within these categories, Connected Spenders can be counted on to trade up to higher-quality or newer versions.
Consider the food-and-beverage category as an example. Nearly all consumers buy food for their homes, but Connected Spenders seek additional benefits when grocery shopping, such as higher-quality produce or exotic ingredients for the latest culinary trend. Grocery stores looking to capture demand from Connected Spenders should play to their preferences, both in assortment and in the shopping experience. This might include smartphone applications that allow shoppers to plan meals and automatically create shopping lists or curated online subscription and delivery services—anything that involves a higher level of technological ability or connotes premium service.
Compared with other internet users, Connected Spenders are much more adept at omnichannel shopping (see Exhibit 7). Compared with non–Connected Spenders, they think shopping online is more fun and convenient and are big researchers. Before buying, online or offline, they gather information—again, both online and offline. They read product reviews online and rely on their social networks to provide suggestions much more frequently than other internet users do. They also take advantage of hands-on, in-store research. It shows that for the most avid shoppers, research and purchasing are not separate actions in separate channels.
Retailers can win if they offer attractive omnichannel experiences to capture growing demand from Connected Spenders. However, even with Connected Spenders, value is key. They use technology to price-shop more than other internet users, and many Connected Spenders from lower-income groups use their technological prowess to research deals across channels to stretch their discretionary spending dollars.
LEADING-EDGE MEDIA CONSUMERS
Connected Spenders are bigger media users than other internet users and have cutting-edge media habits. As shown in Exhibit 8, they are binge-watchers, cord cutters and time shifters. Compared with other internet users, Connected Spenders are more likely to watch a recorded program instead of live brodcats and may stream multiple times in one day. They enjoy the freedom of being able to watch their programs anywhere and anytime. In addition, they turn to the internet and social media to engage with other viewers while they are watching.
Connected Spenders are also more likely than other internet users to use mobile devices—smartphones and tablets—to consume media of all types (see Exhibit 9). While they are only slightly more likely to watch a variety of different programs than other internet users, Connected Spenders are two to three times more likely to view programs on a tablet. Connected Spenders’ preference for viewing media on tablets is particularly strong in growth economies, such as Brazil, China and India, where media consumption on tablets is very low among other internet users. Globally, but particularly in growth economies, mobile devices are a relatively efficient method for consumer-facing businesses to reach a Connected Spender audience, and marketers looking to communicate with them should shift their advertising to mobile devices more and more.
OPENNESS TO ADVERTISING
Connected Spenders enjoy learning about new products and view advertising as a way to do so. The best way for advertisers to reach Connected Spenders is to go online. Connected Spenders have higher-than-average recall rates for online advertisements (see Exhibit 10). They also are more likely than other internet users to visit manufacturers’ web pages and internet forums while researching. Furthermore, they are more likely to engage with friends on social media to discuss purchases.
Traditional advertising methods, such as television and point-of-purchase advertising still resonate with Connected Spenders, but no more than they do with other internet users. So ad campaigns using traditional channels may be an inefficient method for targeting Connected Spenders. For these valuable consumers, online is more efficient: Online campaigns may not have the total reach of traditional media, but a larger share of views will come from Connected Spenders.
While Connected Spenders do appreciate advertising, they also have higher standards. Content must be relevant and useful (see Exhibit 11). Perhaps for this reason, Connected Spenders are more willing than other internet users to share their personal data and preferences to improve their ad experiences.
Consumer-facing businesses should remember these attributes when communicating with Connected Spenders. This is an extremely valuable cohort and worth the added investment.
The demographics and buying habits of Connected Spenders signal why this group is important to consumer-facing companies: They are eager and able to make purchases across many segments. To learn more about the significance of Connected Spenders as a consumer group, read The Rise of the Connected Spender. To compare the advantages of focusing on this group rather than an income group, read Why Not Focus on Income? To explore some marketing implications of the Connected Spender approach, read Implications for Consumer-Facing Businesses. For details on our methods, see the Research Methodology.