The rise of the identity economy

20 Nov 2018  |  Douglas McCabe 
The rise of the identity economy

A new Enders Analysis study has uncovered that spending on purchases related to our identity is increasing much more significantly than other household spend. Here, the report's author explains why this is so important

At times the advertising industry needs an industry referee, protecting the sector from bad investment decisions, and diagnosing collective action issues that require an objective appraisal of the value chains and trading mechanisms.

That’s why, earlier this month, and supported by Magnetic, the trade body for magazine media, Enders unveiled one of the most important advertising research topics we have looked at for a long time – one that provides a huge opportunity for the industry, while also presenting a set of challenges that must be overcome to exploit it.

I’m talking about the rise of the identity economy, and the associated potential of the ‘passion pound’ that comes with it. Our new study has uncovered that spending on purchases related to our identity is increasing much more significantly than other household spend.

The identity economy incorporates 14 categories - products and services that have meaning in terms of status symbols or a means of self-expression. This ‘passion pound’ goes beyond hobbies, incorporating everything from fashion and food to fitness and fast cars. Purchases in these categories channel our passions or bond groups. Many have low frequency of purchases, and consumer choices are made with consideration and are frequently driven by deep emotions – in contrast to categories including many FMCG categories.

These categories made up 52 per cent of discretionary household spending last year, capturing 79 per cent of the growth in spend in the last five years. We found membership of every social activity and club we could think of had risen, often enormously, and discovered clear material growth in the number of adults identifying with lifestyle interests.

However, over the same period the leisure time available to the average person in the UK has not increased, meaning that the categories in the identity economy are in fierce competition with each other. This presents a challenge for brands at the same time as a marketing opening in terms of targeting consumers based on their passions that hasn’t been fully realised by advertisers.

In many of the categories, ad expenditure growth has not kept pace with consumer spend expansion. For example, the average household spent £125 more on fashion in 2017 than they did in 2015, while over the same period advertising spend in the category, as recorded by Nielsen, dropped 11 per cent. Other categories, like Fitness & Sports, show a similar pattern.

In identity economy categories, ad spend grew just 1.7 per cent in two years, much lower than overall ad growth of 12 per cent, a discrepancy that can be explained by the ongoing shift to online performance channels such as search and in-feed social media advertising. We note that search and in-feed social media are not included in the industry data, and of course within the self-service advertising spend there are many new, many small advertisers. As small businesses grow the relevance of media priming and context will become more important.

This raises the key point that targeting consumers based on their passion is distinct from personalised targeting focused on behavioural data, because the former taps into shared identity. In short, identity is about more than your ID in the technical sense, as applied to the data footprint specific to an individual – usually in the context of online ad measurement and attribution.

Targeting consumers as part of a shared interest group means advertising is experienced as ‘overheard’ by the whole interest community, delivering increased impact due to social approval. Academic research suggests that our identity (who we are and what we feel a connection with), and how present-to-mind a given part of it is, influences purchases decision-making. Of course, culturally and emotionally relevant media context can reinforce this, by helping create stronger memory structures around the brand, to be activated later.

It’s clear that some advertisers recognise this and are turning the under investment of others into an opportunity, deploying media strategies that tap into emotionally relevant contexts, and seeing effective results. That’s because I am not the same person, in the same frame of mind, with the same level or nature of attentiveness, when on Facebook as I am when reading a fitness or a culture magazine. Any marketing messages I do see in these varied environments have a completely different level of legitimacy for me.

Both brands and publishers have recognised that this economic growth, the passion pound, provides an opportunity to provide consumers with a diverse range of experiences. Examples range from Cosmopolitan’s Fashfest, to Radio Times’ TV festival, to the Decanter Wine Awards, and Dennis’ move into directly selling consumers’ cars.

And examples of recent magazine activity that demonstrates strong advertiser recognition of the power of the identity economy include LG’s partnership with Esquire townhouse, Smart Energy’s award-winning ‘Power of 10p’ campaigns with Radio Times and Cosmopolitan, and the NME awards sponsorship with V05. Broader examples of big brands that leverage the passion pound and align around consumers’ enthusiasms include 02’s long-term alignment with rugby and music.

In each case, varied media selection plays a big part. Audiovisual media was used to deliver a strong emotional message, whereas publisher websites, podcasts and print were deployed for the consideration stage – making use of the depth of attention these media can generate, and their unique capability to convince their target audience on its own terms. After all, even considered decisions are affected by our identity, especially if primed in the right way.

During uncertain economic times, there’s a big chance for brands to grow alongside the identity economy. The potential rewards will only rise as consumer spend continues to shift to passions, to status symbols, to self-expression. Yes, advertisers face the challenging task of creating emotionally relevant advertising in these categories, but recognising a culturally relevant media context for the right identity groups can help that creative go the extra mile.

Yet, amazingly, much of this growing opportunity remains untapped. Billions of pounds have transitioned to search and social in-feed but brands are being neglected and relevant media deals are being left neglected. This is not an argument about media versus social media. It is an argument about business objectives and media selections.

If your main aim is boosting brand salience with the aid of identity creative, media context should be a top consideration. As the academic and case studies in our new report show, a primed audience in a culturally relevant media context improves the effectiveness of creative. It’s time for brands to reconsider some of their investment decisions and to recognise the rising value of identity-based activity that is ‘overheard’ by whole interest groups over the long-term.

Douglas McCabe is CEO and Director of Publishing and Tech, Enders Analysis

For more details of the report’s executive summary, click here.

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