Consumer Value

A significant gap in knowledge about consumer value was recognised in the late 1990s by Ross Honeywill and Verity Byth while directors at KPMG. It was widely accepted that high-spenders behave differently from low-spenders. However, what form that behavioural difference took and what motivated different consumption levels was a mystery.

Given this gap in knowledge, those wanting to profit from high-value consumers were forced to work only with what was available. 

Demographics and socio-economic data used occupation or income as proxies for value. And while income and wealth are important – you must have money to be able to spend it – the real surprise is that those with money don't automatically have a desire to spend it. Furthermore, these data offered nothing on the psychology of the consumer – eg. Why do they spend? What will motivate them to spend? Do they even want to spend?

Companies researching customers spending or profitability could understand who in the current customer base was providing the most value. However, this still offered nothing on the psychology of the consumer; nothing on how to identify those who have unfulfilled potential or who to target as new customers.

On the psychological side, traditional research into consumer behaviours, attitudes and values was not linked to spending propensity or spending capacity and, by itself, provided little useful knowledge about consumer value. Managers were left to guess about what personal characteristics equated with high value consumption.
 
At the enterprise level, research has indeed been conducted to understand the characteristics of high-profit or high-spending consumers.  But gaps and questions remained. Could, for example, results be used to identify consumers in the company’s customer base who, while they are not currently spending, have the potential to deliver profitable volume? Could high-value consumers not in the customer base be targeted for direct marketing or media campaigns? What is the company’s relative share of high-value consumers – how were they doing compared to the competition?

So it was clear that a new body of knowledge was needed.  And to enable the capture of extra profit from high-value consumers, it would need to:

• Define what personal characteristics drive high-value consumption in a way that is actionable in the design of products/services, marketing content, sales and service approaches, and brand strategies
• Facilitate the identification of high-value consumers in customer databases
• Enable targeting of high-value consumers in the economy via direct marketing or general media
• Allow managers to assess performance in attracting and retaining high-value consumers relative to the competition across market segments and countries, and across consumption categories  

This was the starting point for 5 years of original research that resulted in the identification of the New Economic Order and in development of Neo Group Resources to capture extra profit from NEOs.