VALS™ Lens Applying VALS™ to current events March 2014
In this issue:
- In Advice: Consistently Wrong
- On Cultural Tastes: What's a Hipster?
- In Restaurants: Middle-Class Erosion
In Advice: Consistently Wrong
"It is no secret that equity analysts at banks do not always give the best investment advice," begins an 18 January 2014 Economist article. Are analysts' recommendations better in bull markets than in bear markets? Yes. A recent report from Singapore Management University and Ohio State University noted analysts' profit forecasts between 1983 and 2011. Predictions in bear markets (falling markets) were less reliable than in bull markets (rising markets). Profit forecasts for the coming quarter were off by 46% more during downturns than during upturns. Banks may not be the best place for investment advice. SBI's 2012–13 MacroMonitor's macroeconomic survey of US households reports that 9% of US households use a bank or credit union's stockbrokerage services; Innovators and Thinkers are the most likely to do so. However, these two groups are also more likely than average to have a full-service or discount stockbroker relationship. Perhaps because of the unreliability of investment advice, Innovators and Thinkers rely on more than one advisor.
On Cultural Tastes: What's a Hipster?
Hipsters are a subculture of high-resource, urban Millennials whom no one is sure exist. They embrace indie fashions, indie music, tight jeans, dark-framed glasses, and men's hats (of a certain look). Hipsters are the arbiters of taste and what's supercool but reject the label when it applies personally because—well, it's not cool. Hipsters receive the blame for a number of trends, such as popularizing facial hair—resulting in declines of razor-blade sales, the use of (fixed-gear) bicycles without brakes, and even urban gentrification. One method of spotting a hipster is to go to the nearest bar and check out who's drinking Pabst Blue Ribbon beer (PBR). The cost of this subpremium beer has seen "double-digit price increases," reports the Restaurant Sciences consultancy; a New York Daily News reporter wrote, "You can blame hipsters for that." VALS™/GfK MRI spring 2013 data show that young Innovators and high-resource Experiencers are far more likely than average to drink PBR. Marketers beware: Innovators and Experiencers hipsters move quickly once they sense their tastes are co-opted by nonhipsters. Evidence suggests that hipsters go to great lengths—such as learning to ride a bike without brakes—to distinguish themselves from mainstream consumers.
In Restaurants: Middle-Class Erosion
Income inequality and lack of upward mobility are in the news. However, media don't always pick up on real-world stories about how inequality is playing out in the business world. In February 2014, the New York Times and PBS ran a story about two restaurant chains—Olive Garden and Red Lobster—that are struggling because of the steady decline of the middle class. The NYT article notes that at the same time, upscale Capital Grille—the same company owns all three restaurants—is thriving. A comparison of VALS™/GfK MRI data between spring 2008 and spring 2013 reveals that the incidence of US adults who have visited the restaurants in the past six months is statistically unchanged: 18% have patronized Olive Garden, 14% have patronized Red Lobster. Declining profitability is the result of less frequent patronage by key consumer groups. For example, in 2008, Experiencers were more likely than average to visit Olive Garden three or more times in the past month; in 2013, they are average for doing so. Achievers and Experiencers who patronize Red Lobster in 2013 three or more times per month are no longer above average for doing so as they were in 2008. Beyond understanding price competition, restaurants need to find better ways to create value for key consumers.
Learn more about how middle-class erosion is affecting restaurants