According to Roy Morgan research, we operate on a two-speed consumer economy. 10 million Australians have a traditional mindset when it comes to spending – but 5 million Australians are considered ‘new economic order’ or NEO consumers, spending up to 300% more than traditional consumers.
This data has been used by brands like LVMH, Qantas, David Jones, Macquarie Bank, Lexus and mattress company A.H. Beard. Tony Pearson, CEO of A.H. Beard, talks to Sean Aylmer about the value of NEO consumers, and why it requires different marketing.
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Sean Aylmer: Welcome to the Fear and Greed Business Interview. I’m Sean Aylmer. Consumer
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Sean Aylmer: spending can give a fascinating insight into how the economy
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Sean Aylmer: is traveling, but some types of consumers seem almost immune
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Sean Aylmer: to any slowdown. According to Roy Morgan Research, we operate
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Sean Aylmer: in a two-speed consumer economy. 10 million Australians have a
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Sean Aylmer: traditional mindset when it comes to spending, but about 5
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Sean Aylmer: million Australians are considered New Economic Order, or NEO, customers.
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Sean Aylmer: And those consumers apparently spend up to 300% more than
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Sean Aylmer: traditional consumers, and are less affected by cost of living pressures.
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Sean Aylmer: This data has been used by brands like LVMH, Qantas,
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Sean Aylmer: David Jones, Macquarie Bank, and Lexus. Another is Australian mattress company,
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Sean Aylmer: AH Beard, whose CEO is Tony Pearson. Tony, welcome to
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Sean Aylmer: Fear and Greed.
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Tony Pearson: Thank you, Sean.
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Sean Aylmer: What exactly is a New Economic Order, NEO, consumer?
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Tony Pearson: Sure. Well, there’s been a vast array of research into
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Tony Pearson: trying to segment out buying behaviour in markets for a
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Tony Pearson: long period of time. And NEO is not a buying
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Tony Pearson: segment in the traditional way, it’s more a general mindset of a
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Tony Pearson: particular consumer. The NEO particularly is someone that, as you
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Tony Pearson: just sort of spoke to, typically spends more, and they
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Tony Pearson: spend more often.
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Sean Aylmer: Okay. So, I mean, I imagine they’re very valuable, but
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Sean Aylmer: they don’t necessarily come from any particular demographic or it’s kind of
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Sean Aylmer: more a state of mind thing?
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Tony Pearson: It is. If I talk about NEO in the way…
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Tony Pearson: The founder of NEOs is an Australian gentleman, Dr. Ross Honeywill,
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Tony Pearson: and Dr. Ross undertook a 10-year piece of research in
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Tony Pearson: trying to unpack buying behaviour of populations. And after that
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Tony Pearson: 10 years quite simply he said there’s only really two
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Tony Pearson: types of buyers. And the way he describes them is
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Tony Pearson: not in terms of your typical bio, sociographic, it’s more
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Tony Pearson: about the key mindset. The two are a traditional buyer, they’ve
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Tony Pearson: been around forever, they’re price-led, everything starts and ends in price.
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Tony Pearson: They’re purchasing more based on functionality if you like. And
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Tony Pearson: the other type is your NEO, a little bit more progressive,
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Tony Pearson: they typically like to take a little bit more control
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Tony Pearson: and ownership into key decisions. They focus not as much
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Tony Pearson: on functionality as they do on sense of purpose and
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Tony Pearson: their ability to align themselves to whatever the values and
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Tony Pearson: purposes are of the brand that they’re attracted to.
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Sean Aylmer: Is this something that there is more and more of?
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Sean Aylmer: I mean, you hear, I suppose I’m thinking ESG and
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Sean Aylmer: some of those environmental issues, but kind of broadly beyond
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Sean Aylmer: that, the idea of aligning yourself to brands. Is that
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Sean Aylmer: something that’s always happened or are people more conscious of
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Sean Aylmer: that now do you think?
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Tony Pearson: Yeah, I think it’s certainly emerging more. And I think Dr.
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Tony Pearson: Ross in his own piece of research really sort of
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Tony Pearson: talks back to where did we start to see this
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Tony Pearson: separation between traditional buyer and the new economic order, and
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Tony Pearson: that sort of really accelerated post the early ’90s. So I
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Tony Pearson: think we’re starting to see a widening or an emergence
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Tony Pearson: of the NEO buyer, and it’s a little bit over
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Tony Pearson: simplistic to say just pure NEO. So just to use
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Tony Pearson: some of the Australian statistics, 52% of the Australian buying
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Tony Pearson: consumer markets, so with the NEO research on Roy Morgan,
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Tony Pearson: we talk about people that purchase 14 years and older, 52%
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Tony Pearson: of the population would be your traditional market. The other 48%
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Tony Pearson: are NEOs, and NEOs just broadly have two types, there’s
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Tony Pearson: those that have built capacity to spend already and those
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Tony Pearson: that have the same mindset but have not yet built capacity,
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Tony Pearson: so when we’re talking that 48% of NEO and aspiring NEOs,
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Tony Pearson: that segment of the market is responsible for 77% of
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Tony Pearson: all discretionary spend. When we just look at the NEO
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Tony Pearson: that has already built the potential and capacity to spend,
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Tony Pearson: you’re talking about 24% of the population. And just in
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Tony Pearson: retail they account for over 41% of retail sales. So
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Tony Pearson: they’re quite a powerful force.
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Sean Aylmer: Incredibly valuable to an organisation like AH Beard, for example?
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Tony Pearson: Yeah, absolutely. We are in Australia a traditional manufacturer, and
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Tony Pearson: we don’t directly interact with our consumers. We interact through
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Tony Pearson: our partners, our retailers, hotel providers and others. And so
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Tony Pearson: when you’re looking at how you market your brand and
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Tony Pearson: your products behind them, you’ve got to be very, very
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Tony Pearson: conscious about how you use that limited spend. So the
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Tony Pearson: NEO methodology has allowed us to get very particular around
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Tony Pearson: how we position our brand, how we communicate with that
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Tony Pearson: NEO audience as our preferred target market.
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Sean Aylmer: Stay with me, Tony, we’ll be back in a minute.
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Sean Aylmer: I’m speaking to Tony Pearson, CEO of AH Beard. When
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Sean Aylmer: you were talking then, I was thinking to myself, “I’m
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Sean Aylmer: not a NEO.” But then as you went on, I
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Sean Aylmer: thought, “Actually I am a NEO.” Which, I suppose the
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Sean Aylmer: point there is as you get older like some of
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Sean Aylmer: us do, and you have greater means, can you shift
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Sean Aylmer: into becoming a NEO?
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Tony Pearson: Yeah, it’s a really interesting question. So actually that’s not
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Tony Pearson: necessarily the case. So I’d hate to be trying to
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Tony Pearson: paint a picture that a traditional consumer doesn’t necessarily have
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Tony Pearson: high affluence. In fact, they can. It’s a smaller proportion though.
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Tony Pearson: So if we use Roy Morgan’s Big Spender database, only 6%
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Tony Pearson: of those that would be defined as a big spender
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Tony Pearson: would be a traditional consumer. Over 90% of them are in
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Tony Pearson: fact NEOs. There are NEOs at every age demographic. They
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Tony Pearson: typically skew slightly younger, but there are NEOs at every
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Tony Pearson: age demographic, as there are traditional. So it’s more a
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Tony Pearson: mindset or a behavioural pattern if you like, and so
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Tony Pearson: therefore it’s not necessarily something you grow into.
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Sean Aylmer: Yeah. So potentially there are big spenders who aren’t NEOs
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Sean Aylmer: as well?
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Tony Pearson: Yeah, correct. But their mindset’s still the same, right? Typically
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Tony Pearson: a begrudging spender would prefer to look at function over
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Tony Pearson: form, probably more conservative in their approach to purchase than
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Tony Pearson: a NEO buyer.
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Sean Aylmer: So how does a brand like AH Beard use this
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Sean Aylmer: sort of information?
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Tony Pearson: So we still build products that are available, whether you’re
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Tony Pearson: a NEO or a traditional, and obviously we have a
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Tony Pearson: market that covers both consumer types. So we don’t try
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Tony Pearson: and exclude anyone from wanting to get access or being attracted
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Tony Pearson: to our business, our brand, or our products. What we
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Tony Pearson: do is be very conscious around the way we communicate,
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Tony Pearson: the style of communication, the format, the forum that we’re using,
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Tony Pearson: the channel to market, and everything is built around being
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Tony Pearson: most attractive to the NEO market. And what’s been found
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Tony Pearson: to be true, is if you market that way, a
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Tony Pearson: way that is most attractive to a NEO market, the traditional consumers
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Tony Pearson: will still follow. But the opposite is not true. So
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Tony Pearson: in way of an example, if you look at our
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Tony Pearson: particular product, mattresses is our primary product, they have become
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Tony Pearson: quite a commoditised product. Now that’s because most people actually
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Tony Pearson: don’t understand the true value of the product. Sleep in
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Tony Pearson: AH Beard is the first pillar of health. Right alongside
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Tony Pearson: nutrition and exercise, it’s integral. And sleep is integral to
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Tony Pearson: human wellness. However, that’s not really well known, so the
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Tony Pearson: mysterious rectangle box has become a little bit commoditised. And
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Tony Pearson: how that normally shows up in retail is let’s shout
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Tony Pearson: from the rooftops about the discount or the percentage off.
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Tony Pearson: And when you shout at a NEO it actually turns
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Tony Pearson: them off. So they are more inclined to be attractive
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Tony Pearson: to something that allows them an element of self-discovery. They
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Tony Pearson: can have a little bit more control in the learning
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Tony Pearson: process and the buying into what actually sits behind the
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Tony Pearson: brand and the product. Beauty and form are so much
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Tony Pearson: more attractive to a NEO audience than they would be
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Tony Pearson: to the pure functionality that’s probably driving the traditional purchasing decision.
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Sean Aylmer: Do you think this is a growing, I don’t want
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Sean Aylmer: to use the word trend, but as society evolves, there’ll
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Sean Aylmer: be a great proportion of NEOs amongst us?
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Tony Pearson: It’s an interesting question. My personal assumption is yes, I think…
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Tony Pearson: Because what we’re talking about is a behavioural model, right?
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Tony Pearson: A societal model. And so populations change when the environment
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Tony Pearson: around them changes and our environment’s changing rapidly. And certainly
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Tony Pearson: the consumer environment has continued to change exponentially since the ’80s, ’90s,
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Tony Pearson: early 2000s. And so that bifurcation that Dr. Ross talks about,
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Tony Pearson: that separation between the traditional economic order and the new
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Tony Pearson: economic order, I think will continue to evolve. And now
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Tony Pearson: whether that changes the proportion of populations or not dramatically
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Tony Pearson: is probably secondary. There is a real need to be
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Tony Pearson: able to bring authenticity, transparency, alignment to purpose back into
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Tony Pearson: brands and products, and alleviate some of that commoditisation, that
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Tony Pearson: we spoke about earlier, across a lot of products and brands.
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Sean Aylmer: And the bottom line in all this for a company
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Sean Aylmer: like AH Beard, but pretty much everyone, is they’re a very
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Sean Aylmer: valuable customer set.
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Tony Pearson: Yeah. Particularly in difficult economic times. So time over time
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Tony Pearson: and because of the age of the research and the
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Tony Pearson: data sets, both that Dr. Ross and certainly Roy Morgan, through
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Tony Pearson: the Single Source database have access to, we’re able to
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Tony Pearson: watch behaviour over an extended period. So we can track
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Tony Pearson: consumer confidence levels, go back to pre-GFC, what happened to
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Tony Pearson: consumer confidence through the pandemic, post the pandemic, through the
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Tony Pearson: pent-up demand effect. As the interest rates and cost of
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Tony Pearson: living has increased, we’ve been able to track this incredibly well.
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Tony Pearson: So rather than just looking at a population and saying
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Tony Pearson: consumer confidence sits here, we’re able to have a look
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Tony Pearson: at how does consumer confidence show up for traditional consumers
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Tony Pearson: versus NEOs. And there’s a big gap. And what we
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Tony Pearson: watch time and time again is NEOs lead recovery. So
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Tony Pearson: they spend more, they spend more often, and their consumers’
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Tony Pearson: levels are higher, therefore their recovery rates are faster. So
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Tony Pearson: looking at the post-GFC times, so I was looking at that just
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Tony Pearson: a couple of years ago trying to predict what do
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Tony Pearson: we think might happen post COVID. So what we saw
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Tony Pearson: was a nine-month delay in consumer confidence, exceeding population confidence
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Tony Pearson: norms between a NEO and a traditional consumer. So they absolutely
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Tony Pearson: led the recovery in that period and we’re seeing signs of
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Tony Pearson: them leading it again at the moment.
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Sean Aylmer: Absolutely fascinating. Tony, thank you for talking to Fear and Greed.
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Tony Pearson: Thank you.
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Sean Aylmer: That was Tony Pearson, Chief Executive Officer of AH Beard.
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Sean Aylmer: This is the Fear and Greed business interview, join us
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Sean Aylmer: Australia’s best business podcast. I’m Sean Aylmer. Enjoy your day.