26/11/2007
The recommendation generation: A £750M prize for retailers
Retailers who fail to embrace the ‘Recommendation Generation’ – a newly identified breed of young, educated, urban and online social networking consumer – could miss out on £750 million in online sales, according to Royal Mail.
Published today, a report by Royal Mail and leading think tank The Future Foundation shows that 66 per cent of the Recommendation Generation are more likely to buy a product as a result of a recommendation, or ‘word of mouse’.
And retailers that set up their own branded networks for product reviews could tap into this lucrative trend and win a significant share of sales, with 27 per cent of social networkers saying they would join such a site.
Innovations such as Google’s ‘OpenSocial’ and Facebook’s new technology, that will allow businesses to build custom-designed "pages" on the social networking site, means that social networking will increasingly become an integral part of browsing and cybersurfing, further enhancing the power of ‘word of mouse’ in purchasing decisions.
But the report also reveals that traditional marketing methods also play an important role in inspiring purchasing behaviour for this online savvy social networking community. The use of catalogues, for example, continues to be a significant part of the shopping experience with 45 per cent of social networkers saying they have used a catalogue in the past six months – the same percentage as non-social networkers.
Demonstrating the link between recommendation and purchase amongst the Recommendation Generation, the report revealed:
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Two thirds of social networkers (66 per cent) are more likely to buy a product as a result of a recommendation, compared to 52 per cent of non-social networkers
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Recommendation is the number one reason for choosing a particular site
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Over a quarter (27 per cent) of social networkers bought from a website as a result of a recommendation, compared to 17 per cent of non-social networkers
Alex Batchelor, Marketing Director at Royal Mail, said: “Our research shows that the battle for the home shopping pound will increasingly be fought and won in the aisles of social networking sites where the power of recommendation rules.
“If recommendation accounts for just ten per cent of the average annual online spend of £1,221* for the Recommendation Generation, then the total prize for retailers who tap into this social networking group is £750 million and will only grow.
“Retailers cannot afford to ignore this new generation of shoppers and those who tailor their sites to drive ‘word of mouse’ and understand how to interact with existing social networkers will benefit.”
James Murphy, Editorial Director of the Future Foundation, added: “The development of the Recommendation Generation is part of a fundamental shift in the basis of consumer capitalism – a community of online-savvy individuals at liberty to engage with the pleasures of shopping on their own terms.
“Indeed, modern consumers are so confident in themselves that the ultimate endorsement of a product comes from the lips and clicks of their friends. This is an environment in which brands can benefit greatly, but they will need to be more sensitive than ever before to the voice of the consuming public.”
Making predictions on the impact on the future of the multi-channel retail market, the report forecasts that by 2012, 84 per cent of consumers will have access to the internet and 63 per cent will be using it as a retail channel. This, coupled with the fact that 80 per cent of social networkers say they will continue to use these sites, creates a powerful scenario for the industry.
Ends
Issued by Blue Rubicon on behalf of Royal Mail.
For further information and to set up interviews, please call Lauren Goddard, Kate Cozens or Debbie Howard on 020 7260 2700.
Notes to Editors
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The Future Foundation is a leading commercial think-tank with over eleven years experience in helping high profile British, European and global clients plan their future change.
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Methodology: 1497 adults (18+) in the UK were polled in September 2007. Of these, 497 had a personal profile on a social networking site. This quantitative research was supplemented by forecasts and ongoing trend analysis from the Future Foundation and Royal Mail. A series of interviews with opinion leaders and retailers including Amazon, ASOS, Firebox, IMRG, JWT and Tesco were also conducted to review current practice and elicit opinion on future investment.
* Statistics from Royal Mail Home Shopping Tracker Research 2007