A Little Consumer Behavior Goes A Long Way

Michael Hedges October 28, 2010 Follow on Twitter

Most people in the media world would like consumers to behave a bit better. Broadcasters certainly would. It seems that once consumers got their hands on the remote control everything changed.

Economists aren’t any better at predicting consumer behavior than they are at picking stocks. Ugly things happen when you’re wrong and nobody likes bad press. Economists have figured out that consumer behavior tends to change when money flows rapidly in or out of a country’s economy. This is a happy moment for economists because it is another use for their favorite number – GDP growth rate.

GDP – gross domestic product – is one yardstick for the economic value of a country. GDP growth rate is like a doctors’ thermometer. If GDP growth rate is high, we talk of “dangerous overheating,” something akin to feverish hallucinations. When it’s too low, phone the mortician. Generally speaking, economists and policy makers today like to see GDP growth rates in that 3 to 5 percent range, enough to keep the body warm, money flowing, but not so hot that outcomes are unpredictable. Economists like order.

Consumers in countries with GDP growth rates 3 to 5 percent are orderly and patterns of their behavior change very slowly. But when GDP growth rates rise to seven or eight percent or higher consumers quite quickly change behavior. Just the same, when GDP growth rates fall to zero or worse, consumers react.

Taken over decades, GDP growth rates show changes in economic vitality, something akin to tides. Asia has been at high tide, give or take a few storms, for a generation. By some estimates, China’s 2010 GDP growth rate could be as high as 10%. South Korea isn’t far behind. In contrast, the UK’s 2010 GDP growth rate will likely be about one percent.

Where money flows, everything grows. It is no surprise that countries in the Asia Pacific region are digital economies with the fastest uptake of digital devices and digital media. In June the Economist Intelligence Unit published a report ranking the digital economies of 70 countries.  Seven of the top twenty are in the Asia Pacific region. The report ranks Singapore and Hong Kong as the world’s leaders in digital business and legal environment.

One oft mentioned subject at media conferences is reaching digital natives. The picture is typically people under 30 or so who have always been wired to the web or mobile phones. They are thought of as trendsetters, more than just early adopters.

In Asia digital natives are the norm. Not simply because of the web but because consumer electronics – development and invention – has had a large impact on Asian societies, particularly in Japan, South Korea and Taiwan and increasingly China. In the aforementioned countries, the consumer electronics industry is the cultural equivalent automobile industry in the United States 40 years ago. Fully 11% of employment in South Korea is related to the consumer electronics sector.

With that have been wholesale changes not only in the way media is consumed but what media is.

Like the automobile of the 1970’s, digital today is aspirational. TNS Global recently published a study called Digital Life, one of many recent attempts at getting our arms around the changes brought about by the digital revolution. This study, in particular, looks at social and cultural aspects.

The sons and daughters of the original Asian digital natives are totally absorbed in digital media. We see it in software and graphics in the gaming sector. We see it in the uptake of mobile TV.

South Korea is, with little argument, the world leader in mobile TV and digital radio development. Park Associates ranked South Korea and Taiwan the world leaders in adoption of digital technologies. That was 2005.

How that happened goes back to Asia’s economic crash in the late 1990’s. The South Korean government implemented its digital agenda bringing together major manufacturers like Samsung and society in general to put the country ahead of its neighbors in digital consumer electronics. South Korea built a massive broadband infrastructure. There is no “white-space” between the South Korean government and Samsung. Today South Korean consumers are the quickest buyers of mobile phones, replacing on average every 6 months.

We can really point to far earlier development of the electronics manufacturing industries, to the late ‘60’s and early ‘70’s, when companies took advantage of low-wage employment to, first, produce very inexpensive electronic components for foreign partners. Later, as wages rose, these same companies shifted to more knowledge-based products. Between 1971 and 1976 employment in electronics manufacturing increased 400%. Between 1981 and 1986 employment in the sector doubled again. That was about the same time Samsung opened a research and development facility in California.

A survey by the Korea Management Association, released in July, named Samsung and SK Telecom the country’s best employers. Employees are, obviously, consumers. And Asian consumers are invested – socially and economically – in these huge institutions.

A 2008 academic study of South Korean consumers digital media preferences called the mobility factor “remarkable.” The study also showed a convergence of broadcasting and telecom providers to the point that consumers can barely distinguish between the two. Korean consumers do, however, distinguish among platforms, younger more educated consumers choosing a variety, each with distinct usage characteristics.  IPTV and mobile broadcasting are viewed as complimentary.

Mobile media has captured Asian consumers in ways quite different from the rapid uptake of mobile phones in Europe over the last decade. In Europe, the mobile phone remains basically a communication device, speech and text most important to consumers. In Asia it’s a window to the world, and a colorful one at that. Of course, one reason is far lower device and bit rate costs and that is specifically related to national industrial policies. Asian countries have had digital agendas for a very long time.

South Korea has moved quickly and deliberately in its digital agenda. Lee Jung-gu of the Communication Ministry broadcast division pointed to insufficient frequency resources inhibiting the uptake of new services demanded by consumers. “That’s one of the reasons why we are trying to digitize the whole radio broadcast system,” he said. “Under the current analogue system, newcomers can hardly find available frequency resources.” Just recently Singapore, also rapidly moving to a digital media framework, signed an agreement of cooperation with Korea.

Can we draw insight from Asia into the chicken and egg question? Are digital consumers driven more by devices or content? The media sector in Asia is and has been significantly different from Europe. State controlled media continues to be the norm with notable, sometimes limited exceptions in Australia, South Korea, Taiwan and the Philippines.

The rise of digital devices, though, is shifting consumer behavior. One-third of Indonesians living in Jakarta have a Blackberry and half the population visits Facebook. Smartphones – even the Blackberry – are far less expensive than PCs and Facebook – among other social media sites – is used as a news and entertainment portal. For post-modernists it’s a robust example of disintermediation.

Again in South Korea, more than one-third of radio listening is to digital channels. And the number of channels is growing. What’s also interesting in South Korea is the rise – some say surprising – of a new Korean pop and rock music scene.

That in itself recalls the development of FM radio in the United States in the late 1960’s and early ‘70’s. Broadcast FM had been around for years, mostly used by owners of AM stations for “beautiful music” channels, often offered to retailers as in-store background music. FM radio was neither a consumer destination nor money spinner.

Also at this time America’s GDP growth rate approached an almost unheard of four percent and the full effect of the post-War Baby Boom reached the economy. Broadcasters began experimenting with other music on their FM channels, much of it targeting young people. The first effect was an explosion in the music industry, which then cranked out more, better and bigger. FM radio stations had more unique content, followed by huge audiences and, eventually, a near total transition from AM to FM.

Digital radio in Asia, operationally, has many of the same deficits seen in Europe; too few channels and heavy competition from other digital media like gaming. There are fewer than a dozen digital radio channels in Taiwan, all officially testing, all music-only. Radio station licensing in Hong Kong is oppressively difficult for would-be private broadcasters.  

E-commerce is another driver of digital consumption in Asia, of particular importance to mobile TV providers. Market research firm Millward Brown created an index of digital brand relationships, essentially ranking consumer product categories that are searched or purchased online. Not surprising it correlates with internet penetration. Japan and Taiwan led the world in e-commerce by this index but consumers in other Asian countries have been slow to get excited about buying online.

There is no singular Asian digital consumer as there is no single European digital consumer. Devices drive some. Content drives others. Fashion drives some. As it mixes together the reasonably clear picture can be summed up by saying digital is everywhere but it is not everywhere in the same way.

See also in ftm Knowledge

Social Media Matures (...maybe...)

Hundreds of millions use social media. It has spawned revolutions, excited investors and confounded traditional media. With all that attention a business model remains unclear or it's simply so different many can't see it. What is clear is that there's no turning back. 42 pages, PDF (June 2011)

Order here

Digital Radio - Possibilities and Probabilities

Digital radio has many platforms. From broadcast platforms to internet radio and rapidly emerging smartphone platforms, listeners and broadcasters have choices galore and decisions to make. Some regulators have made up their minds, others not, some hedging their bets. This ftm Knowledge file details the possibilities for digital broadcasting and the probabilities for success. Includes Resources 110 pages PDF (August 2010)

Order here

Media in Spain - Diverse and Challenged – new

Media in Spain is steeped in tradition. yet challenged by diversity. Publishers hold great influence, broadcasters competing. New media has been slow to rise and business models for all are under stress. Rich in language and culture, Spain's media is reaching into the future and finding more than expected. 123 pages, PDF. January 2018

Order here

The Campaign Is On - Elections and Media

Elections campaigns are big media events. Candidates and issues are presented, analyzed and criticized in broadcast and print. Media is now more of a participant in elections than ever. This ftm Knowledge file reports on news coverage, advertising, endorsements and their effect on democracy at work. 84 pages. PDF (September 2017)

Order here

Fake News, Hate Speech and Propaganda

The institutional threat of fake news, hate speech and propaganda is testing the mettle of those who toil in news media. Those three related evils are not new, by any means, but taken together have put the truth and those reporting it on the back foot. Words matter. This ftm Knowledge file explores that light. 48 pages, PDF (March 2017)

Order here

More ftm Knowledge files here

Become an ftm Individual or Corporate Member to order Knowledge Files at no charge. JOIN HERE!