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'Cheap' Is Good, According to a New Survey From The Boston Consulting Group (BCG)

Posted on: Monday, 15 May 2006, 12:05 CDT

BOSTON, May 15 /PRNewswire/ -- A new survey commissioned by The Boston Consulting Group (BCG) illuminates the increasingly important role that smart shopping and savvy bargain hunting ("treasure hunting") play in Americans' lives.

The findings confirm not only that Americans approach shopping and the quest for low-priced, quality goods -- treasures -- as a sport and an avocation, but also that new patterns of spending and "treasure hunting" enable them to live better, balance their budgets, improve family life and satisfy emotional needs.

The results underscore that these new spending patterns -- and the practice of spending to save -- are, in part, a result of a new crop of manufacturers and retailers that (a) understand the emotional dimensions of spending and (b) are able to deliver what the mainstream of middle-market players (like department stores and American auto manufacturers) don't: quality at significantly low prices.

Among the results of the survey, conducted online by Harris Interactive(R) among 1,042 U.S. adults over 18 with annual household incomes of at least $50,000:

-- Half (50%) of Americans say they enjoy a higher standard of living because of savvy shopping. -- On average, Americans say they save over 20% of their discretionary spending by smart shopping and "treasure hunting." -- A significant majority -- 64% -- of Americans say there are more places now than there were five years ago to find real values when shopping. -- 73.1% of Americans identify themselves as "savvy shoppers."

The survey was fielded in conjunction with the publication of Treasure Hunt: Inside the Mind of the New Consumer (Portfolio, May 2006) by Michael J. Silverstein, a BCG senior vice president and co-author of the best-selling Trading Up: The New American Luxury (Portfolio 2003). Treasure Hunt explores how nearly every middle class consumer is now on a "treasure hunt," intelligently and avidly seeking out good quality products and services in every category -- from clothing and luxuries to food and hotel rooms -- at significantly low prices. The book argues that manufacturers and retailers are no longer in the driver's seat -- unless they're both innovating and cost cutting to deliver more value. According to the book, consumers save over $100 billion per year by "treasure hunting."

New Spending Patterns Contribute to Financial Security; They Don't Erode it

The survey results suggest that the majority of middle-class Americans are confident about their finances and save money:

-- 72% say they're in control of their finances; 67% say they balance their budgets, and 45% say they're able to save adequately for the future. -- More than 70% said they save money. On average, respondents said they saved about 13% of their total income last year. -- In terms of the future, 70% say they believe they'll be better off financially; 71% say they'll have a higher income; 60% say they'll be able to buy more of what they want, and 58% say they'll have adequate savings.

Responses to other questions indicate that Americans' approaches to smart spending -- and the increased availability of "treasures," thanks to the new crop of manufacturers and retailers that understand "treasure hunting" -- contribute to their confidence about their finances. For instance:

-- 65% say that it "feels like I'm doing something good" when they purchase an item because it's a good value. Importantly, 41% say "it feels like I'm putting money into savings" when they purchase an item because it's a good value. -- The majority of Americans (56.3%) say it "feels like I'm contributing to savings when I invest in home goods and improvements." -- Nearly two out of five Americans (39.4%) say they "save a lot in some places and splurge in others." The Emotional Payback of "Treasure Hunting": It's Significant

Not only do smart, new spending patterns contribute to Americans' feeling of financial control, but savvy shopping and "treasure hunting" also deliver emotional satisfaction:

-- 71% of Americans say "it makes me happy" when they purchase an item because it's a good value. 59% say "it's exciting," and the majority (51%) say "it feels like I'm on a treasure hunt. -- Most Americans (92.3%) say they tell people about it -- and how much they paid -- when they get a great deal on something special to wear or for their home. -- Nearly three-quarters (73.3%) of Americans have purchased an item that they didn't need at the time -- simply because it was a good value. -- Three-quarters (75.1%) of Americans say they believe "cheap is good" in some categories.

The emotional payback of "treasure hunting" may transcend individuals' financial needs and strictures; on average, respondents with higher incomes were the most excited by "treasure hunting."

Where People "Treasure Hunt" -- and for What

Americans say they're most likely to find high-quality bargains online, at discounters or at warehouse clubs, but very rarely at traditional department stores or neighborhood boutiques.

-- 25% say they'll be most likely to find a special treat or treasure on eBay or another online retailer; 23% say they'll be most likely to find one at a discounter like Wal-Mart, and 20% say it will be at a warehouse club like Costco. -- Only 9% say that bargains will likely be at department stores, and only 5% say bargains will be at a neighborhood boutique.

The treasures that Americans are most likely to find are: electronics; clothing; home décor items; sporting equipment; appliances and liquor, beer or wine.

Said BCG senior vice president and Treasure Hunt author Michael Silverstein, "Today's savvy consumers -- most of them women -- are 'purchasing agents.' They calculate their savings and are proud of them. While they restlessly search for the best deal, they will not compromise on technical or functional benefits. The emotional benefits are what really count. In this era of smart, strategic shopping, companies need to change commodities into treasures, not just bargains. They must create a regular cycle of innovation and also relentlessly drive costs down. The new cheap is not just cheap; it's good."

Survey Methodology:

Harris Interactive(R) conducted the online survey on behalf of BCG between March 27 and April 5, 2006, among 1,042 U.S. adults age 18 and over with household incomes of at least $50,000 per year. The questions in the survey cover the willingness of Americans to trade up (or down) and also take a look at attitudes toward spending and life in general.

Data were weighted to be representative of the total population of U.S. adults with annual household incomes of $50,000 or more on the basis of education, age/gender, ethnicity/race, region and propensity to be online.

In theory, with probability samples of this size, one can say with 95 percent certainty that the overall results have a sampling error of plus or minus 2 percentage points of what they would be if the entire population of U.S. adults with annual household incomes of $50,000 or more had been polled with complete accuracy. This online sample is not a probability sample.

Note: The Boston Consulting Group and Harris Interactive were responsible for the survey design, online data collected and data weighting and BCG was responsible for the data analysis and reporting.

About The Boston Consulting Group:

Since its founding in 1963, The Boston Consulting Group has focused on helping clients achieve competitive advantage. Our firm believes that best practices or benchmarks are rarely enough to create lasting value and that positive change requires new insight into economics, markets, and organizational dynamics. We consider every assignment a unique set of opportunities and constraints for which no standard solution will be adequate. BCG has 61 offices in 36 countries and serves companies in all industries and markets. For further information, please visit our Web site at http://www.bcg.com/.

About Harris Interactive(R)

Harris Interactive Inc. (http://www.harrisinteractive.com/), based in Rochester, New York, is the 13th largest and the fastest-growing market research firm in the world, most widely known for The Harris Poll(R) and for its pioneering leadership in the online market research industry. Long recognized by its clients for delivering insights that enable confident business decisions, the Company blends the science of innovative research with the art of strategic consulting to deliver knowledge that leads to measurable and enduring value.

Harris Interactive serves clients worldwide through its United States, Europe (http://www.harrisinteractive.com/europe) and Asia offices, its wholly-owned subsidiary Novatris in Paris, France (http://www.novatris.com/), and through an independent global network of affiliate market research companies. EOE M/F/D/V

The Boston Consulting Group

CONTACT: Alexandra Corriveau, Sommerfield Communications, Inc.,+1-212-255-8386, Alexandra@Sommerfield.com

Web site: http://www.bcg.com/http://www.harrisinteractive.com/

Source: PRNewswire

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