February 16, 1999

BATTELLE PREDICTS TOP 10 DRIVERS OF
CONSUMER VALUE BY 2010

What benefits and value will be most important to consumers of household products in the United States over the next decade? That question is often asked by companies hoping to make investments in the successful products and services of tomorrow.

"Battelle is frequently asked to characterize future consumer behavior when traditional market research cannot help companies and investors with decisions about new breakthrough products," said Dr. Stephen M. Millett, who manages Battelle's Interactive Future Simulations (IFS) software product development in the Energy Products Division. "The competitive advantage of the future goes to the company that can correctly anticipate consumer value and control the strategic technologies behind them."

The 10-year picture of consumer buying is dependent upon three likely scenarios that were generated by Battelle experts using the IFS software. From these scenarios - which are explained later in this release - emerges a ranking of the 10 most important drivers of future consumer value for such products as appliances, heating and cooling systems, energy services, home entertainment and information systems, and other durable products.

The top 10 consumer drivers for the next decade are predicted to be:

1. Highly desirable products. The willingness and ability of consumers, especially Baby Boomers and Generation X'ers, along with immigrants, to buy highly desirable products, which can be described as products offering features above and beyond those of current products. The challenge of companies will be to offer exciting products for hard-to-please customers in highly competitive markets.

2. Product-related services. Consumers will want service during and after the purchase of items. They may desire the service even more than the product. For example, households may pay for the services of digital TV rather than buy new sets. And they will pay for the comfort of heating and cooling rather than the equipment that produces it.

3. Superior performance and utility. Quality and functionality will be extremely important to consumers, especially Boomers and Generation X'ers. Products will not only have to meet high expectations, they will have to exceed them.

4. Safety and health. Boomers will insist on safe and healthy products, and they will pay more for products and services that offer good health and an active lifestyle. The market for nutritional and wellcare products will expand further. For example, air filtering will become very important, especially if active, but safe, agents are used to kill bacteria, viruses, and spores rather than just trap particles.

5. Ergonomic comfort and ease of use. Too many household products today are difficult and unpleasant to use. Products for chores like cleaning are not very user-friendly, and need better angles and pressure points. As they age, Boomers in particular will demand that products be comfortable to use.

6. Aesthetics. Product styling will be even more important in the future than today. Appliances, for example, will need to have appearances that fit many home decors. They will also take on more designer qualities now seen in clothing and bedding. Even furnaces and air conditioners will be stylish, particularly if they are integrated into living spaces.

7. Functional integration of products. Today, consumers are their own systems integrators. Very few appliances and products are currently linked together. By 2010 we will see functional and physical integration of TV, computing, and telecommunications. We will also see integration of air and water heating and cooling throughout the house. Imbedded microprocessors and "smart" controls will permit extensive appliance networking.

8. Environmental quality. Consumer behavior so far has been inconsistent: People say that they want environmentally friendly products, but they are reluctant to pay more for them. Home water and air treatment and waste recycling will be much more important by 2010 than they are today. Generation X'ers and idealistic, but affluent Boomers will drive the demand for "green" products and services.

9. Brand name and reputation. Brands will still be important by 2010, but not if products fail to meet the first eight value points. Buying decisions on brand identity alone will decline as consumers face the multiple buying options provided by both virtual and physical shopping.

10. The shopping experience, both in person and over the Internet, must be convenient, speedy, and entertaining. Speed and convenience will be highly valued by Boomers, and the socialization and entertainment benefits of shopping will be highly valued by Generation X'ers.

This list is dependent upon the outcome of three scenarios, as mentioned above. The first and most likely scenario shows strong economic growth and high levels of consumer spending generated primarily by Baby Boomers and Generation X'ers. Over the next decade, 78 million Boomers will be experiencing their peak earning and spending years, providing a powerful thrust for consumer products. These consumers will demand high quality products with many features. They also will be able and willing to pay higher prices to get exactly what they want. In addition, high levels of immigration will increase the American population and create a market for a full spectrum of products.

The second, and least likely, scenario presents a downturn in which consumers lose the interest and ability to purchase new items. Consumer confidence will decline and Boomers will decide to spend less on products and invest more for their retirement. Generation X'ers will not replace the declining number of Boomer consumers, driving down product prices and selection.

In the third scenario, the U.S. will experience continued moderate economic growth with Boomers providing the primary consumer leadership. Generation X'ers will prove to be conservative spenders. There is some immigration, but not enough to replace Boomers. Like the first scenario, successful products will offer exceptional quality with many features, and higher prices.

Battelle has distributed annual forecasts of future trends, technologies, and innovative products since 1995. Copies of past reports can be found under the News section of the Battelle web page at www.battelle.org/news/01/default.stm. For further information on the IFS software and the scenarios, contact Dr. Steve Millett at milletts@battelle.org, or Katy Delaney, Manager of Media Relations for Battelle, at 614.424.5544 or at delaneyk@battelle.org.

Battelle serves industry and government by developing, commercializing and managing technology. With a wide range of scientific and technical capabilities, Battelle puts technology to work for clients in 30 countries.