IT’S BECOMING A CUSTOMER-CENTRIC WORLD!

An Overview of Key Trends Shaping Markets

Complied by Ian Ivey

June, 2014

Contents

Introduction ............................................................................................................................................ 3

Value Propositions - Changing Customer ‘Wants’ and ‘Needs’ .............................................................. 4

Customer Megatrends ............................................................................................................................ 7

Overview ............................................................................................................................................. 7

Age Defiance ....................................................................................................................................... 8

Fascination ........................................................................................................................................ 10

Egoism ............................................................................................................................................... 11

Global Living ...................................................................................................................................... 13

Sustainability ..................................................................................................................................... 16

Health & Wellness ............................................................................................................................. 18

Gifts of Time ...................................................................................................................................... 21

Other Key Drivers of Change ................................................................................................................. 23

Lifestyle Influences............................................................................................................................ 23

Social Networks ................................................................................................................................. 26

Disruption ......................................................................................................................................... 28

Customer Centric 2 © Ian Ivey NEXT 2014

IT’S BECOMING A CUSTOMER-CENTRIC WORLD

Introduction

It’s becoming a Customer Centric World! That means the real power is shifting from businesses to customers in just about every sector. Many are blind to the change. Any business that doesn’t understand what is happening is likely to face many challenges in future.

• In a recent survey of medium to large size businesses in Trinidad and Tobago (T&T) , the majority had a poor understanding of their Customers and Clients, as shown in Figure 1.

• A business that takes the time to develop an intimate understanding of its customers, and their wants and needs, has every chance of succeeding in future years. A business that doesn’t faces a bleak future, maybe even failure.

• As Figure 2 depicts, the days when businesses dictated how they would deal with customers are coming to an end. Now customers are increasingly dictating to businesses what they expect from them – in every aspect of their operations and support infrastructure.

Figure 2: Everything is becoming customer centric!

Figure 1: Many businesses don’t understand their Customers and Clients

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Value Propositions - Changing Customer ‘Wants’ and ‘Needs’

• A value proposition is simply a reflection of the price a customer is prepared to pay for a particular product or service - and the way it is presented and delivered to them. The reason why a particular customer makes a purchase decision depends upon a number of variables and may include both real and perceived benefit considerations. The balance between the two is not constant and changes over time as people age, technology impacts, fads come and go, personal priorities alter, politics impact, and life-phases change.

• However, there is one fundamental differentiating factor that helps make it easier to determine where a customer is prepared to allocate personal spending. It is the difference between ‘What I want’ and ‘What I need’.

• In Figure 3 (1) the consumer who makes the decision to purchase something based upon ‘What I want’ really desires a particular product or services and is far less concerned about the price. A simple example is the queue of people who waited outside retail outlets to buy the Apple iPhone when it was launched during 2009. Another example is those who pay US$ 8,000 for a custom-designed and manufactured men’s suit in Savile Row, London.

• By contrast, the ‘What I need’ decision is totally price-driven and generally relates to the fundamental necessities of life such as food, fuel, clothing, appliances, housing, basic services, and transport. Customers making this type of purchase decision are price-conscious and will tend to favour a supplier offering the cheapest price or best deal for a particular product or service.

• From a long-term perspective, the ‘What I want’ decision-making factors are the ones which are more likely to alter over time as customer characteristics change. It tends to be an area that is influenced strongly by innovation, trends, and perceptions over time.

• One classic example is the high-end fashion industry where change is constant. Another example is the launch of a new innovative technology, such as the iPhone and iPad, which has a short lead-time over competitors and achieves a substantial price differential during that time – but often only for a relatively short time frame.

• The value propositions in the ‘What I want’ area tend to be many times higher than in the ‘What I need’ area. They also tend to be more unique and less vulnerable to competitive pressures during the timeframe they are able to maintain a lead position in the market. The ‘What I need’ area tends to be more constant and predictable and is generally characterised by intense competitive pressures as a particular supplier tries to retain a position in the market relative to other suppliers. A simple illustration of the difference between the two customer propositions is shown in Table 1.

1 NEXT Archives, 2009

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Table 1: An illustration of the difference between ‘What I want’ and ‘What I need’ in terms of value propositions

What I want What I need Product Purchase focus Retail Value Product Purchase focus Retail Value Manuka Honey Health & wellness US$ 200.00/kg Commodity Honey Food product US$ 10/kg Sea Island Cotton shirt Unique quality US$ 500 each Cotton business shirt Essential clothing US$ 20-40 each iPhone Elite communications US$ 599* Nokia cell phone Basic communications US$ 70 Gina’s truffles Unique quality US$ 250/kg Charlies chocolate Food product US$ 12 / kg Svarasa soap Experiential product US$ 150/kg Refresh Soap Soap US 5/kg

* Price at the time of launching the original iPhone onto the market.

• The examples shown in Table 1 illustrate how great the difference in value can be when a customer’s decision moves betwen ‘What I want’ and ‘What I need’. The authors have studied this phenomenon in different parts of the world and estimate that there is generally a shift in value of about 400% between ‘needs’ and ‘wants’.

• The more unique a product or service on offer is, the higher the differential is likely to be, if it is in tune with the right trend or trends. In simple terms, the changing value proposition from a customer perspective can be illustrated in a value triangle, as shown in Figure 4 (2).

• The ‘Unique’ area of the value triangle represents products and services that are customised, ‘one-off’, generally made by only one supplier, are elite and can be compared with the special treatment and attention a customer receives as a first-class passenger in an airliner. This part of the market is likely to cater to about 5% of all consumers.

• An excellent example of the ‘Unique’ is the unusual Masai Barefoot Technology ‘anti-shoe’ designed and manufactured by a US company (3), or a custom-designed software platform developed for a major financial group by 3GlobalConnect in the Bahamas that adds considerable unique value for the client. The value differential is often 1000% + over basic ‘off-the-shelf’ commodity products and the associated innovation factor is generally high.

• The ‘World-class’ area in the triangle represents products and services which are of higher quality but for which there are a limited number of quite specialised suppliers in the market place. One example in this category is in the area of up-market perfumes associated with major brand names such as Chanel and Calvin Klein. Another is in the area of high cocoa (70%+) chocolate products. There are now a number of specialist manufacturers and suppliers internationally who often use a differentiating factor (e.g. the use of Trinitario or Criollo cocoa which is specified on the package) to create a more specific connection with discrete groups of potential consumers. The value differential associated with products and services in this area of the triangle is often 400% or more compared to basic commodity

2 NEXT Archives 2009 3 http://us.mbt.com

Figure 4: The value proposition triangle

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products. The level of innovation is generally quite significant. This part of the market is likley to service about 15% of all customers according to surveys done by NEXT.

• The ‘Commodity’ area of the value triangle represents by far the greatest proportion of the total market (80%+) and is characterised by numerous suppliers of basic products competing aggressively to attract customers to buy their particular products. It represents an area of the market characterised by aggressive discounting and high profile advertising and promotional campaigns. Suppliers are under intense pressure to cut costs and provide an ever better deal in order to attract and retain customer interest on an ongoing basis. Excellent examples include the international non-specialist automotive sector, home appliances, basic food products, many mobile phone apps and online software services, and clothing such as jeans and t-shirts. This area is also generally characterised by relatively low levels of innovation.

• An understanding of the difference between ‘What I want’ and ‘What I need’ is of great importance to product and service providers in small countries. Even though the global market niches are much smaller in relative terms, the opportunities in the ‘Unique’ and ‘World-class’ areas associated with ‘What I want’ are those which generally deliver higher levels of profitability than those associated with the ‘What I need’ area as they are linked to much higher value propositions, something which is of real importance in small countries because of the generally higher cost structures and distances to markets. Examples are shown in Figure 5.

Figure 5: Examples of how specific products and services fit in the Value Triangle

• In order to be able to exploit opportunities in the ‘What I want’ area in the value triangle, it is essential to undertand the trends that are shaping future customer expectations as these provide valuable clues to those areas which are likely to favour high value propositions in future years and thus the identification of potential niche opportunity areas that might provide the foundation for commercial success.

• However, the sustainability of such success will only be realised if a process of continuous innovation is adopted because, once someone creates a unique space, ‘copycats’ soon develop similar alternative products and services which tend to diminish the value of the market space that the original ‘Unique’ or ‘World-class’ business person identified and commercialised.

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• There is a constant need to be one step ahead - just as large commodity suppliers always need to be one step ahead in the race to reduce costs or to provide an extra benefit relative to competitors if they wish to survive in a cut-throat marketplace. By always having something unique and fresh on offer helps generate that ‘What I want’ connection with increasingly ‘choosey’ customers.

• Understanding the customer value proposition, whether already obvious or one that has great potential, is the true start point for looking at any value chain because the purchase decisions customers make determine which products and services are likey to be a commercial success in future years.

• One of the best reference books about this theme that you will ever read is ‘The Innovation Playbook’ by Nicholas Webb (4). It explains how to develop a customer-centric approach to business that leads to success in both the ‘What I want’ and ‘What I need’ areas.

Customer Megatrends

In the Introduction the lack of customer/client understanding that characterises a number of T&T businesses was mentioned. Without customers and clients a business simply cannot exist. For that reason, developing an intimate understanding of who they are and how their lives and expectations are likely to change over the coming years is essential for the success of any business. A customer-centric business makes a concerted effort to develop such an understanding by engaging with their customers. In this section we look at some Customer Megatrends that are reshaping every sector of business.

Overview

• Because customers are playing a far greater role in determining which value propositions fit the ‘What I want’ and ‘What I need’ market categories, it is important to understand the underlying trends that are likely to play a role in shaping their future wants and needs. NEXT has identified seven megatrends, shown in Figure 6 (5), that are likely to be of particular significance over the next decade or so.

• The factors driving each Megatrend are many and varied and help explain why the ‘mass-market’ concept is now becoming relegated to history. The days of ‘one-size-fits-all’ solutions are rapidly disappearing because customers are becoming more egotistical and individualistic and demanding greater personal attention with regard to their wants and needs which are, in turn, shaped by their own personal characteristics - genetic, behavioural,

4 http://books.google.tt/books/about/The_Innovation_Playbook.html?id=BEqvwcrslZMC&redir_esc=y 5 NEXT Archives 2009

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life-phase related and perception-based. We are moving into an age of personalised customer-centric solutions.

Age Defiance

• This is a strong global growth megatrend and revolves around customers searching for products and services that will help them stay and feel young - whether the basis is real or perceived. One of the big drivers behind this trend is the rapid ageing of populations in many parts of the world, not only in developed countries but also a number of rapidly developing countries such as India and China (6). The ageing trend for the population in Japan is quite dramatic, as illustrated in Figure 7 (7).

• In T&T the trend is expected to be almost as strong over the next few decades and ageing is expected to have a major impact as early as 2025.

• The upper graph in Figure 7 for each country shows the age distribution in 2010 with the youngest group of persons at the base and the oldest at the top of each pyramid. The middle diagram in each sequence is for the year 2025 and the lower for 2050 - all based upon projections of current patterns of births, deaths and migration.

• Of particular significance in many countries is the ageing of the Baby-Boomer cohort born between 1946 and 1964 (8), one of the largest population cohorts seen in the world’s history.

• The youngest members in this cohort are now 50 years of age and the oldest in their sixties. This is creating a whole new market opportunity as the over-50’s own over 70% of the wealth in developed economies e.g. 77% in the USA (9). A focus on developing new and innovative products and services that cater to their specific wants and needs is a growth trend. This is a generation of people which includes many who are determined to try and stay young for as long as possible. Trends indicate that the majority will live longer than previous generational groups of the same age (10), and perhaps some of the upcoming generations (11).

• A number of innovative companies are already developing unique and innovative solutions to suit older consumers. Some examples include:

6 ‘A slow burning fuse’, The Economist, June 25, 2009 http://www.economist.com/specialreports/displaystory.cfm?story_id=E1_TPRRRDQV 7 http://www.census.gov/ipc/www/idb/ 8 As defined by the United States Census Bureau - www.census.gov 9 http://thedailybell.com/public/files/Institutional-Reports/anti-aging-report-001.pdf 10 http://www.economist.com/specialreports/displaystory.cfm?story_id=E1_TPRRRTDN 11 http://www.heart.org/HEARTORG/GettingHealthy/Overweight-in-Children_UCM_304054_Article.jsp

Figure 7: Projected population pyramids for Japan and T&T for the years 2010, 2025, and 2050

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o The Jitterbug phone - designed for simplicity and ease of use. It also has large digits to help those with failing eyesight communicate easily (12).

o Shops for the elderly that cater to their specific needs - one example is a whole range of specialist shops in the main street Jizo-dori in the Tokyo suburb of Sugamo, Japan (13) and another example the Internet shop, ‘Senioren Online’ (14), in Germany.

o ‘Brain gyms’, such as those developed by the US company Vibrant Brains (15) - their services include the provision of mental exercises and education to help older generations retain and improve their mental faculties and to be able to contribute more effectively as employees as they may have to work later in life, even into their seventies, if current trends related to the viability of many pension funds continue (16).

• However, the ‘Age Defiance’ megatrend is not associated only with older generations. It is also reflected in the development of a range of activities and products that help people of all ages who are increasingly being driven by a personal need to look and feel young - to stay that way ‘forever’! Following are a few additional examples of ‘Age Defiance’ related trends: o Longevity will be the next big wellness trend (17). o ‘Consumers are obsessed with maintaining a youthful appearance and ageing gracefully

and, as the global population’s median age increases, that market will progressively increase’ (18).

o Even younger persons aged between 24 - 35 years, particularly young women, are becoming a major driver behind the ‘Age Defiance’ trend (19).

o Manufacturers are deliberately promoting a ‘mother and daughter’ trend (Figure 9) to create an inter-generational demand for anti-ageing products (20).

o The market for anti-ageing products (topical, dietary, and pharmaceutical) is expected to reach US$ 290 billion in 2015 (21) and grow at an annual 6.7% compound annual growth rate out to 2018.

o So called ‘beauty foods’ - supplements and food products that target the skin from the inside - are seen as being a major growth area.

12 http://www.info4cellphones.com/jitterbug-cell-phone-for-seniors.html 13 http://www.economist.com/specialreports/displaystory.cfm?story_id=E1_TPRRRTTD 14 http://www.senioren-onlineshop.de/ 15 http://www.vibrantbrains.com/ 16 http://www.reuters.com/article/2014/05/02/us-australia-pensionsage-idUSBREA4102D20140502 17 http://nutraingredients.com/news/printNewsBis.asp?id=79397 18 http://www.gcimagazine.com/articles/17221979.html 19 http://www.gcimagazine.com/marketstrends/segments/skincare/The-Importance-of-Anti-aging-for-Gen-Y-

225847881.html?utm_source=Related+Items&utm_medium=website&utm_campaign=Related+Items 20 http://www.consultingroom.com/News/Print.asp?News_ID=2338&Title=World%20Anti-

Ageing%20Products%20Market%20to%20Reach%20U.S.%20$115.5%20Billion%20by%202010 21 http://www.gcimagazine.com/marketstrends/segments/skincare/Anti-Aging-The-Trends-and-Challenges-in-New-Product-

Development-218560461.html

Figure 8: ‘Vibrant Brains’

Figure 9: Mother and daughter trend

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o The anti-ageing product range includes (22): Anti-ageing drugs and pharmaceuticals. Anti-ageing vitamins, supplements and minerals. Anti-ageing cosmeceuticals – skin care, face care, body care, and sun protection

cosmeceuticals. Hair-care cosmeceuticals. Hair growth cosmeceuticals.

o Big future growth areas are seen as being: The cosmeceuticals market (cosmetics combined with nutraceuticals). ‘Dr Brands’ - products marketed with references to dermatology, surgery and

botox-like treatments. ‘Collaborative skin care’ lines - targeted to complement non-surgical cosmetic

procedures. Pharmaceutical company, Allergan, and Estee Lauder have combined forces to develop the ‘Clinique’ range of products.

o High-end retailers say that there appears to be no price resistance associated with ‘Age Defiance’ types of products and customers were prepared to go on waiting lists for expensive products such as Dior’s US$ 380 for a 15 ml bottle of ‘L’Or de Vie’ skin serum (23) when first released in 2007. In 2014, Orlane Paris’s ‘Global Anti-Ageing System’ is retailing at US$ 550 for just 30 ml of product (24).

• It is clear that ‘Age Defiance’ is going to remain a part of the consumer psyche and discretionary spending in the foreseeable future and that many of the high value proposition opportunity areas are associated with the ‘What I want’ area. It is a customer-driven Megatrend that is likely to continue to strengthen for quite some years.

Fascination

• Over the past decade or so a number of trend watchers have observed that each new generation appears to have a greater need for experiences that provide them with stimulation and fascination. One of the first was German Futurist, Eberhard Denzel (25), who described the emergence of this trend in 1998.

• For example, great grandparents may have gone out for dinner at a restaurant as an extra special treat perhaps once a year. It was something that they talked about many times over as they remembered the ‘specialness’ of the occasion. People today eat out regularly and so the impact of each fascination experience is far less. o Today’s young generations have very short attention spans and

many say they require ‘constant fascination’. The intensity of each fascination experience is also said to be decreasing as greater numbers of people search for a greater ‘thrill’. These factors are leading to some interesting developments such as:

22 http://www.consultingroom.com/News/Print.asp?News_ID=2338&Title=World%20Anti-Ageing%20Products%20Market%20to%20Reach%20U.S.%20$115.5%20Billion%20by%202010

23 http://www.mybeautymatch.com/lor-de-vie-diors-most-potent-anti-ageing-line/ 24 http://www.orlane.com/anti-aging-oxygenation-system.html 25 http://www.denzel.de/

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o The 5 second commercial (26) to try and prevent people from skipping advertisements when they are recording and viewing TV programmes - i.e. to reduce the intrusion.

o The evolution of short videos on YouTube, such as ‘World Builder’, which tell a whole story in 1 – 10 minutes (27).

o The evolution of new high technology classrooms to create a 24/7/365 community of interest for primary school students. The concept includes iPods and cell phones as part of an integrated network with school computers and IT systems (28).

o The growth of extreme sports in areas that are increasingly dangerous and bizarre (29). o The growth of extreme tourism to places such as Iraq and Afghanistan is predicted to be

a growth trend in future (30). Increasing numbers of tourists are seeking places that few others have dared to visit - one component of the ‘Egoism’ megatrend.

o Other types of more extreme and unusual adventure tourism said to be ‘hot’ in 2014 (31) include travelling to ‘uncharted territory’ (space and deep sea), fashion branded hotels (e.g. Versace and Armani hotels), food foraging tourism, micro-brewery tourism, marijuana tourism (e.g. in Jamaica), and ‘workcations’ (combined work and vacation travel).

o The growth in use of legal and illegal recreational drugs around the world. The herbal party pill market has shown strong growth in recent years (32).

o People who have pre-booked trips into outer space with Richard Branson’s Virgin Galactic, which is likely to offer the first seats at around US$ 200,000 each (33,34).

• A recent Mastercard survey found the wealthy in Africa, Asia and the Middle east are increasingly choosing ‘authentic experiences over material possessions’ (35). Experiences that generate fascination are going to be winners in future years.

• However, there are counter-trends emerging which, for example, are leading some people to search for a ‘simple life’ (36) that offers an escape from the need for so much fascination!

• Based upon the ‘five second fascination’ characteristics associated with many in today’s younger generations, there seems to be no doubt that the demand for fascination is going to continue to increase and intensify, but this Megatrend will also lead to the development of some counter-trend related ‘escape’ opportunities for those who want to live a less frenetic and demanding lifestyle.

Egoism

• People are becoming far more individualistic and self-indulgent. This is a trend that has been in progress for several decades and seems likely to continue as it has become an inherent characteristic of the Baby-Boomer generation and the generations that have followed. One area that reflects this is the rapid decline in female fertility, a trend which first appeared in developed

26 http://www.commercialalert.org/news/featured-in/2006/07/five-second-ads-try-to-counter-tivo 27 http://www.youtube.com/watch?v=VzFpg271sm8 28 http://www.bcps.org.uk/index2.htm 29 http://jazarah.net/blog/top-20-extreme-sports-from-trend-hunter/ 30 http://www.travelweekly.co.uk/Articles/2009/11/05/32295/industry-leaders-predict-future-tourism-hotspots.html 31 http://www.travelmarketreport.com/articles/Whats-Hot-in-2014-Taking-Travel-to-New-Extremes 32 http://www.free-press-release.com/news/200807/1215739311.html 33 http://www.techmagnews.com/branson-cheap-space-tours-in-my-lifetime.html 34 http://www.thetechherald.com/article.php/200918/3539/Fashion-retailer-first-Aussie-on-Branson-s-commercial-space-travel-project 35 http://www.cnbc.com/id/101708710 36 http://www.aarpmagazine.org/lifestyle/the_simple_life.html

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countries but is now also becoming a strong trend in many of less developed and developing countries. The fertility rate trends in selected developed countries are shown in Figure 10 (37).

• The Economist recently commented that postponing marriage and childbirth has been favoured by many women who want to pursue a career and retain their independence. There is also an economic consideration as it has been estimated that a family household with one child needs 30% more income than a childless couple to maintain an equivalent standard of living.

• In addition males and females can now choose from an increasing range of lifestyle options. For example, greater numbers are choosing to live on their own. In the UK it is estimated that 38% of all households will have just one occupant by 2026. The figure was just 18% in 1971. In Germany 20% of those over 18 years currently live on their own (38). In large cities, such as Berlin and San Francisco, 45% of inner city households had just one occupant around the turn of the millennium.

• One of the concerns about the ‘Egoism’ megatrend is the negative impact it is having upon society as people focus more on themselves and less on others (39). At the same time, it does open up a whole range of new business opportunities which Eberhard Denzel says are driven by a desire to be different to everyone else; to have done something or bought something that no-one else has and make them feel jealous; to have travelled to a place that few have been to and tell others of the experience; to own a car no-one else can afford; and so the list goes on. Following are a few examples of this trend: o The online virtual world, ‘Second Life’, is a place where

egoism is alive and well and people can play roles that they cannot necessarily play in real-life. It is the place where a woman, Ailin Graef, became the world’s first virtual millionaire by doing virtual business in a virtual world (40). It is also the place that has caused several murders in the real world as a result of online relationships that developed.

o Affluent consumers are becoming sated with traditional products and services, and are looking for the unique – things that differentiate them from ‘the rest’ (41).

o A recent survey of 25,000 Australians aged 11 - 24 years of age found that their greatest concern was their personal body image (42).

37 http://www.economist.com/specialreports/displaystory.cfm?story_id=E1_TPRRRTTR 38 http://www.dw.de/record-number-of-single-households-in-germany/a-16095252 39 http://www.onlineoriginals.com/showitem.asp?itemID=135 40 http://www.businessweek.com/the_thread/techbeat/archives/2006/11/second_lifes_first_millionaire.html 41 http://luxuryforecast.com/luxury-travel/in-and-out-luxury-hotel-trends-for-2014/ 42 http://www.missionaustralia.com.au/news/media-releases/215-body-image-main-concern-for-young-australians

Figure 10: Birth rate trends in selected

countries

Figure 11: Image issues in Australia

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o The egoism trend is also starting at a younger age. For example, 9 - 14 year-olds were originally targeted by a website called ‘Miss Bimbo’ - an online game where visitors were encouraged to dress their character up as beautifully as possible and maintain a target weight using pills so they could win beauty contests. They could also choose cosmetic breast surgery to enhance their characters. At one stage in France there were 1.2 million users of this site and in the UK 200,000 (43). Today the site has just under 3 million registered users and illustrates some of the forces shaping the minds of young people.

Figure 12: The ‘Miss Bimbo’ website - originally aimed at ‘tweens’ (9-14 year-olds)

• Anything that panders to the self-interest of the individual is driving this growth megatrend. However, there are several counter-trends that are also emerging. These include the sustainability movement (e.g. LOHAS) as well as numerous online communities of interest where people share ideas and help each other to make decisions or cope with challenges in life. There are also some indications that increasing numbers of young people may have more of a social conscience than their parents and that this may provide some degree of a counter-balance to the path the ‘Egoism’ megatrend might follow in future years (44).

Global Living

• This is a strong trend which crosses over between the real and virtual worlds.

• Greater numbers of people, including from the Caribbean, are working in a global environment, even if they live in a specific location, through virtual channels. Others live a life that involves extensive travel to many places as contractors or global players. A good example in the latter case is Anthony (Tony) Paul (45), Managing-Director and Principal Consultant with the Association of Caribbean Energy Specialists Limited based in Trinidad and Tobago. He has been involved in projects in many parts of the world including Tanzania, Ghana, Nigeria, Senegal, Togo, Iraq, Timor Leste, and Peru.

43 http://www.missbimbo.com/ 44 http://smallbusiness.foxbusiness.com/marketing-sales/2013/12/12/social-conscience-key-to-attracting-young-consumers/ 45 http://www.localcontentchambertt.com/about-the-chamber/board-of-directors/

Figure 13: Tony Paul

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• Many online communities of interest and social networks, such as LinkedIn, Facebook, YouTube, Pinterest and Instagram, are global and their participants interact with each other, even if vast distances apart, on an instant real-time basis.

• Increasingly these interactions are becoming more visual and online real-time video links (such as Skype and ooVoo) as well as video capable mobile phones. These are fast becoming a standard part of personal, household, and business communications and will become increasingly sophisticated in future years. Mobile Apps are adding new dimensions to many virtual groups e.g. driving the re-emergence of a ‘fun’ global social network called Bebo (46).

• The ‘Global Living’ megatrend includes a number of associated trends such as: o The nostalgia trend (see Figure 14) where expatriates seek the ‘good old things’ from

home or people yearn for things that they had experienced or enjoyed in the past. The retail group, Manufactum in the UK and Germany, is an excellent example of a business connecting with consumer nostalgia needs both online and through real world retail outlets (47). Another is the long-established ‘Irbit’ motorcycle manufacturing company in Russia which is now attracting a global niche following (48). A third is the very successful ‘Aunt Betty’s Puddings’ company in New Zealand which achieved global success and was then bought out by a major food group, Hansells, a few years back (49).

Figure 14: Examples of the Nostalgia Trend

o A growth trend favouring ethnic and cultural products and services which complement people’s experiences overseas or provide something unique that is not associated with a person’s traditional ethnicity or cultural heritage. One good example is the Walkers Wood food processing group in Jamaica which now markets traditional Jamaican products as far away as New Zealand and Australia (50).

o Technology that enables people to move from place to place in the world and stay in touch 24/7/365, such as Samsung and iPhone mobile and tablet interfaces.

o Another piece of technology that has recently come onto the market and provides a solution for those who have to travel frequently is a wireless battery charger for a wide

46 http://www.bebo.com/ 47 http://www.manufactum.com/home.html Photo NEXT Archives, Manufactum retail store in Berlin, August 2009. 48 http://bluebird.typepad.com/my_weblog/nostalgia/page/2/ 49 http://www.teara.govt.nz/en/photograph/25149/steamed-puddings 50 http://www.windiestrading.com/

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range of devices that removes the need for transporting numerous device-specific chargers around the world (51).

o It may not be too long before an individual person may be able to have a virtual presence in other parts of the world, as holographic technologies continue to evolve. Richard Branson launched Virgin Digital to an audience as a virtual presence a few years back (52). However, this was a primitive version of what might happen before too long as true 3-D holographic technologies evolve further. Mobile handsets that are capable of projecting, capturing, and sending holographic 3D images have already been developed (53).

o Another associated trend is the evolution of combined digital and real-life profiles that enable individuals to generate a global presence. One excellent example is Trinidad and Tobago fashion designer, Claudia Pegus, who has created an extensive digital profile online (54).

Figure 16: An overview of the digital profile Claudia Pegus has established online (55)

o A trend associated with the development of virtual digital profiles is a move towards more visual interactive technologies that are likely to move beyond the corporate world where they are already becoming leading-edge tools (56) into smaller businesses and households.

51 http://www.pcworld.com/article/156526/powermat_joins_the_wireless_charger_fray.html 52 http://www.eyeliner3d.com/virgin_digital_launch.html 53 http://www.youtube.com/watch?v=hoBa1p8wQk4 54 http://www.google.tt/search?hl=en&q=claudia+pegus&btnG=Search&aq=f&oq= 55 NEXT Archives 2014 56 http://www.informationweek.com/news/mobility/messageing/showArticle.jhtml?articleID=205917459

Figure 15: Holographic phone demo from Graphlex Inc., India

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o One of the big challenges for the aviation sector is its reliance on fossil fuels. Some feel this could impact upon the shape of global living in future (57). The more optimistic feel that technological developments will revolutionise the aviation sector and lead to a more sustainable future (58).

o Whatever happens in aviation, it seems likely that the virtual global component of people’s lives might become more important relative to the physical travel component once virtual technologies offer increasingly more realistic immersion-like experiences - such as 3D and holographs.

o Technology has certainly increased the global connectedness of the human race as evidenced by the evolution of borderless zones such as Facebook, Pinterest, Instagram and LinkedIn – as well as thousands of more specialised virtual zones. Facebook is now the second largest ‘country’ in the world in terms of ‘population’ – China has 1.36 bn people, Facebook 1.31 bn users (59) and India 1.24 bn people.

• The traditional job is also disappearing and so people now have to focus on how to generate income. For many that will require a broader based and often more globally connected work-style (60).

• There is no question that the ‘Global Living’ megatrend is going to continue to evolve and shape the future wants and needs of many customers and clients. However, a significant part of that global lifestyle future is likely to become technology driven as finite global resources continue to come under pressure and increasingly become a limiting factor in the ‘real world’ sphere.

Sustainability

• As shown in Figure 17, the world’s resources are being used up at 150% of the rate that they are being replaced and, if nothing changes, the rate of use is likely to exceed 200% of the replacement rate by 2030 and 300% by 2050 (61,62). In addition, climate-change caused by human activities has become a major international issue. There are also concerns about future global food supplies and the availability of limited resources such as water, energy, and rare earth metals - which play a critical role in many emerging technologies.

• There is no question that the whole issue of sustainability is becoming a concern for increasing numbers of customers and citizens. A number of surveys undertaken in recent years illustrate this trend. Of particular interest is the fact that the citizens in developing countries such as Mexico, China and India have much higher levels of concern than those living in fully developed economies (e.g. 63).

• Even in the USA, there is now (finally) growing concern at a high level about the future costs if climate change is not addressed (64).

57 http://www.breakingtravelnews.com/news/article/golden-age-of-air-travel-at-an-end/ 58 http://www.channel4.com/news/five-big-ideas-that-could-change-the-future-of-air-travel 59 http://www.statisticbrain.com/facebook-statistics/ 60 https://www.linkedin.com/today/post/article/20140623011119-22726740-jobs-are-over-the-future-is-income-generation-part-2 61 http://www.panda.org/about_our_earth/all_publications/living_planet_report/ 62 http://www.environmentalmanagementnews.net/StoryView.asp?StoryID=1035206 63 http://wwdmag.com/International_Survey_Finds-Water-Top-Environmental-Concern-newsPiece19004 64 http://thehill.com/policy/energy-environment/202141-kerry-costs-of-inaction-on-climate-change-catastrophic

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Figure 17: The greatest challenge the world faces over the next 20 years – restoring a balance between resource availability, replenishment and consumption (65)

• As a result there is a significant emerging customer-driven trend driving the development of niche markets which have a strong focus on moving towards a more sustainable future. Some examples of such niches include: o The development of a ‘sustainable fisheries’ authentication system and branding e.g.

for the New Zealand hoki fishing industry (66). o The development of a sustainable forestry authentication system and branding for

timber (67). o The growing demand for organic products in all

market areas, not just food, as illustrated in Figure 18 (68).

o Growing interest in ‘close to home’ food products with low ‘food miles’. Whole Earth Grocery is a US success story built upon healthy food and a strong focus on ‘go buy local’ (69).

o The emergence of sustainable communities built and managed energy production and supply systems in various countries including Nepal, Germany, and Austria (70).

o ‘Green’ electricity which increasing numbers of consumers choose to purchase at a higher cost, especially in European countries (71,72). In several German states (Schleswig Holstein and Mecklenburg Vorpommern), the installed renewable energy capacity now exceeds current demand by 200 – 300% in both states.

65 http://www.panda.org/about_our_earth/all_publications/living_planet_report/ 66 http://www.fish.govt.nz/en-nz/Press/Press+Releases+2009/June2009/Hoki+fishery+recovering+well.htm 67 http://www.sfiprogram.org 68 NEXT Archives, Oeko Laden, Thun, Switzerland, September 2008. 69 http://gobuylocalblog.com/blog/2013/4/17/anatomy-of-a-sustainable-business-whole-earth-grocery-co-op 70 http://www.finfacts.com/irelandbusinessnews/publish/article_10008702.shtml 71 http://www.the-infoshop.com/report/dc101278-b2c-green-energy-toc.html 72 http://www.steckdose.de/oekostrom.html

Figure 18: Recyclable “bio”

plates and cups

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o The growing demand for ‘Fair Trade’ products. Global sales were more than US$ 4.8 billion in 2012, up 21% compared to 2011 (73).

o A shift from the throw away consumer society to ‘products for life’. A leading example is the German pool furniture manufacturer, Richard Henkel GmbH, which guarantees lifelong service for its products (74).

o The increasing number of ‘green’ housing, zero energy, and sustainable building developments that are now happening in many parts of the world including the UK, USA, Abu Dhabi (75), the Palestinian territories and Dominica.

o The growth of green and ethical investment funds. o The rapid growth of asset sharing businesses e.g. Zipcar (76). Younger persons don’t

value car ownership as much today as earlier generations did and tend to favour other greener forms of transport and sharing options (77).

• The ‘Sustainability’ Megatrend is likely to strengthen over the next decade as increasing evidence about the impact the human race is having on the environment heightens individual concerns about the future for both themselves and their offspring. More young people are becoming involved in environmental and climate-change initiatives around the world in both developed and developing countries (78).

• There is also a counter-trend driven by traditional attitudes and egoism that denies that such concerns are ‘my problem’. There are some individuals who will continue doing what they have always done ‘come hell or high water’. Several surveys suggest around 25% of people might have such an attitude (e.g. 79).

Health & Wellness

• This is a strong growth Megatrend internationally and is being driven by numerous factors including: o Ageing populations. o ‘Age defiance’. o A rapid increase in chronic disease problems (largely self-inflicted). o The global obesity epidemic. o The declining health of young people in many parts of the world, especially in the highly

developed countries where some predict that the young people of today may live shorter lives than their parents.

o Concerns about the environment and a disconnection from the global biosphere which is leading to increases in sales of natural products (e.g.80).

o The soaring costs of healthcare and inequities in delivery, particularly in the USA. If nothing changes the costs of healthcare in the USA could reach 25% of gross domestic product by 2025, 37% in 2050 and 49% in 2082 - up from just 16% in 2007.

o ‘Consumers are trying to eliminate anything toxic from their lives’ (81).

73 http://www.fairtrade.net/fileadmin/user_upload/content/2009/resources/2012-13_AnnualReport_FairtradeIntl_web.pdf 74 http://www.architekten24.de/adresse/11506-henkel-wellness-spa-ausstattung-gartenmoebel/index.html 75 http://www.swissinfo.ch/eng/science_technology/Abu_Dhabi_s_eco_city_gets_Swiss_touch.html?siteSect=511&sid=110401 76 http://www.zipcar.com/ 77 http://www.economist.com/node/21563280 78 http://www.un.org/apps/news/story.asp?NewsID=31774 79 http://www.foodnavigator-usa.com/news/printNewsBis.asp?id=84052 80 http://www.advertiser.ie/athlone/article/15555

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• This is driving a number of trends at the personal level, which are reflected by the following findings: o A recent survey of almost ten thousand people in Brazil, Bulgaria, Canada, Germany,

India, Malaysia, Serbia, Slovakia, Russia, the Netherlands, Turkey and the USA examined where people sourced their healthcare information, how often they visited the doctor, how well they followed the doctor’s advice, their use of non-pharmaceutical products and a number of other areas (82). The following came out of this particular survey: 62% of people in India, 56% in Malaysia, and 52% in Slovakia come to the doctor

‘prepared with a diagnosis’. 59% of Canadians say that doctors are just one source amongst several that they

use to make personal healthcare decisions. 82% of Malaysians seek a second opinion other than their doctor when it comes to

choosing a healthcare solution. 10% of Americans now use the Internet to help make personal healthcare

decisions. 66% of Russians say they would prefer to take natural medicines rather than drugs.

More than 50% of all those surveyed had a similar preference. The majority of Germans also favour alternative medicines over pharmaceutical

based medicines. They see them as being less aggressive and offering more holistic and long-term healing. An increasing number of doctors have an extra degree in natural medicine so that they can offer a range of solutions to their clients.

US residents are divided 50/50 when it comes to choosing between pharmaceutical and natural solutions.

Almost three times as many Brazilians use acupuncture compared to the average for all countries surveyed.

• One rapidly growing consumer group that supports the development of sustainable businesses and societies is described as being a group of influential and leading-edge thinkers representing ‘Lifestyles of Health and Sustainability’ - LOHAS (83), also known as ‘Cultural Creatives’ (84).

• It is estimated that 50 million LOHAS exist in the USA with a further 29 million in Japan. They support a marketplace currently estimated to be worth US$ 355 billion in the USA and USD 546 billion worldwide and which is growing at a 10% annual rate (85).

• The LOHAS ares impacting upon tourism destinations because they expect to be able to maintain their ‘green’ and healthy lifestyles when travelling. They want to stay at environmentally friendly facilities and ones that recognise the connection between ‘green’ and health. They are choosing destinations that offer healthier eating options, serve organic and/or local cuisine, use environmentally friendly cleaning products, and which explain what they are doing to conserve natural resources.

• Consumers are becoming better informed about their personal health and increasing numbers are making their own decisions about value for money. Most are looking for a

81 http://stanford.wellsphere.com/healthy-living-article/food-buying-and-healthy-living-trends-2009/640080 82 http://www.synovate.com/news/article/2008/06/global-healthcare-survey-reveals-rise-of-patient-power.html 83 http://www.lohas.com/ 84 http://www.lohas.com/new-cultural-creatives-survey 85 http://lohas.groupsite.com/main/summary

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better quality service at a lower cost. ICTs are ‘flattening the world’ and making healthcare into a more globally functional business (86).

• In 2014, the global health and wellness market is expected to continue to be driven by demand for natural products, with consumers becoming increasingly sophisticated in their expectations. Not only do they want less of the ‘bad’ stuff (and this now includes gluten, lactose, etc.), but they also want more of the good, such as protein, vegetable and functional properties. Emerging economies, characterised by poverty and wealth co-existing side by side, are driving global health and wellness growth. Food fraud has crept into the spectrum of First World consumer concerns.

• The Top 10 Global Consumer Health and Wellness Trends for 2014 (87): 1. Protein rules. 2. Enhanced natural merging with ‘free from’ e.g. GMOs, preservatives, artificial

colours, and artificial flavours. For example, General Mills recently removed GMO ingredients from its popular Cheerios cereal line. Ben and Jerry’s are moving to 100% non-GMO ingredients in their ice cream products. Both are examples of companies responding to changing customer demands.

3. Meat reduction is the word. 4. More veggies please! 5. Sugar reduction – by stealth in food but openly in beverages. 6. Emerging markets drive global health and wellness growth. 7. Cold pressed juice is the new premium. 8. Probiotics are conquering the southern hemisphere. 9. Wholegrain controversy. 10. Health and wellness products under suspicion of fraud.

Figure 19: Health and Wellness Trends – Products that fit and don’t fit

• In Figure 19 the product on the left, made in the USA, only contains three natural ingredients and no preservatives. The product on the right, made in T&T, contains many ingredients - including some which an increasing number of customers would not consider to be natural. This latter product is not aligned with the strong growth personal health and wellness trend

86 http://www.wfs.org/2008health.htm 87 http://blog.euromonitor.com/2014/04/top-10-global-consumer-health-and-wellness-trends-for-2014.html

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and a customer desire to avoid additives that they perceive may be harmful. • The health and wellness trend applies equally in the Caribbean region as anywhere else,

according to a 2013 Survey. Amongst other things, it showed that a majority of Caribbean consumers would pay a premium for fresh produce that was either organic, pesticide free, and/or free from other chemicals, as shown in Figure 20 (88).

Figure 20: Caribbean health and wellness preferences found in a 2013 regional survey

• Increased customer concerns about personal health and wellness is an area that offers numerous high value proposition opportunity areas. Many of the examples referred to demonstrate how the ‘Health and Wellness’ Megatrend is intimately interlinked with the other six consumer Megatrends described in this report. All the evidence is pointing to a considerable strengthening of this trend over the coming years.

Gifts of Time

• A feature of a numerous consumer studies is how many of those surveyed say that they never have enough time to do all the things they want to do, whether perceived or real. This Megatrend is growing in strength and becoming a key shaper of many consumer decisions.

88 https://www.dropbox.com/s/zbjgo8tpyoj69xe/Adding%20Value%20to%20Local%20Foods%20Survey%20Final.pdf

Figure 21: Waiting for a “gift of time”

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• The ‘time crunch’ factor is being reflected in the following ways: o People are sleeping fewer hours and trying to cram more activities into their day. In the

USA the number of people sleeping less than 6 hours a night rose from 13% of the population in 2001 to 20% in 2009 (89).

o In Australia 82% of couples with children under 15 years of age where both parents are working ‘always or often felt rushed or pressed for time’. 67% of couples without children under 15 years of age felt the same pressures (90).

o Parents are also prioritising activities to suit their lifestyle needs as best as possible and this often has a cost. For example, 75% of parents in the UK say they don’t have enough time to play with their children (91).

o The top ten luxury travel and lifestyle trends for 2014 includes a growing trend towards providing solutions which help busy people save time, especially when they want to relax .

• At the turn of the millennium German Futurist, Eberhard Denzel, predicted that any business or organisation that provides consumers with a ‘gift of time’ would benefit at the expense of those that did not. Since making that observation, the consumer desire for ‘gifts of time’ has grown and been driving a number of market niches including: o Mobile communications so that people can remain connected 24/7/365 and make many

decisions on the move, including business and organisational decisions. o Online banking and e-commerce channels remove the need for standing in queues or

travelling to physical ‘bricks and mortar’ banking and retail outlets to make transactions or purchases.

o Door-to-door delivery services. o Online portals such as Ask.com and Kayak.com which enable people to find out more about

products and services before they make a purchase without having to leave home (92). o Household help services such as ‘Hire-a-Hubby’ to get odd-jobs done around the house as

there is never enough time to do them (93). o Robots designed and programmed to help the elderly as the so-called ‘sandwich generation’

tries to cope with pressures from both their ageing parents and their own offspring. The Japanese are leading developments in this field (94).

o Sales of take-out ready-to-eat and pre-prepared meals are increasing strongly (95). o The Megatrend is also driving a return to central city living in some parts of the world as

people seek to reduce the need for long commutes. • Two local companies that focus on giving their customers a ‘gift of time’ are: o Market Movers who provide an online ordering and

door to door delivery service for mainly locally sourced health and wellness focused selection of fresh and gourmet products (96).

89 http://news.thomasnet.com/IMT/archives/2009/04/americans-losing-sleep-over-economy-performing-poorly-at-work.html 90 http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4102.0Main+Features50Sep+2009 91 http://www.guardian.co.uk/society/2009/aug/03/play-time-limited-parents 92 http://www.ask.com/web?q=cameras&search=&qrsc=0&o=)&l=dir 93 http://www.hireahubby.com.au 94 http://www.economist.com/news/special-report/21599528-robot-around-house-doesnt-just-have-be-handy-it-has-be-likeable-too-

seal 95 http://www.bbc.com/news/magazine-21443166 96 http://www.dmarketmovers.com/

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o PPR Electronics who provide an online ordering, door to door delivery with a mobile credit card payment service for laptop purchases (97).

• There are many businesses and organisations ‘stealing’ people’s time by making them wait in queues, by failing to deliver at the promised time, by running out of stock, by installing voice menus at the customer interface and making it difficult to speak to a real person, and being inflexible in their approach when it comes to delivering to individual needs.

• For example, I went to buy an expensive watch at a jeweller’s shop in Long Circular Mall, T&T, recently. They had a good selection of models. The expandable watch strap on the watch I chose was loose and so I asked if they could remove two links. They said they could not do it at their Long Circular Mall shop and that I would need to travel to their Ellerslie Plaza shop to have this done. That would have taken an hour of my valuable time (that lost time would have cost me personally more than the value of the watch). I went upstairs to a second jeweller and chose a top line watch. Again, the expandable strap was loose and the woman behind the counter said I would have to go to their shop at Westmoorings to have several links removed. She was not trained to do it. That would also have taken an hour of my time. As a result I refused to buy a watch from either shop and instead bought one on my next trip overseas – where removing a link or two at the counter was just standard service. These two T&T retailers have no understanding of how precious time is becoming to their existing and potential customers and both are essentially ‘killing’ their businesses by ‘stealing a customer’s time’.

• There is no doubt that the ‘Gift of Time’ Megatrend will play a significant part in shaping customer demands and business and organisational responses over the next several decades. A lot of change is needed in T&T to align with this powerful Megatrend.

Other Key Drivers of Change

Lifestyle Influences

• People live increasingly mobile lifestyles and many don’t want to disconnect when underway. e-Bay allows mobile phone users to monitor sensitive auctions that they have an interest in while underway. Fandango and Moviefone are driving transactions that are convenience driven (98).

• Combined Internet and mobile banking provides customers with a ‘gift of time’ and is aligned strongly with that major consumer driven growth Megatrend.

• In this context Internet and mobile banking satisfies this need by being (99): o Fast (no waiting in queues). o Convenient (a range of financial transactions can be done from the comfort of home or

while on the move). o Cost-effective (especially for the banks but also for customers who receive a ‘gift of time’

that can be used for other more productive purposes compared to the time waiting standing in a queue to receive branch service).

o All time accessibility (24/7/365 – 24 hours a day 7 days a week 365 days a year).

97 http://pprelectronics.com/ 98 http://www.mobilecommercedaily.com/mobile-commerce-payments-growing-mpayy-exec/ 99 http://current-trends-now.com/2010/01/internet-banking-is-becoming-%E2%80%9Cneed-to-have%E2%80%9D-service/

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o Flexibility (by being able to access and process a range of products and services without having to go to a bank e.g. loan approvals, creating and closing accounts, trading stocks, shares and securities).

• One of the biggest shifts occurring is from ‘consumer’ to ‘prosumer’ – which essentially means that customers are rapidly becoming ‘king’ or ‘queen’ and manage their own customised networks of product and service providers to suit their own particular needs (100). It is a trend towards ‘markets of one’ where each consumer becomes the centre of his or her own value network.

• In this context, social networks and peer influences are playing an increasingly important role as ‘prosumers’ seek trust, transparency, value creation, web pro-activity, and stability. For example, following the global financial crisis the biggest hurdle the banking and finance sector has faced is restoring and maintaining customer trust levels. Some still have a way to go!

• Futurist Don Abraham says there are eight consumer trends (in developed countries in particular) that are likely to reshape markets between now and 2018 (101). They are: o In search of ‘enoughness’ – Consumers rethink their life goals and what they work for. o New Americanism – America reconsiders its place in the world (as the BRIC countries in

particular - Brazil, India, China and Russia - become more dominant). o Sensing consumers – Technology exposes hidden aspects of daily life. o The transparent self – Biological and other advances reveal the body and mind’s inner

workings. o Just in time life – Ubiquitous information flows reshape how people socialise, work and

shop. o Women in charge – Women overtake men educationally, leaving them better prepared

for the 21st century workforce (this is particularly the case in the Caribbean – 70% of the students at UWI are female. Males are dropping out of the educational system at a frightening rate and few are thinking about the potentially serious negative future consequences of this trend).

o Virtual made real – Boundaries between virtual and real worlds become more porous. o Education revolution – Traditional institutions go virtual and modular.

• The differences between generations, illustrated in Figure 22, are also becoming stark and will impact upon the shape of future markets. In 2020 Gen Y will be playing a major part in how the future plays out in many parts of the world. How they are being empowered today will have a very significant influence on the future impact that they have economically and socially (102).

100 http://www.slideshare.net/dinisguarda/trust-7-trends-about-the-future-finance-dinis-guarda 101 http://haoodnla.com/article/lxy09217655y9j01/194249 102 http://www.strategy-business.com/article/00022?gko=2c2d5

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Figure 22: Growing differences between the generations

• Gen Y is not a 9 to 5 generation when it comes to employment. They prefer to work in multiple employment roles and determine their hours of work and play within, for example, a results-only working environment (ROWE). It is a model that provides the ultimate in working hour flexibility and a ‘work anywhere’ environment for the majority of employees (103).

• Many in Gen Y and Gen Z have a totally different way of doing things when it comes to communicating. They do less live talking (face-to-face) and the majority of their communication in a more detached way through virtual interfaces - iMing, Facebook, Instagram, Pinterest, Skype and numerous other channels. Electronic technology is just part of life for these generations (104), and sometimes they are a little ‘carefree’ about the way they use such technologies.

• ‘Real things’ are becoming more important. Huge historically virtual businesses, such as Google and Microsoft, are now developing substantial hardware based businesses. For example, Google is building 3D virtual glasses, computers and tablets, as well as driverless vehicles. They have also invested heavily in renewable energy (105). Microsoft now also markets hardware such as tablets and computers and has taken a large stake in the mobile phone sector by taking over Nokia and integrating their entire devices and services business (106). One of the reasons is that the value of much software, including mobile apps, is approaching zero, unless connected with something tangible that has real value (107).

• However, the wealthy in some parts of the world are reported to be ‘ditching’ products and services and looking to find unique, self-satisfying experiences (108) – a sign of what Danish Futurist Rolf Jensen said in 1999 would happen as we move into the age of ‘The Dream Society’.

103 http://www.npr.org/templates/story/story.php?storyId=124705801 104 http://edition.cnn.com/2010/OPINION/02/08/rosen.texting.communication.teens/index.html 105 http://www.cnbc.com/id/101417698#. 106 http://www.microsoft.com/en-us/news/press/2014/apr14/04-25nokiapr.aspx 107 http://stratechery.com/2014/business-models-2014/ 108 http://www.cnbc.com/id/101708710

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Social Networks

• A whole new way of doing things in just about every sector is emerging internationally and leading to the development of strongly customer-centric or peer-to-peer networks which recommend or don’t recommend just about anything and everything.

• Many traditional businesses have a history of being conservative and almost arrogant in their approach towards satisfying customer needs. Some still have an expectation that their customers will continue to do business with them, even if the service they have received is poor. The reality is that customers are finding other ways to satisfy their wants and needs, including through the numerous peer to peer (P2P) networks which now span the world.

• There are increasing numbers of people who are concerned at the massive profits banks have been making in ways many view are detrimental to society. This is leading to some banking customers seeking to earn a better and more ethical return through social lending networks rather than through traditional banks where they receive meagre interest rates at the same time the banks appear to make huge profits.

• Two leading US P2P lenders are Lending Club and Prosper which offer loans with fixed rates to borrowers at 20% less than traditional banks. Low rated credit card customers have been paying as much as 30% interest on their debts. Groups such as the Lending Club and Prosper have taken out the corporation as the middleman (109).

• The concept of P2P lending is spreading rapidly around the world. Pioneers were Zopa in the UK, Prosper in the USA, Smava in Germany, and Boober in Holland. More recently PPDai is offering P2P lending solely online in China. Because credit risk assessments are not available for most Chinese, this social lending group is focusing largely on standardising and facilitating loans between family members and friends - a market area that is much larger that personal loans from banks in that country (110).

• Fynanz is technology provider of ‘turn-key private student lending networks’ that basically enables private lenders to lend to students. One such network is www.cuStdentLoans.org (111).

• State-backed non-profit lending groups are also appearing in the US. For example, the Metropolitan Economic Development Association in Minneapolis is helping small businesses access loans after they have been refused by traditional banks, even when they have solid credit ratings (112).

• P2P lender Ripple says that the trustworthiness of traditional banks is open to question given the recent global financial crash. They use a model which allows ‘anyone to act as a bank’ and ‘grant credit within the Ripple system to anyone they know’. There is no need for the involvement of a traditional bank in any way (113).

• Kiva is another social lending network that began focusing on making small loans (US$ 25 – 75) to entrepreneurs in poor countries but is now also lending to ‘unbankable’ clients in the

109 http://www.mybanktracker.com/bank-news/2010/02/02/peer-to-peer-loans-the-next-best-alternative-to-banks/ 110 http://technode.com/2014/04/14/p2p-lending-service-ppdai-gets-millions-dollars-series-b-funding-risk-control/ 111 http://www.fynanz.com/company 112 http://www.pressherald.com/business/nontraditional-lending-fills-gap-for-small-businesses_2010-03-06.html 113 http://www.masternewmedia.org/news/2005/06/27/p2p_can_cut_banks_out.htm

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USA. By March 2010 more than 500,000 investors had lent USD 130 million to borrowers through Kiva. It was incorporated as a non-profit in November 2005 (114).

• In recent years P2P social network based lending channels have increased and include Kickstarter and much more locally focused groups such as PledgeMe in New Zealand(115).

• Social media is now becoming a powerful tool that can make or break a company or organisation. Consumers are increasingly using social networks as valuable sources of information about how good or bad a company, product, or service is as seen through the eyes of their peers. This is a trend that is going to be of critical importance in the future business world (116).

• People are talking about businesses on social networks such as Twitter. The question is are businesses monitoring what people are saying about them and responding accordingly? The answer so far seems to be not many (117).

• Businesses ignore social networks at their peril. For example, in 2009 United Airlines staff wrecked an expensive guitar belonging to a Canadian musician after refusing to allow him to carry it into the aircraft cabin. They then prevaricated when it came to ‘putting things right’. Dave Carroll, the musician concerned, was able to video the ground crew damaging his guitar. He turned it into a music video which went viral internationally and quickly attracted over 14 million views on YouTube (118). It is a blunder that United Airlines cannot erase.

• Many multiple product/service provision portals, such as TripAdvisor, allow customers to provide comments and ratings when it comes to the products and services supplied by businesses that market on the Internet. For example, here is a comment on the international travel booking site, http://www.hotels.com (119) about a well-known hotel in Tobago. ‘Location was good along with the view. Staff were for the most part unhelpful and not outgoing with the guests. Prices at the bar seemed to fluctuate depending on time of day and/or bartender as we were not on the all-inclusive plan. Breakfast was ok, nothing spectacular. I would recommend the sister hotel next door as it is far more modern.’ Here is another about the Bacolet Beach Club in Tobago. ‘Just what we needed after Carnival in Trinidad. Quiet, secluded, massages in the room and delicious food. Beware of the restaurant charges, however. They tried to overcharge us (twice!), and it wasn't a cheap meal in the first place!’

• Compare the above comments with the 5 out of 5 star experience tourists have recorded at the Jamaica Inn in Ocho Rios and their very positive reviews (120) e.g. ‘Jamaica Inn was an exceptional escape from our routine hotel adventures. From the wonderful service we received to its mixture of native and English/American cuisine, to the luxury of its own beach and an outstanding danceable nightly entertainment program, it was a vacation that renewed our spirits and had us planning for a return trip in the near future.’

114 http://www.kiva.org 115 https://www.pledgeme.co.nz/ 116 http://www.activ8inc.com/b2evolution/index.php?p=30&more=1&c=1&tb=1&pb=1 117 http://thebankwatch.com/2008/04/07/innovation-happens-at-the-edges-banks-are-you-watching/ 118 http://www.youtube.com/watch?v=5YGc4zOqozo 119 http://www.hotels.com/ho128431/grafton-beach-resort-black-rock-trinidad-and-tobago/ 120

http://www.hotels.com/hotel/details.html?pa=5&pn=1&ps=5&tab=reviews&destinationId=718070&searchDestination=Ocho+Rios&hotelId=213433&rooms[0].numberOfAdults=1&roomno=1&validate=false&previousDateful=false&reviewOrder=date_newest_first#reviews

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• Customers increasingly have the power to ‘make or break’ businesses through the recommendations they make to their social network peers. It is becoming one of the most powerful market shaping forces in the world.

• Many marketers do not understand how social networks work and still try to ‘hard sell’. Social networks are essentially ‘owned’ by the people who are part of them. They are essentially a place to share ‘stories’ and not a place for hard selling. Those who try the latter are likely to be quickly ‘unfriended’!

Disruption

• Perhaps the biggest change over the past decade or two has been the rising power of the consumer and how this is impacting upon the way that companies do business, as illustrated in Figure 23. This is leading to what is called ‘disruptive innovation’.

Figure 23: A big shift in the power balance has been taking place

• Historically companies had the power to ‘dictate’ what they would or wouldn’t do for their customers because they had local market power. But that is changing fast as the world becomes more interconnected and now customers increasingly decide which businesses succeed and which fail at home and abroad.

• For example, the giant Kodak group failed because the top executives did not understand how digital camera technology would make photography easy for everyone and eliminate the need to process films, i.e. they failed to understand what their customers wanted.

• Internet shopping services, such as Aeropost and eZone in the Caribbean region and Amazon and Ali Baba internationally, are creating serious challenges for traditional high street retailers who are often located in traffic congested areas where little or no parking is available nearby and who don’t have access to the same range of stock items that an online retailer has. Many retailers face a bleak future for the reasons above, as well as their often poor customer service. They are not trying to understand what customers want.

• In terms of disruption driven by technology, think about paper tickets which were once made by commercial printers. Now they are fast becoming electronic.

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Figure 24: The big move towards paperless ticketing

• There are many business sectors that are under threat because of changing consumer lifestyles, workstyles and preferences. Some examples of sectors that are ‘going’ and what is likely to be ‘coming’ to replace them are shown in Figure 25.

Figure 25: Examples or sectors facing a decline (‘going’) and likely to grow (‘coming’)

• One of the things that may create the biggest disruption to markets and businesses in the coming years is the growing inequity between the worlds rich and poor. Just 85 people in the world possess as much wealth as the 3.5 billion poorest (121).

121 http://www.forbes.com/sites/laurashin/2014/01/23/the-85-richest-people-in-the-world-have-as-much-wealth-as-the-3-5-billion-poorest/

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Figure 26: The 99% is becoming disillusioned and restless.

• This is leading to the emergence of ‘businesses with a purpose’ – i.e. more value than profit driven. The online handcraft business network, ETSY, is an excellent example (122). It seems likely that we will see strong growth in ‘purpose-based businesses’ in future years because of growing consumer disenchantment with ‘greedy corporations’.

• Disruption is going to reshape almost every market sector and any business that is unaware of the threats to their future position in the market faces the risk of becoming irrelevant to their customers and clients.

• The majority of medium and large size T&T businesses which participated in the 2012 CARIRI Business Future Fitness Survey, as well as those that didn’t, have a great deal of work to do to ensure that they become more customer-centric and don’t become blindsided by the disruptive forces re-shaping their traditional market spaces.

122

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