"Choices seem to be motivated not by style or status but by what gives people a sense of well-being and respite from day-to-day pressures"

A new consumer purchasing survey conducted for The Boston Consulting Group (BCG) by Harris Interactive shows a continuing pattern of trading up to premium priced "New Luxury" goods and trading down to lower-cost value brands.

In this third annual survey of more than 2,100 adults with household incomes of $50,000 or more, consumers demonstrate how markets have split - some consumers purchasing the premium priced products at 200% or more over average goods and others trading down and buying the value option. This split has caused growth at the top and bottom ends of virtually all categories surveyed. Consumer companies and retailers stuck in the middle with average goods and average prices are finding their markets eroding.

"Consumers appreciate quality and are putting their money on the line. They continue to trade up in several categories of goods and services ... cars, homes, appliances, dining out, and trade down to balance their budgets," says Michael Silverstein, BCG senior partner and author of the best seller Trading Up: The New American Luxury (Portfolio), whose second edition, including updated research, will be available in January. "Many of the consumers we surveyed have a 'personal calculator' that sets the amount they are prepared to spend on a particular good. For their trade up purchases, they are looking for the right combinations of technical improvement, functional benefit and emotional value."

Majority of People Pay "A Little More" or "As Much As I Can" In At Least Five Categories
Over 80% of the respondents to the survey said they trade up in five or more categories, and 75% said there are some priorities that are too important to skimp on. Choices seem to be motivated not by style or status but by what gives people a sense of well-being and respite from day-to-day pressures. Two-thirds said they know all the details of the products they favor. This November's survey asked consumers about their spending patterns in 79 product and service categories, and included a new section on grocery and household items. What are they? The top ten trading up categories for this year are:

Top 10 Trading Up categories(1)

1. Personal computers: 52.1%
2. Meat: 51.3%(2)
3. My home or apartment itself: 50.7%
4. Furniture: 49.4%
5. Sit-down restaurants: 48.1%
6. Cars: 48.0%
7. Bedding: 47.6%
8. Kitchen appliances: 46.7%
9. Home entertainment products: 46.6%
10. Travel/Vacations: 46.3%

Young Men Trade Up for Computers, Divorced Women for Cars
There are variations based on demographics -- but also some common themes. The top category for young men is personal computers. Divorced women named cars and their own homes and apartments as their preferences. Both like sit- down restaurants. Home-related goods, such as washers and dryers, furniture and bedding, top the list for married couples with kids at home.

In Order to Trade Up, Consumers Also Trade Down Aggressively, Often with Groceries and Household Items
Consumers also continue to trade down aggressively, according to the survey. Eight of the top 10 trading down categories for this year are grocery and household items:

Top 10 Trading Down categories(3)

1. Canned foods: 50.0%
2. Dry goods: 46.6%
3. Snack foods: 46.4%
4. Household cleaners: 46.0%
5. Paper products: 46.0%
6. Fast-service restaurants: 45.7%
7. Accessories: 45.0
8. Soft drinks: 44.8%
9. Bottled water: 43.6%
10. OTC health remedies: 43.1%

Traditional Mass Market Category Will Hollow Out
"This trend is not going to abate," says Mr. Silverstein. "The forces behind it are too powerful, both on the demand and supply side. That means sooner or later, in one category after another, we will see markets re- structure and the middle hollow out. Low cost countries like China, international supply chains and the management of intellectual property will play big roles and demand as much attention as traditional success factors in consumer and retail such as brand management and merchandising. This year you will see Black Friday actually turn into a very bright day for some companies and be very dark for others."

"The survey shows that people are making choices," he added, "and our research indicates these are knowledgeable, personally informed choices. Choices that have never been richer."

(1) Percentage of respondents saying they would pay "a little more" or "as much as I can" for each category of goods or services.
(2) Meat is the newcomer to the list.
(3) Percentage of respondents saying they either "spend the bare minimum" or "try to save a little money" for each category of goods or
services