NEO’s – A Salesmans Best Friend
Neo-Consumers have high levels of past, present and intended spending and take a value-based rather than a price-based approach to purchasing.
50% of the population are Traditionals – price-sensitive and more interested in a deal than in quality, in normal times they account for only 23% of discretionary spending but when frightened by an economic downturn, account for far less. They almost stop spending altogether, and can usually only be tempted to pull out their wallets or purses by huge discounts. They are Harvey Norman customers.
25% of the population are made up of NEOs – high-spending, high-margin, high-discretionary choice; 25% are Evolvers – so called because they exhibit a number of NEO characteristics and spend more than Traditionals and, as a consequence, are likely to evolve toward Neo behaviour over time. These folk buy quality rather than prestige – think iPods, and try to imagine someone asking for a discount when buying one.
NEOs and Evolvers make up 50% of the population and account for 77% of discretionary spending. Would now be a good time to find out more about them?
We’ll come back to these folk in the next newsletter, but if you’d like to talk about ramping up your product offering (first), then your marketing to them, please drop me a line.
The New Economic Order
There are 59 million in the USA, 6 million in Canada and 4 million in Australia.
NEOs are metropolitan dwellers. More of them live in Vancouver, inner urban Sydney, downtown New York and San Francisco than anywhere else. Almost half of all the people who live in those urban locations are NEOs, and when compared to their Traditional (non-NEO) cousins, NEOs are 3 times more likely to live in the world’s great urban villages.
45% of NEOs are women and 55 % are men.
While NEOs range over all age groups, they tend to be younger and, conversely, Traditionals tend to be older. NEOs exceed the national average in every profile between age 20 and age 50, while Traditionals exceed the national average in every profile above age 50. Specifically, NEOs are most highly represented in the 25 – 39 age segments.
Half of all people with a university degree are NEOs and when compared to Traditionals, four times more NEOs have degrees. They are most likely to be in professional or management occupations and earn significantly more than the rest of society. Specifically, they dominate every income category above $60,000pa and are 5 times more likely than anyone else to earn in excess of $100,000pa.
More importantly, they earn more because they’re NEOs…they are not NEOs because they earn more (income was not used in identifying who was a NEO and who wasn’t).
NEOs Spend More (More Often)
And they spend more! And spend more frequently than anyone else. NEOs dominate the ‘Big Spender’ category with 92% of them in the top third of discretionary spenders. While at the other end of the scale, only 4% of Traditionals are in the top third of discretionary spenders. Traditionals, many of them wealthy, just don’t like spending – they dominate by more than 10:1 the bottom third of discretionary spending.
NEOs have progressive social values and attitudes both in the marketplace and the workplace.
The NEO social and economic typology is unashamedly commercial. To qualify as NEOs, individuals must have high levels of past, present and intended spending – they must score in the top 25 percent on 12 discretionary spending factors. And they must exhibit both the underlying attitudes that equate to high spending and the behaviours that signal spending motivation – they must score in the top 40 percent on 184 NEO attitudinal and behavioural factors.
THE NEO TYPOLOGY – A BRIEF BACKGROUND
Background
The NEO typology had its genesis in the mid-late 1990s at the KPMG Centre for Consumer Behaviour. It was developed by consumer behaviourist Ross Honeywill and social scientist Verity Byth, then directors of KPMG Consulting (Asia Pacific).
In 2001 Random House published Honeywill & Byth’s first book outlining the typology and its practical business application titled I-Cons: the essential guide to winning and keeping high-value customers. In that same year the typology evolved and was applied to the Roy Morgan Single Source database: arguably the largest consumer database of its kind in the world with 120,000 respondents each year and more than 2,000 consumption variables. This move operationalised the NEO typology and took it into the offices of every major media agency in Australia.
In 2004 I-Cons was translated into Chinese and published in Mainland China.
In October 2006 NEOs: how the new economic order is changing the way we live work and play was published in Australia and New Zealand by Scribe Publications.
Social Segmentation
The NEO Typology is a social segmentation defined by using Psychonomics – standard psychographics (values, attitudinal & behavioural) + a statistical discriminant model (SDM) using multivariate modelling (to characterizing the differences between social segments) + a spending propensity model (SPM) to identify the respective economic impact of each social segment. It operates at a societal level providing an analysis across the population and the economy of the social segments that are the most influential – economically, politically and socially. It therefore sits above, and can easy integrate with, market segments developed at an enterprise level.
Psychographics + SDM + SPM = NEO typology
Population data
Defined by 194 factors, the NEO typology is a complex model with a simple interface: three master segments. Each social segment is scored to 5% increments (i.e. each has 20 detailed and differentiated levels). The three social segments are:
New Economic Order (NEO)
Evolving Economic Order (Evolvers)
Traditional Economic Order (Traditionals)
The NEO and Evolver social segments are psychographically similar, but may exhibit different spending characteristics (an Evolver may have a majority of NEO attitudinal and values factors, but not conform to the requirement by the NEO algorithm to also be in the top 25% of discretionary spending).
The Traditional social segment is statistically (behaviourally and attitudinally) different to both NEOs and Evolvers.
Genetic Hardwiring
While Social Intelligence (see What is Social Intelligence? section) is soft-wired and adaptive, individuals are born hardwired to be either a Traditional or a NEO / Evolver according to Honeywill & Byth’s work conducted over 10 years with data from more than 750,000 interviews conducted in North American, the UK, Australia, Indonesia and New Zealand. They found that not only do NEO respondents differ markedly from Traditional respondents, but they are genetically programmed to be different.
Ross Honeywill’s work in social genetics is paralleled by other international studies including the work done in 2005 by John Alford at Rice University, Houston, Texas. Alford and his colleagues found that only 11 per cent of any social or psychological variance is due to early childhood socialization, including parental influence. In other words we are the subjects of nature, not nurture.
Elsewhere in the world, psychologists have found that people with conservative or traditional attitudes demonstrate more structured and persistent cognitive styles, whereas those with liberal or socially progressive views (i.e. NEOs) are more responsive to informational complexity, change and new experiences. David Amodio, from New York University’s psychology department reported that, “conservatives (i.e. Traditionals) have been found to be more structured and persistent in their judgments and approaches to decision-making. Progressives (i.e. NEOs), by contrast, report higher tolerance of ambiguity and complexity, and greater openness to new experiences on psychological measures.”1
Different gene variants produce profoundly different social responses. In the case of Traditionals, for example, the gene D4DR leads to higher levels of the neurotransmitter dopamine which is in turn linked to the need to impose order on the world.2 Traditional personalities are more likely to be genetically hard-wired to bring order to an otherwise chaotic world.
Conversely, other genes may well be responsible for NEO personality traits. According to a report in the New Scientist magazine, the genes ‘5HTT and MAOA, both help control the levels of serotonin, a neurotransmitter that also influences brain areas linked with trust and social interaction.’ In short, the NEO social type is more likely to have the genes that improve the regulation of serotonin, making NEOs more sociable and outgoing.
