New Consumer Behaviors

Micheal Mendenhall: Welcome back. You know, if you really want to better understand the values and psychology of the American people, follow their wallets. Well, that is exactly what our next speaker does with an incredibly fresh and novel approach titled 'The New Consumer.' Literally, he follows the money and files the story that uncover how people spend money. And it's not always what you think, and in fact, I saw some of this research. It's quite interesting, especially with the Gen X crowd. So, sit tight and get ready for this one. And get ready to hear from the expert who studies this inside and out.

Ladies and gentlemen, please welcome Dan Frommer. And this is not the Frommer from the travel guides. Some people get confused. This is Dan Frommer, who's got amazing consumer insights. So Dan, welcome to PeopleForce.

Dan Frommer: Good afternoon. Hi, I am Dan Frommer. I am a longtime business and technology journalist. I am also the founder of The New Consumer, a new kind of publication, as he said, exploring how and why people spend their time and money. I'm at newconsumer.com. My partner in this research that you'll see today is Coefficient Capital, a venture capital firm based here in New York City, investors in many companies that you've likely heard of, and this is our consumer trends report.

This is the third one—our second one we've done this year. We'll do one more at the end of the year. This is our fourth year doing these and we focus on profound changes in the consumer landscape, what's going to matter for years ahead. Our midyear report, this one you're going to see now, focuses on the three things anyone wants to talk about this summer—AI, Ozempic and the economy. I will also cover some of the highlights from our past few reports that I think will be relevant for you all.

And before I start, a big part of our research is what we call the Consumer Trend Survey. We've now done seven of them over the past years. Each of these has a survey of more than 3, 000 U.S. consumers. Our most recent one wrapped up just weeks ago in June and we surveyed Gen Z as young as age 15.

So, really trying to get a really close look at Gen Z and our survey is powered by Toluna. Thank you, as always, to them. Let's go right into it. AI is the obsession of the year. People in the media can't stop talking about it. Articles about AI have spiked this year. You all in corporate America can't stop talking about it either. These are mentions of AI on earnings calls, as tracked by Bloomberg. Huge spike this past quarter for Q2. Why now? Why is everybody talking about AI right now? One big reason—things have changed. There's been another decade of technological progress. Some useful and novel products are finally coming to market.

And the truth is, many companies just need a new narrative, so AI is it. Most Americans have heard of AI, how familiar are they, younger generations, Gen Z and millennials, and you'll see a lot of my charts are grouped by generation here. The ones here on the left side, Gen Z and millennials, more than half say that they are extremely or very familiar with AI, lower percentages for older generations.

In terms of the tools that people know about, ChatGPT is the early winner so far, ahead of products by Google, Microsoft and Adobe. More than a third of U.S. consumers or so say they are aware of ChatGPT. Work, of course, a huge topic, work and labor—trillions of economic impacts, McKinsey things, dictated by AI.

More than a quarter of U.S. workers say they are worried that AI will replace them at work within five years—higher, slightly, among higher earners and also among lower earners. Workers who tell us that they are, they feel the most familiar with AI are also the ones that feel that they're most at risk. You see the ones who say they're extremely familiar with AI are the ones who are most worried about getting replaced with it, replaced by it within five years. However, most higher earning workers also say they're already using AI tools for work. Lower earners say they have not, in our survey, and the idea is, perhaps, AI will make them more productive. So, in the meantime, before you are replaced, you are a super worker especially among higher earners. Most humans, however, in our research, still want humans as their doctors or lawyers. That is pretty consistent among professions like that.

If you look, the blue are people who want human doctors or lawyers or assistants slightly lower for financial advisor; maybe AI will have some inroads there. But interestingly, also people who say they are the most familiar with AI are also the ones who are most likely to trust an AI doctor, still the minority of them. The majority do not want an AI doctor, but increasingly, as you learn more about AI, it appears the more likely you are to trust those things. AI, of course, also expected to have profound impact on culture. Half of Gen Z and millennial consumers, in our research, say they consider AI art to be art, lower among older generations.

The key question of course—will AI become the dominant form of entertainment? And so, we asked our survey audience and about 40% of Gen Z and millennial consumers at least somewhat agree that 20 years from now, most movies, art, music and books will be created by AI. And then also around 40% believe that 20 years from now, the best of media, movies, art, music and books will be created by AI—pretty similar and consistent across those different media forms. But AI is also fun; it's entertainment and most Gen Z and millennial consumers say they have already used AI tools for fun, lower among older generations.

I use AI tools for fun sometimes at home. I have Midjourney make me, this is a soda can for a sardine-flavored soda. Actually looks kind of appetizing, vaguely Scandinavian. I'm not sure about that. And then, Wes Anderson style commercial for a salad chain. These are the things that I have Midjourney working on for me. I don't know about all of you.

AI, of course, also expected to have big effects on society. "What will AI do to or for us?" we asked our survey panel. Most likely to have a total lack of trust in visual and/or audio content, but also things like acceleration in science and the arts, of course, mass transformation of jobs. Only about a third, I think, of people are expecting AI to turn on us and for robots to take over.

Who should regulate AI? In our research, most people, the largest percentage at least, believe the federal government should and then lower for things like companies should regulate it themselves; we'll see about that. State governments, local governments, and then of course, some people believe no one should regulate AI.

And then in terms of what impact will AI have on society? The more familiar people are with AI, the more likely they are to say it will have a positive net impact on society. The less you know about AI, the less likely you think it will have a positive impact and the more likely you will think it will have a negative impact.

And then how does AI make you feel? This is another one we separated by generation. The digital natives, much more likely to say “excited” or “hopeful,” and then older generations, more worried or scared. Still, some excitement and some worry among each set, but definitely I think a split there in terms of digital natives.

Ozempic and the new diet drugs. In our research, across all income groups, more Americans would rather feel 25% healthier than earn 25% more money. And weight remains the top concern for Americans in terms of their health. We ask them, "What are your top three health concerns?" Weight is the top for the largest percentage of people and about half of those who self-identify as overweight. Almost half of Americans say they felt pressure around their body type, higher among people who self-identify as overweight and as a result, we've seen diabetes drugs like Ozempic and Wegovy, which is the one intended for weight loss, have really soared in popularity since being approved by the FDA for weight loss a couple of years ago.

These are the number of prescriptions. It seems like we're nearing an inflection point there. In our research, almost 40% of Americans say they've heard of Ozempic. By far the largest brand awareness among the similar drugs, much lower for Wegovy, although I've seen subway ads for it, like, every station.

So, perhaps this chart will look different in a few months. But the net is that these drugs are very appealing. More than half of our survey audience of people who want to lose weight and know about the drugs say they are extremely or very interested in using one. It's even higher among millennials, almost three quarters of them, higher among men, higher among urban consumers, and also higher among higher earners and those who identify as overweight. However, about half of people are also concerned about their long-term effects on their health—you kind of have to stay on them. And then of course these drugs will also have an effect on society and on business.

This is another one where we saw a very interesting generational split. We asked, "Do you think that drugs like Ozempic will have a positive or negative net impact on society?" Millennials, most likely to say the highest positive impact, and then Gen Z, the generation following them, the younger generation, had the highest negative impact. Still more positive than negative, but really interesting dynamic there. Come to my breakout tomorrow, we will expound on that and talk about it in more detail if you want to talk through perhaps the why of some of that.

Digital natives, we spend a lot of our research focusing on Gen Z and millennials, why they represent now 40% of the U.S. population and are also entering their prime spending decades and working decades. So, very important to companies and also to consumer businesses. In our research, half of younger Americans say it feels like they live online. More Gen Z and millennials say they feel most like themselves online, as opposed to offline. Much different story for their parents. More than 40% of Gen Z and millennials say that they feel more valued for their talents online as opposed to offline. Pretty even, but still a large portion. Millennials say they feel more creative online than they do offline and consumers say they feel similarly stressed out online and offline. Then we ask, "Do you want to spend more time or less time online?" The answer is both, actually. People would like to spend, about a third of people want to spend more time online and a third of people want to spend less time online.

I thought this was fascinating: most Gen Z and millennial consumers say they consider themselves a gamer. Kind of on purpose, we didn't define what gamer meant, but pretty stark generational differences here, too. And more than a third say they consider themselves a digital creator. Again, something we kind of let them self-define, but that's a lot of people who think that they are a digital creator.

Which brings us to our next topic, TikTok. The average American now spends 13 hours a day using technology and media. Video's still the largest portion, audio and the truth is, a lot of times they're multitasking, they're doing two or more of these things at once.

I borrowed a question from the great internet stock analyst, Mark Mahaney, which was if you were trapped on a deserted island and could only access one social media network, which one would you choose? This is where Gen Z is really on that island by themselves. TikTok was the number one for Gen Z, whereas millennials and older overwhelmingly chose Facebook.

So, a very big difference between Gen Z and older generations, in terms of where they would choose the one place to spend their time online. Little more balanced for millennials than kind of everyone else, but anyway, most Gen Z and millennial TikTok users also say they would choose TikTok over TV or streaming if they could only choose one. And they're not just watching goofy dance videos or music, they're also doing things. Half of TikTok users say they prepared a new recipe because of a video, higher than other social networks. They also use these tools differently for brand discovery. If you look at where different generations discover new food and beverage brands. I spent a lot of time thinking about the future of food, beverage and grocery, and Gen X and boomers still primarily discover brands in retail stores, on television, and from friends.

If you look at Gen Z and millennials, it is YouTube and TikTok, and including a quarter percent of Gen Z for TikTok. How does TikTok make people feel? Actually, the number one response was happy and amused. Also more culturally aware, more globally aware. So, not super stressed out. Only 7% of people said it made them feel stressed.

And then we did something interesting in our last bit of research. We actually separated the responses from people who use TikTok at least once a month from those who don't. And as you might imagine, they have vastly different opinions about the company and the service. Specifically, most people know that the U.S. government is in the process of trying to decide whether to ban TikTok. Most people know it's owned by a Chinese company. But big difference here, about 40% of the monthly TikTok users are afraid that using the service will expose their personal data to China. Most non-TikTok users are afraid, a minority percentage of monthly active TikTok users.

Similarly, influencing content of the platform. Most people who use TikTok are not concerned about that. Only 37%, whereas almost two-thirds of non-TikTok users are afraid of the Chinese ownership impact on the platform. In terms of users of TikTok, three-quarters of them have a favorable opinion of the company and the service. Only 5% of non-users have a favorable opinion of the company. I thought that was very interesting and stark. And then only a quarter of active TikTok users think it should be banned in the U.S., whereas almost two-thirds of non-users think it should be banned in the U.S.

And someone came up to me after I gave this talk recently and said, "So, what is a drug?" Interesting. Very different opinions among users and non-users, and also support for banning TikTok increases and decreases in the U.S. by age. Only about 20-some percent of Gen Z believe TikTok should be banned, as opposed to their parents. The majority; more than 60% of boomers believe TikTok should be banned.

Lastly, the economy. The good news is that inflation has decelerated here in the U.S., while unemployment has actually remained very low and actually relatively stable. However, in our research, even as inflation has cooled, it still feels to consumers like prices have increased a lot. About 60% of consumers say that it feels like prices of everyday goods have increased a lot over the past six months.

The good news there is that is down from 73% in our research earlier this year in February. Right now, this is a look at consumer spending on all credit and debit cards as measured by Ernest Research. Ernest Analytics is their new name actually. And you can see that it has gone up and down throughout the year between e-commerce and retail stores.

Currently, “all in” is about flat right now, “in-store” is down a little bit, “e-commerce” is growing a little bit now. But if you zoom back for the past three or four years during COVID, this chart looked absolutely wild. So we've kind of stabilized here to flat spending.

Also good news here, consumer sentiment as measured by the University of Michigan is up. It is up from the all-time low last summer. Last June was the all-time low in like the many decades they've been doing this survey. The less great news is that it's still below pre-COVID levels, so the consumer is still hurting a little bit. Again, in our research, modestly more optimistic than they were this time last year, about 47% say they feel very or moderately optimistic about their financial situation over the next year. That is up from only 35% in our survey last summer, so that feels right and so one of the other things we've been doing—we've been doing this survey now for a very long time and we've been able to ask some of the same questions over and over, and we've tried to build what we call like a net promoter score for life.

We ask people, "Just how satisfied are you with life as a whole these days?" The average American is 6.6 this summer. Not bad. Actually, varies somewhat widely by category. Highest among millennials and the silent generation. Slightly higher among men than women. Highest among urban consumers as opposed to rural or suburban. Higher as you make more money. And then, I love this one. If you have zero kids, it's 6. 4. If you have one kid, it goes up a little. If you have two kids, it goes up again. And three or more, back down. So, makes some sense. And also great news, life satisfaction is on the rise and I hope this trend continues as well.

Sensitive topic here: the return to work seems stalled, however, around 50%. This is the office occupancy, as tracked by CASEL and again in our survey. Now 79% of consumers say they believe they should have the legally protected right to work remotely if technology and the nature of their work permits it. I know. It is amusing, but this has been consistent every time we ask this question and is even higher among women, Gen Z, and millennials and people with children. And again, up from 75% when we asked this last year.

Lastly, more weird times ahead here in the U.S. We have another election coming up. 40% of our survey panel said that they would vote for Donald Trump if he ran for president again next year, across all age groups and income groups. Very high ranking there. And then we also asked, “Who's the best leader for the U.S. today? Donald Trump is the highest one in our research, followed by Joe Biden and then “not sure”. Elon Musk has fallen from 4% to 2%, in our survey. He can't run for president, so it doesn't matter. But actually, if you look at Gen Z, it's very interesting. Between him and AOC, they have 10% of the Gen Z vote. Now, most of them can't vote yet, or many of them can't vote, but I thought that was fascinating.

Thank you to my team at Coefficient Capital for collaborating on me with this again. You can access all these reports for free on my site, newconsumer.com/trends, and please send me ideas or feedback or questions. And then lastly, if you would like these slides, well, we lost our QR code, but send me an email and I'll get you the slides. And now we will have some time for questions. I'd like to invite Tom Rose, SVP of Customer Success and Ops from TriNet out to lead our Q& A. Thank you. Thank you for your time.

Tom Rose: A lot of information.

Dan: Yeah.

Tom: We'll get that QR code up there.

Dan: Yeah, maybe if you want to put that QR code up for a minute. That would be nice, but as you wish.

Tom: You think they memorized all that information you just went through?

Dan: Me? Or them?

Tom: It was a tremendous amount of information.

Dan: Yes.

Tom: Great info.

Dan: Yeah, and I'm always redesigning the slides to make them more legible from an audience, but please send me feedback or questions or ideas. And again, we'll be doing a follow up tomorrow for an hour or I guess 40 minutes or something like that.

Tom: Yeah, we have about 40 minutes to go.

Dan: Please join us for that and grill us. I think that could be fun.

Tom: Well, that was incredible. That was incredible.

Dan: Thank you.

Tom: A lot of good stuff in there. I have to get a TikTok account, but I don't want to be one of the people that they take it away from me. So I'm going to sign up and then they take it away.

Dan: It depends who owns your phone, but yes.

Tom: Yeah, true. True. So as I went through a lot of the material and trying to kind of gain a foundation for it and where to go with it. I think one of the items I really want to understand, and I think it might be interesting for the team here, for the folks that are attending and online, is: When you look at a trend versus a fad, how do you break that out? How do you determine that? What's the approach there?

Dan: It's tricky and of course, we always benefit from hindsight. When we started doing this report in the fall of 2020, every chart looked absolutely crazy, and so it was very hard to discern what would really stick and what wouldn't. Things like home fitness, for example, is something that, you know, we were able to get spending data on consumers and you could see literally the customers of Equinox shift their personal spending directly to Peloton, and it was wild. And then, the gym opened back up and it went right back to Equinox.

So, yes, what is a trend and what is a fad? We look for structural changes, so things that, either because of a new technology or science or way of living, that is very unlikely to revert back to the way it once was. You know, in our lifetimes, we've had a couple of those profound changes, the internet being the biggest one. I think, mobile technology too, where you just can't really go back.

Once everyone had a very powerful computer in their pocket and things like Uber and Airbnb were possible, or mobile payments or all these types of things, you're not going to go back to writing a personal check at a store or something like that. So, a lot of it is just thinking like, "Okay, if this works, then what"? And then, is this something that people are really not going to want to go back from once they're used to it? You know, everyone made predictions in 2020 that were wrong, but I think a lot of them were right. One that I've spent a lot of time researching is online grocery. A lot of fields, e-commerce penetration shot up and then went right back down the minute retail stores were open and I would say that, but pretty much everyone has been impressed with the performance of retail since the pandemic. But online grocery has actually maintained its gains. It's still roughly the same place as it was at the beginning. So, it did not collapse the way some other shifts did. So, it was not a fad, it was a trend. It's not growing right now, which is problematic. But yeah, that's how we think about it.

Tom: Yeah. And when you look at those trends and those fads—how does it impact small to medium-size businesses in the U.S.? I mean, we have a lot of customers and prospects and vendors and partners here. How does it impact those small to medium-size businesses specifically?

Dan: I think the great thing about technology and the internet has been a democratization of tools that only big companies previously had access to. So, now you could literally be a one-person startup with a Shopify, e-commerce platform and conduct a level of business that a large company with hundreds or thousands of employees would have very few advantages over you.

Sure, they have more funding and they have more, you know, ability to get inventory or customer service or all those things. But the playing field, you can be a one person and create marketing on TikTok or Instagram or whatever that outperforms marketing from a multi-billion dollar company. And that I believe is not going to reverse.

So, the tools are there. It's about being comfortable with them and growing into them and, you know, embracing them often. But I think that's one of the biggest things across all sectors, marketing, you know, recruiting, everything. Digital technology, the internet, mobile technology specifically, I think, has been one of the greatest things for small business imaginable. You know, it's hard to be great at everything, but you can, and I think that's really cool.

Tom: That's interesting. Technology strategies for small to medium-size companies. You focus on the influence and the approach. We talked a lot about AI. Where do you see the trends going there on the technology front?

Dan: AI is a fascinating topic. We'll be hearing more about it soon. It's in a weird phase right now where a lot of people, very smart people, think it could have real profound impacts on everything from, you know, how we work to how the world works. The truth is that no one knows and we'll find out. However, it's one of those things where because it could have such a profound impact, it's a great idea to do some research, to poke around with these tools, play around, have fun with them, you know, go on ChatGPT and just see what they can do.

Maybe you'll get an idea that's really cool, maybe you'll design the next great sardine flavored soda can, or maybe not. But I think if you're running any size business, I run a one-person business. I do not run my business with any AI tools, but I experiment here and there and I think that's an approach that everyone should be embracing. In hindsight, now we laugh at certain elements of crypto and Web3, but it helped to have some familiarity with that. For some companies it was an interesting tool and for others it wasn't and the charts also look crazy, but yeah.

Tom: They prove it out. Yeah, I mean I think AI is one of those things where you can't resist it. You have to embrace it and then see how it impacts your business.

**Dan:**Again, it could make you extremely productive. It could also make you sound like someone you're not. So you have to be careful with it.

Tom: Yeah, agreed. I think on the native section of the digital native section, we talked about gamers. I'm certainly not a gamer, but I think one of the things that you pointed out on there was a digital creator. And the stats there around the Gen X and the boomers. Why do you think that is?

Dan: Do you feel that that was high or low?

Tom: I felt it was high, very high.

Dan: I mean, it's higher, obviously among younger generations who've grown up with those tools. Again, this is a question we purposely left a little vague because we were curious how people would interpret that themselves and really kind of an area for research, further research.

But yeah. I think another really, really interesting thing that's happened over the past 20 years is this democratization of publishing. Previously, to get attention or to become famous or to build a personal brand or whatever, you needed buy in from a big TV show or a network or Hollywood or something like that.

Now you could be literally one person with a phone and make a video that gets hundreds of millions, if not billions of views. And so, we asked some follow up questions. Most people, obviously, are not getting paid to post on social media. But enough people feel like it's part of their identity now that that's how they answer a survey question.

Tom: Yeah, that's incredible. The economy, let's talk a little bit about the economy. And your slides, it talked about prices increased a lot, right? It's 60% down from 73% in February. Where do you see that going? I mean, its pretty interesting.

Dan: I think we'll see it further reduce. You know, if you look at the actual numbers, they are going down. But there is a disconnect between what is real and what is perceived. And it still does feel like prices are a lot higher than they were certainly years ago, perhaps in some categories more than they were six months ago. You hear on earnings call after earnings call right now that the consumer is strong. They're still spending money especially higher-end consumers, but they are with some grit in their teeth and some feeling that prices are still high.

Tom: One more topic, because I know we're running out of time. Return to work. It's a hot topic. Hot, hot topic. And everybody's talking about. I think one of the slides also you showed in there, it's kind of stabilized out 50%, right?

Dan: Yeah, we're kind of at a plateau.

Tom: Yeah, and it's just…

Dan: …remarkably stable, actually.

Tom: And you had a dip in there. There was a dip down to like 25%.

Dan: Yeah, the dips are fascinating. So, Castle is the company that makes the key fobs for office buildings. So they're measuring people who are coming, literally people who are tapping in to go to the office. And there's been, I think, a pretty strong shift, obviously, when it comes to holidays, people taking, you know, four or five day weekends sometimes. But also, because there's higher familiarity with remote work, weather conditions, so that specific example. The Texas ice storm earlier this year actually had a pretty profound effect on return to work in, I believe, Austin and Dallas, which are the two highest return to work cities among the ones that Castle tracks.

So, something like an ice storm whereas before perhaps people would, well I guess before we weren't looking at these charts, right, but yeah things like that, you know, there's a better safe than sorry. Just stay home. And so things like weather and holidays have a pretty big impact now. You also hear this from, still on the earnings calls from like, Chipotle and sweet cream, like Friday is still not that big.

Tom: Well, we're gonna talk some more about it on our breakouts tomorrow. I think we'll get through some additional information. I don't know if I really want to touch the last two slides, though.

Dan: Let's not and say we did.

Tom: But let's talk about it, right? I mean, I think that's there's a little shock and awe on some of that stuff. And some people, you know, it may resonate and seem, "where are you going with that next?" So, you look at this, you have new reports coming out. I think you have another report coming out soon, right?

Dan: End of the year.

Tom: Are you going to start focusing on that as we get closer to that time?

Dan: We'll see. I'll put this disclaimer out there. We're not political pollsters. That is not our specialty. We don't ask people if they're registered voters. So, there are much more trusted sources for real political polling. Our interest is in two things. One is some change over time and seeing, you know, and I would say, as an American, the sustained popularity despite, you know, all the things that have happened with our former president, it's pretty impressive. Like it's very high.

You know, I think it points to a very high level still of disconnect and you know, some stratification in our society. But for us, we are also interested in how different demographics think about these things. You know, this thing about, you know, again, as someone who's not a political pollster, I am fascinated by kind of who's the bench, who are the next leaders for our younger generations.

And you know, again, Elon Musk can't run for president. He's not, allowed to. But people see him, well, 5% of Gen Z see him as the best leader for our country and I think it's interesting to see another parallel, especially in my many years writing about big tech companies is people like Tim Cook, the CEO of Apple, like he conducts himself much more as a world leader than as the old caricature of what a corporate CEO is.

You know, between the photo ops and everything, like, he is essentially acting as the president of Apple. And he has actual real geopolitical things to contend with. And so seeing how, you remember there was a very stupid few months where people thought that Jeff Bezos and Mark Zuckerberg would race to run for president and not gonna happen. But we are very fascinated with the kind of idea of business leaders versus traditional politicians and who consumers think of as the best leader for our country.

Tom: Yeah.

Dan: You could argue that, you know, that social media or the media is ultimately running the minds and hearts of our country.

Tom: It's up for debate.

Dan: Yeah. Yeah, definitely.

Tom: I'm a big advocate of the stats and believing in driving off the stats. So at TriNet we do a lot around customer effort score as they go through those actions and NPS and it helps drive where we go and what we need to deliver for our customers.

And it's very useful information. So with that said, I know we're at time. I think the code is over there. I don't know if that's going to help anybody, but we can get out. If not, we have a breakout tomorrow. We'll make sure we give it there and dig into some more information.

Dan: Please join us. Yeah, that'd be great. Thank you.

Tom: Thank you.