1 00:00:03,930 --> 00:00:07,650 Sean Aylmer: Welcome to the Fear and Greed Business Interview. I'm Sean Aylmer. Consumer 2 00:00:07,650 --> 00:00:10,920 Sean Aylmer: spending can give a fascinating insight into how the economy 3 00:00:10,920 --> 00:00:15,029 Sean Aylmer: is traveling, but some types of consumers seem almost immune 4 00:00:15,089 --> 00:00:18,449 Sean Aylmer: to any slowdown. According to Roy Morgan Research, we operate 5 00:00:18,449 --> 00:00:22,800 Sean Aylmer: in a two-speed consumer economy. 10 million Australians have a 6 00:00:22,800 --> 00:00:25,800 Sean Aylmer: traditional mindset when it comes to spending, but about 5 7 00:00:25,800 --> 00:00:30,720 Sean Aylmer: million Australians are considered New Economic Order, or NEO, customers. 8 00:00:31,110 --> 00:00:34,590 Sean Aylmer: And those consumers apparently spend up to 300% more than 9 00:00:34,590 --> 00:00:38,070 Sean Aylmer: traditional consumers, and are less affected by cost of living pressures. 10 00:00:38,280 --> 00:00:41,489 Sean Aylmer: This data has been used by brands like LVMH, Qantas, 11 00:00:41,490 --> 00:00:46,620 Sean Aylmer: David Jones, Macquarie Bank, and Lexus. Another is Australian mattress company, 12 00:00:47,309 --> 00:00:50,009 Sean Aylmer: AH Beard, whose CEO is Tony Pearson. Tony, welcome to 13 00:00:50,009 --> 00:00:50,729 Sean Aylmer: Fear and Greed. 14 00:00:51,299 --> 00:00:52,080 Tony Pearson: Thank you, Sean. 15 00:00:52,680 --> 00:00:57,240 Sean Aylmer: What exactly is a New Economic Order, NEO, consumer? 16 00:00:57,960 --> 00:01:01,590 Tony Pearson: Sure. Well, there's been a vast array of research into 17 00:01:01,590 --> 00:01:04,739 Tony Pearson: trying to segment out buying behaviour in markets for a 18 00:01:04,740 --> 00:01:08,610 Tony Pearson: long period of time. And NEO is not a buying 19 00:01:08,610 --> 00:01:14,220 Tony Pearson: segment in the traditional way, it's more a general mindset of a 20 00:01:14,640 --> 00:01:20,700 Tony Pearson: particular consumer. The NEO particularly is someone that, as you 21 00:01:20,700 --> 00:01:23,280 Tony Pearson: just sort of spoke to, typically spends more, and they 22 00:01:23,280 --> 00:01:24,150 Tony Pearson: spend more often. 23 00:01:25,410 --> 00:01:28,859 Sean Aylmer: Okay. So, I mean, I imagine they're very valuable, but 24 00:01:29,129 --> 00:01:32,400 Sean Aylmer: they don't necessarily come from any particular demographic or it's kind of 25 00:01:32,670 --> 00:01:33,839 Sean Aylmer: more a state of mind thing? 26 00:01:34,440 --> 00:01:37,919 Tony Pearson: It is. If I talk about NEO in the way... 27 00:01:37,950 --> 00:01:42,300 Tony Pearson: The founder of NEOs is an Australian gentleman, Dr. Ross Honeywill, 28 00:01:42,719 --> 00:01:47,459 Tony Pearson: and Dr. Ross undertook a 10-year piece of research in 29 00:01:47,459 --> 00:01:53,580 Tony Pearson: trying to unpack buying behaviour of populations. And after that 30 00:01:53,580 --> 00:01:56,370 Tony Pearson: 10 years quite simply he said there's only really two 31 00:01:56,370 --> 00:01:59,610 Tony Pearson: types of buyers. And the way he describes them is 32 00:01:59,610 --> 00:02:04,829 Tony Pearson: not in terms of your typical bio, sociographic, it's more 33 00:02:04,830 --> 00:02:09,600 Tony Pearson: about the key mindset. The two are a traditional buyer, they've 34 00:02:09,600 --> 00:02:13,918 Tony Pearson: been around forever, they're price-led, everything starts and ends in price. 35 00:02:13,980 --> 00:02:18,960 Tony Pearson: They're purchasing more based on functionality if you like. And 36 00:02:18,960 --> 00:02:22,680 Tony Pearson: the other type is your NEO, a little bit more progressive, 37 00:02:23,010 --> 00:02:26,190 Tony Pearson: they typically like to take a little bit more control 38 00:02:26,190 --> 00:02:30,960 Tony Pearson: and ownership into key decisions. They focus not as much 39 00:02:30,960 --> 00:02:35,550 Tony Pearson: on functionality as they do on sense of purpose and 40 00:02:35,550 --> 00:02:39,450 Tony Pearson: their ability to align themselves to whatever the values and 41 00:02:39,450 --> 00:02:41,729 Tony Pearson: purposes are of the brand that they're attracted to. 42 00:02:42,508 --> 00:02:44,580 Sean Aylmer: Is this something that there is more and more of? 43 00:02:44,580 --> 00:02:47,700 Sean Aylmer: I mean, you hear, I suppose I'm thinking ESG and 44 00:02:47,700 --> 00:02:52,109 Sean Aylmer: some of those environmental issues, but kind of broadly beyond 45 00:02:52,110 --> 00:02:55,919 Sean Aylmer: that, the idea of aligning yourself to brands. Is that 46 00:02:55,919 --> 00:02:59,309 Sean Aylmer: something that's always happened or are people more conscious of 47 00:02:59,309 --> 00:03:00,691 Sean Aylmer: that now do you think? 48 00:03:00,691 --> 00:03:05,610 Tony Pearson: Yeah, I think it's certainly emerging more. And I think Dr. 49 00:03:05,610 --> 00:03:08,309 Tony Pearson: Ross in his own piece of research really sort of 50 00:03:08,309 --> 00:03:10,858 Tony Pearson: talks back to where did we start to see this 51 00:03:11,309 --> 00:03:16,409 Tony Pearson: separation between traditional buyer and the new economic order, and 52 00:03:16,410 --> 00:03:21,030 Tony Pearson: that sort of really accelerated post the early '90s. So I 53 00:03:21,030 --> 00:03:24,870 Tony Pearson: think we're starting to see a widening or an emergence 54 00:03:24,960 --> 00:03:28,169 Tony Pearson: of the NEO buyer, and it's a little bit over 55 00:03:28,169 --> 00:03:32,969 Tony Pearson: simplistic to say just pure NEO. So just to use 56 00:03:32,969 --> 00:03:38,070 Tony Pearson: some of the Australian statistics, 52% of the Australian buying 57 00:03:38,160 --> 00:03:41,940 Tony Pearson: consumer markets, so with the NEO research on Roy Morgan, 58 00:03:41,940 --> 00:03:46,319 Tony Pearson: we talk about people that purchase 14 years and older, 52% 59 00:03:46,320 --> 00:03:51,450 Tony Pearson: of the population would be your traditional market. The other 48% 60 00:03:51,450 --> 00:03:54,780 Tony Pearson: are NEOs, and NEOs just broadly have two types, there's 61 00:03:54,780 --> 00:03:58,350 Tony Pearson: those that have built capacity to spend already and those 62 00:03:58,350 --> 00:04:02,070 Tony Pearson: that have the same mindset but have not yet built capacity, 63 00:04:02,070 --> 00:04:07,710 Tony Pearson: so when we're talking that 48% of NEO and aspiring NEOs, 64 00:04:08,370 --> 00:04:12,510 Tony Pearson: that segment of the market is responsible for 77% of 65 00:04:12,510 --> 00:04:15,750 Tony Pearson: all discretionary spend. When we just look at the NEO 66 00:04:16,020 --> 00:04:19,950 Tony Pearson: that has already built the potential and capacity to spend, 67 00:04:20,339 --> 00:04:24,089 Tony Pearson: you're talking about 24% of the population. And just in 68 00:04:24,089 --> 00:04:27,808 Tony Pearson: retail they account for over 41% of retail sales. So 69 00:04:27,990 --> 00:04:29,370 Tony Pearson: they're quite a powerful force. 70 00:04:30,270 --> 00:04:34,110 Sean Aylmer: Incredibly valuable to an organisation like AH Beard, for example? 71 00:04:34,500 --> 00:04:39,000 Tony Pearson: Yeah, absolutely. We are in Australia a traditional manufacturer, and 72 00:04:39,420 --> 00:04:44,339 Tony Pearson: we don't directly interact with our consumers. We interact through 73 00:04:44,400 --> 00:04:48,840 Tony Pearson: our partners, our retailers, hotel providers and others. And so 74 00:04:48,900 --> 00:04:52,618 Tony Pearson: when you're looking at how you market your brand and 75 00:04:52,620 --> 00:04:55,560 Tony Pearson: your products behind them, you've got to be very, very 76 00:04:55,560 --> 00:04:59,130 Tony Pearson: conscious about how you use that limited spend. So the 77 00:04:59,130 --> 00:05:04,109 Tony Pearson: NEO methodology has allowed us to get very particular around 78 00:05:04,109 --> 00:05:07,980 Tony Pearson: how we position our brand, how we communicate with that 79 00:05:07,980 --> 00:05:11,100 Tony Pearson: NEO audience as our preferred target market. 80 00:05:11,910 --> 00:05:14,040 Sean Aylmer: Stay with me, Tony, we'll be back in a minute. 81 00:05:20,070 --> 00:05:24,239 Sean Aylmer: I'm speaking to Tony Pearson, CEO of AH Beard. When 82 00:05:24,240 --> 00:05:27,539 Sean Aylmer: you were talking then, I was thinking to myself, "I'm 83 00:05:27,540 --> 00:05:28,980 Sean Aylmer: not a NEO." But then as you went on, I 84 00:05:28,980 --> 00:05:31,020 Sean Aylmer: thought, "Actually I am a NEO." Which, I suppose the 85 00:05:31,020 --> 00:05:33,660 Sean Aylmer: point there is as you get older like some of 86 00:05:33,660 --> 00:05:38,549 Sean Aylmer: us do, and you have greater means, can you shift 87 00:05:38,549 --> 00:05:39,630 Sean Aylmer: into becoming a NEO? 88 00:05:40,260 --> 00:05:44,490 Tony Pearson: Yeah, it's a really interesting question. So actually that's not 89 00:05:44,490 --> 00:05:47,580 Tony Pearson: necessarily the case. So I'd hate to be trying to 90 00:05:47,580 --> 00:05:52,080 Tony Pearson: paint a picture that a traditional consumer doesn't necessarily have 91 00:05:52,080 --> 00:05:56,159 Tony Pearson: high affluence. In fact, they can. It's a smaller proportion though. 92 00:05:56,400 --> 00:06:01,260 Tony Pearson: So if we use Roy Morgan's Big Spender database, only 6% 93 00:06:01,860 --> 00:06:05,490 Tony Pearson: of those that would be defined as a big spender 94 00:06:05,490 --> 00:06:10,078 Tony Pearson: would be a traditional consumer. Over 90% of them are in 95 00:06:10,080 --> 00:06:14,460 Tony Pearson: fact NEOs. There are NEOs at every age demographic. They 96 00:06:14,460 --> 00:06:19,350 Tony Pearson: typically skew slightly younger, but there are NEOs at every 97 00:06:19,529 --> 00:06:24,390 Tony Pearson: age demographic, as there are traditional. So it's more a 98 00:06:24,390 --> 00:06:29,190 Tony Pearson: mindset or a behavioural pattern if you like, and so 99 00:06:29,190 --> 00:06:31,890 Tony Pearson: therefore it's not necessarily something you grow into. 100 00:06:32,400 --> 00:06:35,520 Sean Aylmer: Yeah. So potentially there are big spenders who aren't NEOs 101 00:06:35,520 --> 00:06:36,060 Sean Aylmer: as well? 102 00:06:36,209 --> 00:06:40,050 Tony Pearson: Yeah, correct. But their mindset's still the same, right? Typically 103 00:06:40,050 --> 00:06:44,669 Tony Pearson: a begrudging spender would prefer to look at function over 104 00:06:44,670 --> 00:06:50,159 Tony Pearson: form, probably more conservative in their approach to purchase than 105 00:06:50,160 --> 00:06:50,939 Tony Pearson: a NEO buyer. 106 00:06:51,779 --> 00:06:54,510 Sean Aylmer: So how does a brand like AH Beard use this 107 00:06:54,540 --> 00:06:55,589 Sean Aylmer: sort of information? 108 00:06:56,190 --> 00:07:00,659 Tony Pearson: So we still build products that are available, whether you're 109 00:07:00,660 --> 00:07:03,630 Tony Pearson: a NEO or a traditional, and obviously we have a 110 00:07:03,630 --> 00:07:07,919 Tony Pearson: market that covers both consumer types. So we don't try 111 00:07:07,920 --> 00:07:11,280 Tony Pearson: and exclude anyone from wanting to get access or being attracted 112 00:07:11,789 --> 00:07:14,760 Tony Pearson: to our business, our brand, or our products. What we 113 00:07:14,760 --> 00:07:18,840 Tony Pearson: do is be very conscious around the way we communicate, 114 00:07:18,900 --> 00:07:23,309 Tony Pearson: the style of communication, the format, the forum that we're using, 115 00:07:23,309 --> 00:07:28,439 Tony Pearson: the channel to market, and everything is built around being 116 00:07:28,440 --> 00:07:32,220 Tony Pearson: most attractive to the NEO market. And what's been found 117 00:07:32,220 --> 00:07:35,970 Tony Pearson: to be true, is if you market that way, a 118 00:07:35,970 --> 00:07:40,710 Tony Pearson: way that is most attractive to a NEO market, the traditional consumers 119 00:07:40,710 --> 00:07:44,639 Tony Pearson: will still follow. But the opposite is not true. So 120 00:07:44,639 --> 00:07:47,039 Tony Pearson: in way of an example, if you look at our 121 00:07:47,100 --> 00:07:51,240 Tony Pearson: particular product, mattresses is our primary product, they have become 122 00:07:51,240 --> 00:07:54,990 Tony Pearson: quite a commoditised product. Now that's because most people actually 123 00:07:54,990 --> 00:08:00,300 Tony Pearson: don't understand the true value of the product. Sleep in 124 00:08:00,870 --> 00:08:03,029 Tony Pearson: AH Beard is the first pillar of health. Right alongside 125 00:08:03,030 --> 00:08:07,020 Tony Pearson: nutrition and exercise, it's integral. And sleep is integral to 126 00:08:07,109 --> 00:08:11,370 Tony Pearson: human wellness. However, that's not really well known, so the 127 00:08:11,430 --> 00:08:14,489 Tony Pearson: mysterious rectangle box has become a little bit commoditised. And 128 00:08:14,490 --> 00:08:18,479 Tony Pearson: how that normally shows up in retail is let's shout 129 00:08:18,480 --> 00:08:21,900 Tony Pearson: from the rooftops about the discount or the percentage off. 130 00:08:22,469 --> 00:08:25,530 Tony Pearson: And when you shout at a NEO it actually turns 131 00:08:25,530 --> 00:08:30,810 Tony Pearson: them off. So they are more inclined to be attractive 132 00:08:30,930 --> 00:08:35,070 Tony Pearson: to something that allows them an element of self-discovery. They 133 00:08:35,070 --> 00:08:38,939 Tony Pearson: can have a little bit more control in the learning 134 00:08:38,940 --> 00:08:43,620 Tony Pearson: process and the buying into what actually sits behind the 135 00:08:43,620 --> 00:08:49,020 Tony Pearson: brand and the product. Beauty and form are so much 136 00:08:49,020 --> 00:08:52,020 Tony Pearson: more attractive to a NEO audience than they would be 137 00:08:52,020 --> 00:08:56,400 Tony Pearson: to the pure functionality that's probably driving the traditional purchasing decision. 138 00:08:57,210 --> 00:09:00,540 Sean Aylmer: Do you think this is a growing, I don't want 139 00:09:00,540 --> 00:09:04,980 Sean Aylmer: to use the word trend, but as society evolves, there'll 140 00:09:04,980 --> 00:09:07,500 Sean Aylmer: be a great proportion of NEOs amongst us? 141 00:09:07,800 --> 00:09:11,250 Tony Pearson: It's an interesting question. My personal assumption is yes, I think... 142 00:09:11,610 --> 00:09:15,900 Tony Pearson: Because what we're talking about is a behavioural model, right? 143 00:09:16,559 --> 00:09:21,689 Tony Pearson: A societal model. And so populations change when the environment 144 00:09:21,690 --> 00:09:25,740 Tony Pearson: around them changes and our environment's changing rapidly. And certainly 145 00:09:25,740 --> 00:09:32,520 Tony Pearson: the consumer environment has continued to change exponentially since the '80s, '90s, 146 00:09:32,520 --> 00:09:38,010 Tony Pearson: early 2000s. And so that bifurcation that Dr. Ross talks about, 147 00:09:38,010 --> 00:09:43,290 Tony Pearson: that separation between the traditional economic order and the new 148 00:09:43,290 --> 00:09:47,309 Tony Pearson: economic order, I think will continue to evolve. And now 149 00:09:47,309 --> 00:09:51,689 Tony Pearson: whether that changes the proportion of populations or not dramatically 150 00:09:51,690 --> 00:09:55,830 Tony Pearson: is probably secondary. There is a real need to be 151 00:09:55,830 --> 00:10:01,860 Tony Pearson: able to bring authenticity, transparency, alignment to purpose back into 152 00:10:01,860 --> 00:10:05,700 Tony Pearson: brands and products, and alleviate some of that commoditisation, that 153 00:10:05,700 --> 00:10:08,070 Tony Pearson: we spoke about earlier, across a lot of products and brands. 154 00:10:09,000 --> 00:10:12,059 Sean Aylmer: And the bottom line in all this for a company 155 00:10:12,059 --> 00:10:16,320 Sean Aylmer: like AH Beard, but pretty much everyone, is they're a very 156 00:10:16,320 --> 00:10:17,760 Sean Aylmer: valuable customer set. 157 00:10:18,510 --> 00:10:23,458 Tony Pearson: Yeah. Particularly in difficult economic times. So time over time 158 00:10:23,460 --> 00:10:27,299 Tony Pearson: and because of the age of the research and the 159 00:10:27,299 --> 00:10:31,679 Tony Pearson: data sets, both that Dr. Ross and certainly Roy Morgan, through 160 00:10:31,679 --> 00:10:33,809 Tony Pearson: the Single Source database have access to, we're able to 161 00:10:33,809 --> 00:10:38,160 Tony Pearson: watch behaviour over an extended period. So we can track 162 00:10:38,460 --> 00:10:43,769 Tony Pearson: consumer confidence levels, go back to pre-GFC, what happened to 163 00:10:43,770 --> 00:10:48,780 Tony Pearson: consumer confidence through the pandemic, post the pandemic, through the 164 00:10:48,809 --> 00:10:52,679 Tony Pearson: pent-up demand effect. As the interest rates and cost of 165 00:10:52,679 --> 00:10:56,160 Tony Pearson: living has increased, we've been able to track this incredibly well. 166 00:10:56,160 --> 00:10:58,320 Tony Pearson: So rather than just looking at a population and saying 167 00:10:58,320 --> 00:11:01,230 Tony Pearson: consumer confidence sits here, we're able to have a look 168 00:11:01,230 --> 00:11:05,370 Tony Pearson: at how does consumer confidence show up for traditional consumers 169 00:11:05,609 --> 00:11:09,390 Tony Pearson: versus NEOs. And there's a big gap. And what we 170 00:11:09,390 --> 00:11:14,730 Tony Pearson: watch time and time again is NEOs lead recovery. So 171 00:11:14,820 --> 00:11:17,969 Tony Pearson: they spend more, they spend more often, and their consumers' 172 00:11:17,969 --> 00:11:21,750 Tony Pearson: levels are higher, therefore their recovery rates are faster. So 173 00:11:21,780 --> 00:11:25,950 Tony Pearson: looking at the post-GFC times, so I was looking at that just 174 00:11:25,950 --> 00:11:27,809 Tony Pearson: a couple of years ago trying to predict what do 175 00:11:27,809 --> 00:11:30,929 Tony Pearson: we think might happen post COVID. So what we saw 176 00:11:30,929 --> 00:11:36,958 Tony Pearson: was a nine-month delay in consumer confidence, exceeding population confidence 177 00:11:36,960 --> 00:11:42,359 Tony Pearson: norms between a NEO and a traditional consumer. So they absolutely 178 00:11:42,359 --> 00:11:45,030 Tony Pearson: led the recovery in that period and we're seeing signs of 179 00:11:45,030 --> 00:11:46,800 Tony Pearson: them leading it again at the moment. 180 00:11:47,790 --> 00:11:50,700 Sean Aylmer: Absolutely fascinating. Tony, thank you for talking to Fear and Greed. 181 00:11:51,150 --> 00:11:51,809 Tony Pearson: Thank you. 182 00:11:52,469 --> 00:11:54,990 Sean Aylmer: That was Tony Pearson, Chief Executive Officer of AH Beard. 183 00:11:56,009 --> 00:11:58,259 Sean Aylmer: This is the Fear and Greed business interview, join us 184 00:11:58,260 --> 00:12:00,508 Sean Aylmer: every morning for the full episode of Fear and Greed, 185 00:12:00,540 --> 00:12:04,350 Sean Aylmer: Australia's best business podcast. I'm Sean Aylmer. Enjoy your day.