Fifty-two percent of U.S. consumers would allow retailers, content providers to track their activity, send them advertisements in return for discounts on products and services, finds KMPG survey

NEW YORK , December 9, 2011 () – Consumers are spending considerable amounts of time online and on mobile devices for shopping and entertainment, and many indicate that they would allow retailers and content providers to track their activity, or solicit them with advertisements, in return for discounts on products and services, according to the 5th Annual KPMG Consumers & Convergence study. Some security reservations and usage preferences exist, but the increased adoption of digital business models provides a compelling argument for retailers, content providers and advertisers to conquer the digital divide.

"Consumers are in the driver's seat," said Mark Larson, KPMG's global retail practice leader. "They continue to be guarded about invading their space and wish to dictate their terms of access. It is imperative for these companies to use data analytics to leverage the customer data they have at their disposal to conduct customized consumer outreach. We see some retailers adopting these strategies online to offer customer product suggestions, coupons, and mobile shopping applications, among other programs."

In reviewing the habits of U.S. consumers using internet, phone and cable, KPMG found 52 percent say they would be willing to let usage patterns and personal information to be tracked by advertisers if this resulted in lower product costs or free online content. In addition, 43 percent are willing to receive advertising in exchange for lower fees or service. Consumers aged 16-34 are more inclined to permit both tracking and advertising, compared to those above age 34.

In looking at mobile phones, only 28 percent said they would be willing to receive such advertising for a lower fee. Again, younger adults were more likely to consider an exchange, 35 percent compared to 21 percent for older adults.

While older adults would consider an exchange for retail discounts, younger adults are more inclined to do so for entertainment.

Larson added, "I think these findings send an important message to retailers - providing compelling reasons for consumers to share information about themselves is going to determine the winners and the losers in digital commerce. The more targeted and tailored the interaction is with the consumer, the more effective it will be."

The KPMG survey also found that security and privacy concerns exist when using a mobile device. For example, 43 percent are very concerned about the potential for credit card information to be intercepted, 41 percent about the threat of unauthorized parties accessing personal information, and 40 percent receiving unsolicited promotional material. As to whom they trust most in keeping their personal and financial data secure when making an online purchase, 53 percent said a financial institution, 29 percent said a service internet payment system, and 11 percent said an online retailer.

"There is a high level of consumer concern regarding security and privacy, particularly when using new services or technologies," said Paul Wissmann, KPMG's National Sector Leader for Media and Telecommunications. "With an ever expanding array of online services and devices, consumers are constantly being given new options to choose from. The goal for providers is to enable consumers to get what they want, when they want it at the same time feeling that their privacy is maintained."

Yet, despite the wariness, 52 percent in the KPMG survey said they would be willing to let usage patterns and personal information to be tracked by advertisers if this resulted in lower product costs or free online content, with younger adults more inclined to let advertisers track them.

"Many companies are now looking for ways to collect more valuable customer data from their digital business offerings," said Wissmann. "Companies can collect a wealth of consumer information, but they must collect data that is compelling while navigating the consumer privacy concerns, otherwise they risk consumer backlash from being exploited for their personal data."

Shopping made easy...but not for all products

According to the KPMG study, consumers clearly indicate that there are certain products and services that they are more willing to shop for online or via mobile device. In fact, among the products consumers say they are most inclined to shop for digitally are: flights/vacations; physical personal media (CDs, DVDs, Books, video games); electronics; and toys. The items least likely to be purchased digitally are food and groceries; luxury goods; and furniture.

According to KPMG's Larson, "The integration of the various channels is becoming increasingly important to retailers as they begin to see many of their consumers move to online and application-based purchases."

The KPMG survey found most people shopping on-line each day, with 42 percent of young adults saying that they spend more than one hour at it.

When it comes to retail shopping online or via mobile, consumers say they are most often using smart phones or tablets to locate stores, research products, get on-line coupons, and scan barcodes for product information. "Mobile innovations are rapidly capturing the imagination of consumers and changing the business models for retailers," added Larson.

When asked about factors that were most influential when buying products or services, consumers in the KPMG study indicate that social networks and blogs are least influential. Conversely, consumers said they are strongly influenced by manufacturer or store customer feedback and ratings online (46 percent), followed by 35 percent who said a manufacturer or store web site.

Dollars dictate digital consumption and service

For content and service providers, only 19 percent of consumers currently say they pay to access content on websites. The survey results found that younger adults are more willing to make purchases across a wider landscape of purchases that includes video, music, news, travel and books.

Eighty-one percent do not pay to access any content, and 77 percent said they would not be willing to pay if a site began charging for access to previously free content, a view that was consistent across all age groups. However, 55 percent of those paying for content said their access started as a free trial that they later decided to purchase.

As to marketing to consumers by mobile and Internet providers, price continues to be a key factor. Fifty-one percent of consumers said that price was the top factor in determining changing mobile service providers, followed by 49 percent who said quality of coverage. This was consistent for older and younger adults, though those 16-34 also felt other factors might get them to change providers, including phone selection and opportunity to bundle and unbundle services.

Price was even more of a factor for Internet providers, with 59 percent saying it is the top factor and 50 percent saying the quality of network coverage, with agreement from all age groups as to the key factors.

"I'm certain that during these trying times consumers are more so shopping on price," said KPMG's Wissmann. "But closely matching price is quality of service and coverage, which providers also see as a point of differentiation. While price will remain competitive, consumers aren't likely to switch providers until service issues arise, so investing in customer support is critical."

Thirty-four percent of those surveyed by KPMG do not have a landline and 18 percent plan to discontinue their landline in the next year. In addition, 13 percent indicate that they do not have home TV service, with 10 percent planning to eliminate it in the next year. Younger adults were more inclined to walk away from land lines and home TV service, and are increasingly turning to Internet streaming to view TV programs and movies. However, less than half, 46 percent, said they pay for Internet streaming. Although 25 percent of older adults are Internet streaming, two thirds say they pay for it.

"Young adults are happy with video content available on-line but keep in mind that they still prefer to watch video via a TV screen," said Wissmann. "Older adults deciding no longer to have home TV service are looking at it from a budgetary standpoint and feel that service is not valuable for the money. A wholesale change from current home TV service is still a ways off and will be driven by the technology changes that will make online video viewing on a TV screen as easy an experience as current TV services provide the consumer."

As to being connected, consumers are more and more married to mobile and Internet. Forty-two percent of consumers spend 2-3 hours browsing the web each day, outside of work or school, and 21 percent say they spend that same amount of time emailing.

For those aged 16-34, 51 percent spend more than two hours each day browsing the Internet, 25 percent spending two hours e-mailing and 19 percent spending two hours chatting or Internet messaging. Older adults are also Internet locked, though spending far less time, with 32 percent browsing, 18 percent e-mailing and six percent chatting.

Consumers and Convergence V: The Converged Lifestyle, KPMG's survey of consumer trends in digital technology, communications and e-commerce surveyed 9,600 consumers in 31 countries, including 300 in the United States, ranging in age from 16 to over 65.

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