1. 1
Post Recession
Post Digital
The New Horizon
15th September 2010

2. 2
The First global recession for 60 years
(since second world war)

3. UK Debt Problem

4. First Half 2010 Green Shoots

5. But Double Dip a possibility

6. UK Economic Forecast

7. Will the UK fall behind in next 5yrs

8. Ageing UK Population

9. The New UK Economy

10. Britain’s always on society 24/7

11. UK Ad Expenditure

12. 12
After this recession what is different
• The impact on the consumer psyche and difference
from past recessions
• The experience of past recessions

13. 13
The aftermath of financial crises
Percent decline Duration of downturn
(years)
House prices -35.5 6
Equity prices -55.9 3 – 4
Unemployment 7 4.8
GDP -9.3 1.9
Public debt 86 -
An examination of the effects of protracted financial crises based on an analysis of relevant
systemic financial crises of the past.
Source: National Bureau of Economic Research, Working paper 14656

14. 14
Recovery time for spending in the UK
(number of quarters for spending to recover to pre-recession level *)
0
5
10
15
20
25
30
Overall spending Holidays abroad Alcohol consumed
in the home
Clothing Food consumed in
the home
Hotels in the UK
1970s
1980s
1990s
Source ONS
* Spending (in real terms) to recover to the level of six months prior to the start of the
recession

15. 15
Wealth impacts of this recession in the UK
• UK wealth peaked in the 3rd quarter of 2007
– Net housing wealth : £3.8tn
– Net financial wealth : £2.9tn
– Overall net wealth : £6.7tn
– By 1st quarter 2009 we calculate the following losses:
– Loss of housing wealth : £0.55tn
– Loss of financial wealth : £0.75tn
– Overall loss : £1.3tn
Source: Bank of England/Trajectory Analysis

16. 16
Consumer incomes compared to last year
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Up 5% + Up less than
5%
Same Down less
than10%
Down 10-
25%
Down 25%+
Total
Source: Trajectory/Sense Consultants

17. 17
Impact of the credit crunch, so far
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Home
repossesed
Moveto
cheaper home
Higher
mortgage
repayments
Refused Credit Noneof these
Source: Trajectory/Sense Consultants

18. 18
Confidence to ‘spend as usual’ on everyday items less affected
(food, going out, clothing etc)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Very Confident Fairly Confident Bit Cautious Very Cautious
Source: Trajectory/Sense Consultants

19. 19
Confidence to ‘spend as usual’
on large items – more affected
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Very Confident Fairly Confident Bit Cautious Very Cautious
Source: Trajectory/Sense Consultants

20. 20
The consumer psyche post-recession

21. 21
The consumer psyche post-recession
• Key consumer themes:
– Simplicity here to stay
– Trust/transparency given a boost (faith in companies damaged
permanently)
– Thrift for a generation
– Post-austerity Britain/World = considered consumption: innovation
essential

22. 22
Real versus psychological impacts of the recession
• The impact of the recession on most consumers is psychological
rather than real or tangible
• Trajectory latest research (UK) shows that:
– only 25% of consumers feel that their incomes have fallen in the last year – 75%
report that their incomes are the same or have increased
– Over 80% of consumers have not been directly affected by the credit crunch
• However, the majority of consumers have had their confidence
undermined by the current economic crisis
– over 70% say that they are not confident to ‘spend as usual’ on large items (e.g.
a car or holiday)
– 55% of say that they are not confident to ‘spend as usual’ on everyday items
(e.g. Food or clothing)
Source: Trajectory

23. 23
The consumer context for this recession
• The current economic crisis follows 15 years of
exceptional economic growth and stability from 1993
onwards
• Consumer incomes and asset values rise rapidly, with
low and stable levels of inflation
• Between 1995 and 2005 real disposable consumer
incomes in the US and UK increased by a third
• This has had a liberating effect on consumers -
broadening horizons, interests and concerns
• Towards the end of the growth period, we began to see
a questioning of the benefits of growth and increased
affluence among better off consumers

24. 24
Some key impacts of the recession on the consumer psyche
• Simplicity
– the pressures of life in a recession increase the consumer
desire for simplicity
– Consumers want edited choice and strong, identifiable,
reassuring brands
– Growing role for advisors and intermediaries
• The new thrift
– Recession makes a (pre-existing) desire for thrift
acceptable for more affluent consumers
– Appeals to the desire for a more ‘wholesome’ and less
extravagant consumer lifestyle than the one that emerged
towards the end of the period of economic growth

25. 25
Some key impacts of the recession on the consumer psyche (2)
• The extremes of the experience economy are put on
hold
– The extremes of the experience economy now seem frivolous – out of
keeping with our new seriousness and an era of responsibility
– Also, the recession creates pent-up demand for ‘things’ (durable goods
especially)
– Simple, ‘wholesome’ experiences will do better
• Ethical consumption put on hold
– Green consumption holding up relatively well in this recession, but only
to the extent that reducing waste fits with the new thrift
– Other aspects of ethical consumption – organic, fair trade, CSR - take a
back seat as making ends meet becomes a priority
– A renewed interest in boardroom ethics: prudence, stability and no
excessive bonuses!
Source: Trajectory

26. 26
Challenges to received wisdoms
• Because it’s going to be bad, things won’t return to normal or at least will
take a long time to do so
• Britain can survive London no longer being a major global financial centre if
that were to happen
• Government debt has historically been higher and not as bad as some
international competitors
• But impact on taxes (and public services) inevitable
• Key consumer themes:
– Simplicity here to stay
– Trust/transparency given a boost (faith in companies damaged
permanently)
– Thrift for a generation
– Post-austerity Britain/World = considered consumption: innovation
essential

27. 27
The biggest single consumer psyche post-recession
is TRUST
• Trust in Banks and Companies fundamentally
undermined .
• People now believe friends and other users and
look to social media blogs and reviews

28. 28
User-generated content and social media will be key to
generating sales and reaching consumers
once the recession lifts
“Social media key to recovering post recession,”
Experian's 2009 Insight Report
• As disposable income tightens, UK internet users are spending less time
on transactional sites and more on user content driven websites such as
social networks, according to.
• In terms of traffic, social networks overtook retail websites in the UK for
the first time in January 2009 and by March were receiving 14 per cent
more internet visits, the report said.

29. post digital
29
“Like air and drinking
water, being digital will
be noticed only by its
absence, not its
presence.”
Nicholas Negroponte
MIT Media Lab

30. Harriette’s computer

31. post digital now?
31

32. post networked digital?
32

33. the transition continues
…by 2011, 90-percent of our
product categories will
connect wirelessly to the
Internet – and to each other
33

34. first recession where the internet is mainstream
34

35. in just two years…
35
IPA Touchpoints 3 vs. Touchpoints 2008 changes in average time online per week . Average increase 32” (5%)

36. unprecedented access to information
Source: European Technographics Benchmark Survey, Q2 2008

37. but…display advertising media driving search
Source : IPA Touchpoints 3. Rank order within age-group of def/tend to agree “<medium ads> often lead me to search the internet for informationon products and services”

38. unprecedented access to people
38

39. unprecedented access to people
Source: Universal McCann

40. Key considerations for businesses and brands
“(post) Recession”
• Trust
• Transparency
• Simplicity
• Thrift
• Efficiency
• Transparency
• Conversation
• Desirability
“(post) Digital”

41. 41
“Shopping itself is less impulsive
and more disciplined. Recession-
habituated shoppers are more
inclined than ever to do
research...” [Booz & Co]
Valuing customer
relationships, listening
and offering great service
will pay dividends
Degradation in product quality,
poor service, marketing
chicanery will be uncovered
and disseminated via the
social web

42. 42

43. 43

44. post digital services: mint.com
44

45. post digital products: wifi scales
45

46. post digital brands: uniqlo lucky counter
46

47. post digital brands: coca cola village
47

48. post digital brands: nike chalkbot
48

49. post digital brands: nike chalkbot
49

50. what about online advertising??
50
+$1billion this
year globally

51. what about online advertising??
51

52. what about online advertising??

53. Google goes post pc
53
“What we call 'display' today will just be 'advertising' -
a single platform that can coordinate an advertiser's
campaign across streaming audio ads in car stereos,
interactive mobile experiences on smartphones, and
HD video ads on set-top boxes“
Jonathan Bellack, Director of product management

54. beyond the pc
54

55. screen proliferation
55

56. flipboard: social magazine
56

57. location liberation
57

58. at home… in just two years
58
Source: Percentage HH, Touchpoints 3 (2010) vs Touchpoints 2 (2008)

59. beyond home…hotspots nearly triple in 4 years
59

60. smartphone sales
60
In June 2010, over a quarter of people in the
UK said they had a smartphone, more than
double the number two years previously.
The Communications Market
August 2010, OFCOM
Over 60% of contract phones sold
in the UK are now smartphones
Gfk, May, 2010

61. interface evolution
61

62. Content, services and social
interaction…
…how people want, where they want,
when they want
62

63. A tale of two screens: Mobile
63
The Mobile Internet
…Simply put, location changes everything. This one
input – our coordinates – has the potential to change
all the outputs. Where we shop, who we talk to, what
we read, what we search for, where we go – they all
change once we merge location and the Web.
Mathew Honan, WIRED magazine, 1/19/09

64. Smartphones show the future
Source: comScore GSMA MMM; comScore Media Metrix, December 2009

65. Currently all about social updates
Source: comScore GSMA MMM; comScore Media Metrix, December 2009

66. soon: location as a platform
66

67. IBM Seer – augmented reality utility
67

68. A tale of two screens: TV
68

69. TV – INTERWEB CONVERGENCE
69

70. but people like watching TV on TV
Source: IPA Trends in TV

71. project canvas – many pipes, but TV screen

73. even so, linear’s got legs
• Deloitte predicts that in 2010 most video content
will continue to be consumed linearly - that is,
according to broadcasters' programming schedules.
They estimate is that over 90 percent of all television
watched will be via traditional broadcast.

74. TV and web belong together

75. summary
• post recession
– trust, transparency, simplicity, thrift
• post digital
– digital is a virtual given
• new horizon
– Internet everywhere, seamlessly integrated into life