WAC Survey’s Online TrendSpotters ® Panel - Identifying and Maximizing Trend Data Among Innovators and Early Adopters

1. WAC Survey’s Online TrendSpotters® Panel- Identifying and Maximizing Trend Data Among Innovators and Early Adopters - June 2005

2. Background • Of late, several WAC Survey clients have expressed interest in conducting ongoing attitudinal and behavioral research in an effort to spot emerging patterns and trends relative to a host of ‘product’ consumption areas: entertainment, culture, consumer goods, as well as fashion and travel and leisure products. • Most have expressed that they want to learn, on an ongoing basis, what U.S. male and female adults believe is currently ‘hot’ with regards to popular culture and social trends and how this foretells new opportunities. • Beyond that, among other objectives, they have also expressed that they would like to be able to identify potential ‘hits’ before they actually do become so. For this objective, they would require a ‘new’ analytic perspective to enable them to help realize this capability. • In order for such information to maximally pay off, resulting trend data, once obtained, need a customized approach to interpretation. • WAC Survey currently utilizes specialized analytic techniques to provide optimal direction for ‘trendspotting’ emerging cultural and social-psychological trends that will likely impact new entertainment, fashion, and consumer goods opportunities.

3. Discussion: Evolution of a ‘Hit’ • For each and every latest hit TV show, movie, Broadway show, successful novel, latest rage in fashion, cosmetics and accessories product, automobile, cell phone, computer, home entertainment breakthrough, vacation spa and consumer product, the diffusion of tastes and preferences which directly make any phenomenon a ‘hit’ requires a very definite evolutionary process. • It is a marketing process that requires, in fact, a segment of ‘special’ consumers’ who ultimately become responsible for making that phenomenon a ‘hit’. • The process is termed either ‘buzz’ or ‘word of mouth’ and requires that several different marketplace subgroups be identified in order to ensure that the required evolutionary ‘hit’-making process is achieved: • Innovators • Early Adopters • Early Majority • Late Majority • Laggards

4. What Makes a ‘Hit’? • Every network wants to create the next ‘Desperate Housewives’ or ‘Apprentice’. • Each one attempts to succeed with some replica or variation of ‘American Idol’ or ‘Survivor’ (e.g., ‘The Contender’). • In the ‘World of Fashion’ who will be the next Marc Jacobs or Michael Kors? • Will Satellite Radio live up to its advance notice? Will music downloading ‘kill’ the record industry? • What will eventually supercede iPod and cell phones with video and photo capabilities? • What’s the next ‘big thing’ in automobiles? What will come along to surpass OnStar and satellite navigation?

5. What Makes a ‘Hit’? (cont.) • What is it then that must be in place for the ‘next BIG thing’ to happen? • There must be an ‘idea’ that can be spread • The ‘spreading’ is called ‘buzz’ or word of mouth • The buzz is spread by those who are ‘experts’ or ‘influentials’ who tell their friends or colleagues about the new ‘idea’ (e.g., TV show, movie, novel, product, fashion designer, etc.). ‘Experts’ enjoy credibility among their peers so that their word is taken as ‘gospel’ • Innovators or Early Adopters are the ones who first buy or ‘buy into’ your idea, but they must also be the ones to spread word of mouth and buzz. • Every market and product category contains these initiators who spread word of mouth. These are usually the Early Adopters. Finding and seducing this important group is an essential step in creating a ‘hit‘ • Early Adopters are more eager to talk about your new ‘product’. Beyond this, the ‘idea’ migrates to the masses. This migration has been called ‘diffusion of innovation’

6. What Makes a ‘Hit’? (cont.) • Some new ‘products’ catch on and more do not. It’s no accident. • When an idea succeeds, it’s because several dynamics have occurred smoothly: • An idea creates excitement and is seen as worthy of ‘buzz’ • Word of mouth is smoothly and easily spread. ‘Viral’ marketing campaigns can be planned and implemented to help expedite the process. • Early Adopters and Innovators ‘spread’ it to their friends and colleagues regularly • The initial target group of Innovators and Early Adopters is tightly connected—they communicate frequently with credibility amongst themselves and to the Early and Late Majority • How persistent is the ‘idea’? Is it a fad that needs to spread quickly before it dies or will it have ‘legs’? • These are dynamics or signals that can be examined regarding any new idea to determine whether or not it is likely to catch on and become worthy of launching.

7. Who Are the ‘Players’ in the Game? • So far, we’ve been discussing five groups whose identification is integral to the diffusion of innovation process: • Innovators • Early Adopters • Early Majority • Late Majority • Laggards • The following New Product/Idea Diffusion Curve demonstrates how each of the groups relate to the success of any new idea

8. Who Are the ‘Players’ in the Game? A Normal Frequency Curve for the Diffusion of New ‘Product’ Acceptance Penetration/Acceptance 5% 15% 35% 35% 10% Innovators Early Early & Late Laggards Adopters Majority Size of Each Segment

9. The True ‘Market Makers’ • On the preceding idea diffusion curve, the bulk of acceptance (e.g., ‘sales’) comes after the product or idea has been adopted by those consumers willing to take a chance on something new. • Innovators and Early Adopters—typically representing 20% of a market—are the true market makers who create the environment in which the Early and Late Majority feel safe buying (into) the new product or idea. • The sales that matter don’t come until the left part of the curve (Innovators and Early Adopters) is completely sold, even though the bulk of total overall sales come later on from the Early and Late Majority.

10. Characteristics of the Five Segments • The vast majority of the curve (Early, Late Majority and Laggards) ignores most marketing efforts at the earliest stages until they are convinced that the product or idea is not a fad. Successful new products, the ‘hits’, are most sought by Innovators and Early Adopters soon after introduction: • Purchases and ‘buy-in’s are first made by Innovators who are the ones who like having something first. They might not even need the product; they just ‘want’ the satisfaction of being first. Innovators are the folks who sit in the front row at a fashion show, go to Internet World and read edgy trade and consumer journals • Early Adopters are the group who actually benefit from using a new product or service who want to maintain their edge over the rest of the population by seeking out new products and services. It could be a new investment or TV show, but for any significant market, this segment is sizeable and willing to spend money at an early stage • The Early and Late Majority don’t necessarily yearn for a new product or service that can be of benefit, but if enough of their peers try it and discuss it, these followers will come along • This group is keenly adept at ignoring marketing communications • They, especially those in the Late Majority, often ignore Innovators on the left side of the curve: they want protocols, systems and safety that new products rarely offer. Many new products fail to reach this part of the curve • Laggards are the last ones in. They are the ones who finally get around to buying a VCR when everyone else has moved onto DVD players. They don’t use anything new until it’s so old that what they had used is obsolete, impractical or unavailable.

11. Major Requirements for Producing ‘Hits’ Unique or Remarkable ‘Products’ • Need to sell to those who like new items, who like change, who are actively looking for what you sell. • Products that are unique or ‘remarkable’ enough to attract Early Adopters—but are flexible and attractive enough for Early Adopters to have an easy time spreading ‘buzz’ and ‘selling’ the rest of the curve Easier to Attract Left Side of Curve Easier for Early Adopters to Sell their Peers

12. Respondent Target 5: Laggards Respondent Target 4: Late Majority Respondent Target 3: Early Majority Respondent Target 2: Early Adopters Respondent Target 1: Innovators Applications to TrendSpotters® Panel Research RESEARCH COROLLARY: Ongoing attitude, awareness, usage and opinion research that attempts to obtain direction for ‘trend-spotting’ should be conducted among a universe containing the very respondents most responsible for initiating and spreading trends which ultimately lead to ‘hits’

13. RecommendedApproach • Obtain opted-in samples of all five groups. All respondents agree to become monthly (annualized) participating members of WAC Survey TrendSpotters® Panel’ (participating in one survey per month). • Respondents are never informed that the research is being conducted on behalf of any particular WAC Survey client. • Respondents advised about monthly incentive arrangements. • Investigate current/recent activity among each of the two avant garde (Innovators, Early Adopters) segments—in terms of extent of involvement with and attitudes towards culture, product purchase and entertainment. For these groups, the first survey will involve self-administered web ‘diaries’ requiring self-monitoring/reporting. • Suggested categories to be measured: • TV viewing: listing programs viewed • Movie going: films seen • Other pop culture: music, magazines, theatre, online • Extent of online usage: websites visited; product bought • Fashion and accessories purchased (e.g., jewelry) • Travel and transportation used • Health and fitness programs, products, memberships • Food and beverage consumption • Dining experiences; home food preparation • Social trends • Other important categories

14. Uses of the WAC Survey TrendSpotters® Panel • In addition to trendspotting, the WAC Survey TrendSpotters® Panel can be used for any number of different purposes and types of studies: • Measuring extent of trend awareness and involvement • Tracking • Concept testing • Promo/ad testing (online exposure of test ads, promos) • Program testing (online exposure of programming) • Tracking (ad effectiveness, impact of ‘viral marketing’ efforts, awareness and usage, satisfaction, social attitudes and issues) • Strategic studies • ‘Buzz’ or public opinion measurement • Newsworthy polls for editorial purposes • Ad sales studies • Web usability tests • Online focus groups

15. WAC Survey Online TrendSpotters® Panel Sample • Drawn from a national opted-in universe of households including adults, children, teenagers, and seniors • Number of households in the WAC Survey TrendSpotters® Panel universe is over 2,100,000, representing more than 6,000,000 household members • The panel is multi-sourced using a variety of methodologies in order to avoid source or user bias • Extent of use of panel: we are careful not to overuse them; most households have been added in the past 24 months with one-third having been recruited in the past 7 months. They complete a maximum of one survey per quarter. • Heavy e-mail blasting and over-recruitment based upon category incidence levels • WAC Survey client name ‘masked’ to eliminate biasing effects • Extensive demographic and geographic profiles available for targeting and analysis

16. WAC Survey TrendSpotters® Panel Procedures and Deliverables • Web invitations blasted to direct interested respondents to dedicated WAC Survey Panel member host website for screening and recruitment of eligible, opted-in panel members • Qualifying respondents will be U.S. females 18-54 who reside in cable/satellite TV subscribing households • Additional screening requirements, if any, determined by Client • No mention of Client sponsorship of the survey program • 12 monthly surveys, plus initial ‘diary’ survey to define and profile Innovators and Early Adopters, plus to ‘spot’ key behaviors and trends to consider for future monthly surveys • The initial wave of surveys will obtain approximately 1200 completed ‘diary’ interviews including 600-700 among Innovators/Early Adopters • Each monthly survey will deliver approximately 600 total respondents, including 300 of the Innovators/Early Adopters groups • Questionnaire survey design, survey pilot-testing and programming, web survey hosting, monitoring member bounce-backs and sample replacement all provided by WAC Survey

17. WAC Survey TrendSpotters® Panel Procedures and Deliverables (cont.) • Full tabulated results of each monthly survey (up to two banners); multivariate analysis whenever deemed necessary (e.g., opportunities for attitudinal segmentation modeling, prime prospect analysis, perceptual mapping, etc.) • Full analysis and ‘trendspotting’ report for each basic monthly and initial diary wave among Innovators/Early Adopters • Panel management: • Management of incentives and gifts • Invites and recruitment • Detecting attrition and bounce-backs; panel member replacements • E-mail reminders, blasts; promo blasts • Adherence to CAN-SPAM compliance requirements, proper web host ID’ing, opt-ins, etc.

18. Timing and Cost FOR FURTHER INFORMATION REGARDING TIMING AND COSTS, PLEASE CONTACT: ART SAVITT asavitt@wacsurvey.com 516-466-7467, ext. 1023 JIM FRISCH, Ph.D Jfrisch@wacsurvey.com 516-466-7467, ext. 1022

19. About WAC Survey WAC Survey is a full-service, custom market research company specializing in strategic and tactical market research, as well as creative and eclectic ad hoc studies. *Founded in 1986, our client list includes: AT&T, Verizon, MCI, Time Warner, Avaya, New York Life, Weight Watchers International, Radio Disney, ABC-TV, Chase, Anheuser Busch, Pillsbury, Rider University, Berkley College, Hachette Filipacchi, HBO, Viacom, Turner Networks, National Basketball Association, Amtrak, IFF, Corning, Burger King, Tetley, Ferrero USA, Chrysler, Keyspan Energy, Blue Cross and Blue Shield and several top NYC and Chicago Advertising Agencies (Y&R, BBDO, Bates USA, Saatchi, FCB, Omnicom, JWT, Ogilvy, DMB&B, among others) *The firm's principals, Art Savitt (CEO) and Jim Frisch, Ph.D (President), have a combined 60 years experience in the market research industry, having served at executive level positions at such organizations as Audits and Surveys, Simmons MRB, Citibank, DMB&B, Bates USA, Heller Research and Young and Rubicam.

20. About WAC Survey (cont.) *WAC Survey's specializations lie in the areas of tracking, strategic studies (brand equity, segmentation, branding, positioning) and tactical studies (advertising and concept research, name, logo and package design, pricing and conjoint studies) and global studies. * Our suite of entertainment and television network clients includes National Basketball Association, ABC-TV, Turner, Time Warner, HBO, MTV/VH-1, Showtime, USA Networks, Sci-Fi Channel, Cablevision, BET, Radio Disney, Bally and ESPN * The Company's infrastructure includes a staff of 17 research professionals and seven analysts, as well as strategic alliances with two major data collection organizations: CMI for all CATI interviewing and Focus World International for all its global surveys *For further information about us, please visit our website at www.wacresearch.comand click on 'Quantitative' to access our PowerPoint credentials file.  (Run in Slideshow mode to gain screenenhancements).

21. Why WAC Survey? • Strong Online Research Case History Experience and Credentials • Previous proprietary online panel development and multi-wave survey work for such clients as Hachette, Avaya, Baruch College, Berekely College, Rider University, Tetley, JP Morgan-Chase, National Basketball Association, NYCLA • Testing commercials and tv programming via a reusable and consistent technical platform that can deliver sounds, stills and moving pictures to an online panel of customers • Testing new product and ‘idea’ concepts (‘concept optimization’), using conjoint analysis, discrete choice analysis and predictive modeling techniques • Usability website testing at pre-production and finished levels • Global online research experience in Asia, Europe and South America

22. Why WAC Survey? (cont.) • WAC Survey specializes in the conduct of online conjoint and discrete choice analysis. Some of the monthly ‘waves’ of this research program under consideration could utilize this methodology as well. • Conjoint and discrete choice analysis are excellent techniques to determine customers’ true needs and wants • Enables excellent data collection for concept and product optimization • Has simulation capability to allow for “what-if” scenarios. Is highly predictive • Cost efficient technique: yields a lot of information in relatively short time • Rapid turnaround time; respondents actually report “enjoying” the interview procedure • WAC Survey owns the module and can tailor any conjoint or discrete choice interview to your specific needs and objectives

23. Why WAC Survey? (cont.) • 3. WAC Survey has a keen understanding of the ‘Derivativeness’ of motion picture and TV programming fare. As such, this makes it easier to identify the truly ‘new’, remarkable and unique entries that are released. • 4. WAC Survey also understands that trends in fashion, autos, accessories, home furnishings, home entertainment products, high tech, etc., can and usually do originate from cinema, literature and television. (e.g., software and data manipulation as exhibited in Spielberg’s ‘Minority Report’ currently being pre-tested by IBM and Microsoft; ‘future car’ intros in ‘Minority Report’ and countless James Bond films; the resurgence of Reese’s Pieces sales due to its placement in ET; various fashion trends ranging from Gable’s shirtless scene in ‘It Happened One Night’ to Richard Gere’s Armani ensemble in ‘American Gigolo’ to Diane Keaton’s ‘Annie Hall’ look). • Art Savitt’s experience with Client Ogilvy and Mather’sTrend Monitor Group back in the late ’80’s served to provide a strong case history background regarding social and (popular) cultural trend identification, measurement and analysis.

24. Why WAC Survey? (cont.) • 5.Diversity of Online Research Experience Reflected in Recent Projects: • Major Producer of Telecommunications Infrastructure Software: Five-country online global segmentation and modeling program • Major Broadcast Network: determination of who are the core viewers of a major prime time program • Major Bank: (helping to shape their Web Home Page); also, a comprehensive study of their debit card users’ attitudes and behavior • Major Auto Publication: Evaluation of a concept for a new web-based consumer information service • Major Confections Manufacturer: setting appropriate pricing for two of their major brands • Major Insurance Company: determination of the vitality of U.S. Asian and Hispanic Markets for financial services and products

25. Why WAC Survey? (cont.) • 5.Diversity of Online Research Experience Reflected in Recent Projects (cont.): • Major Insurance Company: online conjoint-discrete choice analysis among insurance brokers • Major Weight Loss Organization: member satisfaction tracking • Major Financial Services Company: collateral materials customer response and refinement • Major Home Entertainment Systems Manufacturing Company: optimization of several new product concepts • Major Professional Sports League: satisfaction tracking among season ticket holders • New York Lawyers’ Association: Problem detection to help minimize membership attrition

26. Our Unique Qualifications: Approaches to On-Line Interviewing • Over the Internet • Intranet • Disk to Internet • E-mail

27. Our Unique Qualifications: WAC Survey Mission Statement • To provide top quality research • To exceed our Clients’ expectations • To return the elements of marketing and strategy to the research process • To return creative thinking to the research process • To deliver results on time and within budget • To bridge consulting and research vendor practices—being there for you after the report and presentation have been delivered—as a member of your “team”