Just a few years ago, a major bank predicted that Indonesians would, on average, earn US$3,000 per capita by 2020. At the beginning of 2011, Indonesia hit that mark, beating the prediction by nearly a decade. While other countries in the region and around the globe have been affected by significant economic uncertainty, Indonesia’s economy is running at full bore, with a rapidly expanding middle class that is now the third-largest in the world. At 48 percent of the population and accounting for 44 percent of all FMCG spending in the country, middle class consumers are shaping today’s retail scene. Recently, during its 35^th Annual Marketing and Media Presentation in Jakarta, Nielsen provided nearly 1,000 clients and stakeholders with a snapshot of what Indonesia’s middle class is doing in terms of media usage and shopping patterns, and how companies can reach them effectively.

While all income groups have benefited from Indonesia’s accelerated growth, the middle class has enjoyed the most rapid advances in terms of spending increases and quality of life improvement, and increased demand in a range of consumer categories from home electronics and appliances to health and beauty products. The Indonesian middle class prefers to combine the convenience and fresh offerings found through traditional retail channels such as wet markets with the price-savings and expansive product offerings of the modern trade.

What are middle class Indonesians buying?
Some key facts about middle class shopping trends that retailers and manufacturers need to consider include:

• Fresh food makes up 37 percent of their monthly spending. Ice cream, noodles, and biscuits are the biggest movers thanks to product innovations.
• Value for money is key for nearly all (97%) middle class shoppers.
• 88 percent of middle class consumers said they want to experiment with brands.
• More than half (53%) shop in a modern trade outlet twice a month.
• They tend to visit the minimarket closest to their home, but promotions can disrupt their regular routine: 90 percent are looking for stores “with attractive and interesting promotions.” They also desire a diverse assortment of goods, friendly service and a comfortable environment.
• Mini-markets see the highest levels of spending, followed by supermarkets, with traditional retailers still highly important for fresh foods and the location convenience they offer.

What are middle class Indonesians watching?
Indonesians of all income levels love to watch TV, and nearly all (95%) middle class homes own a TV, with 96 percent watching programs every day. Other traditional media such as radio and newspapers are also popular, but are increasingly being consumed online, a trend driven primarily by Indonesian youth.  Internet usage and mobile phone ownership are surging, each increasing every quarter. Mobile penetration is already high, and purchase intent for smartphones is strong. These devices are fast becoming the primary platform for a variety of activities, such as watching video, accessing the Internet and connecting to social networks, opening a space for marketers and content providers to focus their efforts to include mobile in their content distribution. Nevertheless, relevancy and convenience to the consumers remain key to mobile content distribution.

Key media usage trends for middle class Indonesians include:

• Middle class Indonesian households watch an average of 4.5 hours of TV a day. Sports programming is the most popular, followed by drama series and other entertainment genres.
• Local content is appealing to middle class, which is why each city has its own newspaper.
• Almost a quarter (22%) of middle class consumers have Internet access, and spend 1.5 hours a day accessing the internet.
• Nearly three-quarters of middle class consumers in major cities (71%) have a mobile phone, with almost half saying they use the devices to access the Internet. More than one-third (35%) have a smartphone.
• Indonesians love social networking: 94 percent are connected to social networks, and 89 percent have a Facebook account.

Reaching the middle class
Given the abundance of opportunities in the marketplace, how can retailers, manufacturers, marketers and media companies connect with the middle class consumer? In a number of consumer goods categories, innovation has proven to be a growth engine. For example, in the ice cream category, the number of new varieties has surged by nearly 32 percent, with single packs the driver of sales. Volume sales of snack noodles surged 92 percent in the past year, thanks in large part to new flavors and a repositioning of the category (what used to be seen as a basic meal now is a great, convenient snack). The instant coffee market has expanded, and middle class consumers contributed 71 percent of volume growth within that category.  In contrast, categories that presented few innovations saw slower growth.

In addition to innovation, other trends seen among Indonesia’s middle class consumers include:

• Kids playing a role in modern shopping: 95 percent said that they “hardly ever refuse” the invitation from their kids to go to the minimarket.
• Convenience is key: today’s middle class consumers are pressed for time, with the demands of work and family life. Products that make life a bit easier are clear winners.
• Appeal to the fact that they are smart shoppers: Indonesians know how much items cost and where they are located in the store. Retailers must create a welcoming environment, promote value for money and win customers’ loyalty.
• Connect with consumers: they are increasingly online, and they discuss brands and products in that space. Retailers must strive to engage with them on social networks.
• Be relevant: tailor marketing – especially online and mobile campaigns – to consumers and their need-states.

Nielsen’s new Southeast Asia Digital Consumer Report examined the digital media habits and attitudes of consumers in Singapore, Thailand, Indonesia, Malaysia, Vietnam and the Philippines. Singaporeans led the region in online usage, spending more than a day (25 hours) online each week, while Filipinos and Malaysians came close behind, spending 21.5 hours and 19.8 hours a week online, respectively. Indonesians trailed the region, spending an average of 14 hours per week.

“The increasing availability and uptake of Internet-capable mobile devices is driving the surge in digital media usage across the region and bringing about considerable changes in the way media is consumed,” said Melanie Ingrey, APMEA Region Research Director. “More and more, consumers are accessing multiple media platforms simultaneously, such as accessing the Internet while watching TV.”

While PCs continue to be the primary way to access the Internet, smartphones are on track to supplant them: in four of the six SEA countries, ownership of mobile devices equals or exceeds owner ship of PCs, either desktop or laptop. In Indonesia, for example, more than three-quarters (78%) of consumers owned Internet-capable mobile phones compared to just 29 percent who owned notebook computers or 31 percent with desktops. Tablets are just starting to make their mark in the region, but they are likely to show rapid growth in several countries in the region in the year ahead.

Reading and sending email was the most popular activity for netizens in Malaysia, Singapore, Philippines and Thailand, while reading news was the favourite digital activity in Vietnam and Indonesia. Accessing social networks ranked in the top five activities for all of the countries except in Vietnam, with Facebook dominating the landscape in Indonesia, where 90 percent said that they maintained an active profile on the site, which was also popular in the Philippines and Malaysia. Facebook does not enjoy the same penetration in Thailand or Vietnam, however, with competitors such as 4Shared and Zing having significant popularity. YouTube ranked as one of the top five most popular sites in all six countries.

As in other parts of the world, social networking sites have become an increasingly important way for consumers to connect with the brands they like. In the Philippines, nearly two-thirds (65%) of respondents said they interacted with brands, products or companies via social media, while 60 percent of Malaysians and 56 percent of Singaporeans did the same.

Online engagement with brands is particularly important for consumers in making purchase decisions, with vast majorities of consumers in four of the six countries (Malaysia, Philippines, Singapore and Thailand) indicating that they read product reviews online. Majorities in those countries also post their own reviews of products and services purchased.

“Social media platforms offer myriad opportunities for organizations to engage with consumers, and it is becoming an increasingly critical means of influencing consumer decision making,” noted Ingrey. “As Southeast Asian digital consumers are becoming more familiar and comfortable using social media, their level of participation is also increasing. A significant proportion of consumers visit online discussion forums at least monthly and many are now starting to take an active role in these online discussions.”

Online advertising is still in its infancy in the region, with Singapore leading the way in terms of proportion of total ad spend in the channel at 6.9 percent; in Malaysia and Thailand, the figure is less than one percent. Digital consumers in Vietnam indicated the highest positivity toward online ads, while those in Thailand were less receptive. As always, creating ads that are relevant to the needs and interests of individual consumers is critical to gaining their interest.

“Online activity is only going to increase in the years ahead as more consumers obtain smartphones, and 3G and broadband access become more common and affordable. Marketers would be well-advised to examine how they can fully leverage these trends through innovative, creative and most importantly, relevant ad executions,” said Ingrey.

For more information, download The Digital Media Habits and Attitudes of Southeast Asian Consumers.

Country by country, peak viewing times vary somewhat:

• South Korea has the latest viewing peak, with the highest proportion of viewers (26%) tuning in between 10pm and 11pm
• New Zealand and Australia have the highest proportion of viewers tuning in at any particular time – on average, 40 percent of New Zealanders and Australians watch television between the hours of 8pm and 9pm, closely followed by the Philippines with 39 percent
• New Zealand has the highest number of viewers outside of the 8pm to 9pm peak time – between 7pm and 8pm 39 percent of New Zealanders tune in to their televisions and the 6pm to 7pm time slot also enjoys around 35 percent of New Zealand viewers
• Malaysia has the largest proportion of late night viewers, with one quarter of Malaysians still watching television between the hours of 11pm and midnight
• Filipinos are the most likely to tune in to daytime television – more than one in five (22%) watch television between 12pm and 2pm.

Ramadan, the month-long period where Muslims pray and engage in reflection, started August 1st, and in Indonesia – the world’s largest Muslim country – a majority of consumers will abstain from eating during the day. But that hardly means Indonesians will spend less on food and beverages; in fact, Nielsen research shows that households actually spend more during the festive season. After sundown, families and friends gather to break the fast at Iftar time, the traditional eating of three dates or sweet snacks and then celebrate with joyous banquets and dinners.

Manufacturers can expect to see healthy growth in consumer good sales value as Ramadan always drives consumers to spend more. Nielsen recorded 9.2 percent growth in sales value of consumer goods during 2010’s festive months. Growth in consumer good sales during the festive month came from all income levels, but lower income groups increased their spending by 30 percent last year. Middle class households posted a 16 percent increase while upper income homes spent 13 percent more.

The festive season means it’s time to entertain and connect with friends, and several categories enjoy strong growth during this period. Below are highlights from key categories of the festive months:

• Assorted biscuits, used as gifts for others and also as snacks to welcome guests during fast-breaking, grew 11 times in sales value during festive months of 2010 compared to a regular month. Nielsen data shows that more consumers buy this product, with penetration reaching 11 percent during this period compared to 0.7 percent penetration in regular months. Wafers, used for the same purpose as biscuits, also enjoyed 25 percent growth, driven mainly by an increase in volume per buyer.
• Soft drinks also enjoyed growth in volume as sales of large plastic bottles tripled during the festive months. Sales of soft drinks are driven by increased penetration and purchases from Upper and Middle classes.
• Sales of Margarine and Syrup during the festive months tended to be slower; however, in the month leading up to this period, sales grew 36 percent in value for margarine and 37 percent for syrup, indicating that consumers stocked up on these items to prepare for the festive period.
• Non FMCG categories that enjoy growth during the festive months are apparel and electronic appliances, with both categories enjoying double digit growth, 15.9 percent and 17.1 percent respectively, during last year’s festive months, led largely by upper income consumers.

While consumers buy products for gifting and entertaining others, they are also purchasing more convenient products for themselves. Categories such as sausages & meat balls (+34%), canned fish and meat (+119%) and nuggets (+49%) all tend to enjoy growth during the holy month. These products help consumers prepare their meals faster, especially important during times when domestic help is not available.

Festive Months: Time to watch TV?
During the festive months, consumers are not only changing their buying behavior but also the way they consume the media, especially television. Compared to regular months, there were 14 percent more TV viewers during Ramadan 2010. They are also watching more TV, spending 4 hours and 40 minutes compared to 4 hours and 16 minutes during regular months.

There are several explanations for this trend. First, consumers prefer to stay home and spend time with family and entertain guests, but also watch TV, which airs religious programs during this time. Second, school holidays during this period lead to a 27 percent increase in the number of viewers aged 5-14. The festive months also feature a new prime time that occurs during the morning meal from 02:00 to 05:00. Nielsen analysis shows that during festive months of 2010, the number of viewers during this “new” prime time increased six times compared to regular months.

This years’ festive month is likely to show robust growth, especially now that GDP per capita has crossed USD 3,000 and consumer confidence is still relatively high. We expect middle income consumers will contribute significantly to CPG sales growth during this year’s Ramadan period, while upper income consumers will continue to spend on lifestyle related products, contributing to the growth of other categories such as health, automotive and tourism. Ramadan is of course first and foremost a celebration of faith and devotion, but Indonesian businesses also have good reason to celebrate during the festive period.

In a sign of how times are changing, one-quarter of household shoppers in Indonesia are now men, according to Nielsen. And not all of these men are shopping because they have to, one-third said they “really enjoy” or “like” shopping, with just 15 percent saying they dislike the task. In 2010, 19 percent of men were the primary shoppers for their households. Nielsen’s Shopper Trends study also examined the purchasing behavior of consumers, retail channel trends and the impact of promotions.

Women still dominate shopping, accounting for 74 percent of Indonesian shoppers. Two-thirds said they “really enjoy” or “like” shopping, and for slightly more than one-third (37%), the task is still considered a chore (compared to 51% of men who said the same).

This shift in dynamics represents opportunities for manufacturers and retailers alike, provided they fully understand shoppers’ behaviors. To reach the male shopper, they may want to look at creating an “easy” shopping environment that appeals to the grab-and-go nature of men. They can also think about ways to convert that shopper into one who enjoys browsing the store more.

Impulse Shopping on the Rise, Traditional Channels Still Dominant

Impulse purchases are becoming increasingly common in Indonesia, with just five percent of consumers saying they never buy beyond their shopping list; 21 percent said they don’t make any list whatsoever! In 2003, 69 percent of shoppers said they might buy an additional item, but today 39 percent said they always buy additional items. This calls for manufacturers to develop more innovative products and collaborate with retailers to create effective in-store promotions and activities to build bigger basket sizes.

But while these core characteristics have changed significantly over the past eight years, others have not. The average Indonesian still shops at three or four channels depending on shopping mission. For example, 36 percent of minimarket shoppers visit the stores for top-up and emergency shopping, while 30 percent of wet market shoppers visit to buy food to prepare daily meals. Wet markets continue to play an important role in the country, with most consumers visiting them almost daily to purchase fresh vegetables, fruits and meats. This channel still accounts for half of household spending. Modern trade stores are used for personal care products and infant milk, while traditional stores are used to purchase basic food commodities such as soy sauce and powdered coffee.

Getting Shoppers into Stores

Grocery shopping is a habitual behavior, and more than half of shoppers always go to the same store, with 85 percent saying that they visit the closest store. But 21 percent of shoppers said that they visit stores that offer attractive deals and coupons promoted in newspapers and flyers, a 16-point increase from just three years ago.

A strategic location near housing developments continues to be the critical factor in a store’s success, but retailers need to adopt other promotion tactics to attract new shoppers, particularly in the larger cities.

With Indonesia’s economy continuing to grow and its population becoming more affluent, retailers and CPG manufacturers are well-positioned to capitalize on these trends. But the companies that reap the greatest rewards are likely to be those who strive to understand as much as possible about who consumers are and what they are buying.

It’s a new era in Indonesia: global capital markets have recovered significantly since the financial crisis of 2008, and in 2010 the GDP grew 6.1 percent and GDP per capita hit US$3,000, according to the IMF World Fact Book. If the experiences of China and South Korea are any indication, that income level marks the start of accelerated growth, with strong demand across a range of commercial sectors such as automotive, health, insurance and travel. Manufacturers of fast-moving consumer goods (FMCG) can also expect to experience stronger growth this year; a new retail audit conducted by The Nielsen Company found that industry to be growing at twice the pace of the economy in 2010.

As consumers saw economic conditions improve, they tended to adjust their purchasing habits, increasing their willingness to spend money or becoming more adventurous by buying in categories they had never before considered. Some consumers used products more frequently or “traded up” to more premium versions of products they use.

Upper class consumers seek premium products
Consuming “regular” products is no longer enough for upper-class shoppers, and they are now seeking products that provide them with greater benefit and added value. Nielsen’s home panel reported that household spending for health and lifestyle categories has increased since 2009. As time is also a concern for these consumers, products that provide them with convenience will see growth.

Nielsen observed three categories that experienced growth by answering the needs of the upper class: lifestyle, health and convenience.

1. Hair conditioners: By offering convenience with their leave-on product, manufacturers of hair conditioners saw value sales grow 68 percent in 2010. The “Leave On” variant offers practicality, though the price is more than twice of regular hair conditioner.
2. Liquid Milk: Sales grew 18 percent, with brands promoting health-related benefits such as low/non-fat, added calcium, probiotic qualities and kids nutrition.
3. Toothpaste: Although it is already purchased by nearly all households in Indonesia, the sales value for this category still recorded 10 percent growth, driven mainly by medicated segments which grew 17 percent in 2010. The new variants promise stronger teeth, sensitivity reduction, calcium, anti-bacterial, natural and herbal.

Middle and lower class consumers buy products that are considered premium
As the upper class is seeking more benefits, the middle and lower class consumers are starting to buy products that they used to consider premium. Nielsen observed three categories (Cheese, Frozen Meats and Baby Diapers) that experienced increases in the number of household purchases.

1. Smaller packages of cheese have opened to the mid-lower income segment. The category experienced 13 percent growth in sales value in 2010, with the annual sales value of smaller pack size doubling in 2010.
2. Household spending for frozen fish/meat experienced a 23 percent increase in 2010 among the middle class and 32 percent among the lower class.
3. Diaper single packs posted 93 percent growth in sales in 2010, with the variant providing affordability and convenience to middle-lower consumers.

The growth in these categories was also influenced by other factors, such as driving availability in more outlets and spending more in advertising to increase awareness and drive purchases. Nielsen’s retail audit found that both cheese and baby diapers have increased their availability by expanding the number of outlets in which they could be bought by 17 percent and 9 percent, respectively. Advertising spending in all six of these categories grew at rates higher than 2010 total advertising growth: Hair Conditioner (+22%), Liquid Milk (+52%), Toothpaste (+35%), Cheese (+32%), Frozen Food (+39%) and Diapers (+70%).

To grow in this new era, FMCG manufacturers need to adapt to these changes in consumer behavior by driving:

1. Innovation, by understanding the need-gaps of upper class consumers, especially in area of convenience, health and lifestyle.
2. Accessibility, by understanding purchase behavior of middle to lower class consumers and ensure availability of smaller pack sizes at the right price.
3. Portfolio management, by having the right product portfolio to meet different consumer purchase motivations and providing the right level of support.

Indonesian consumers have proven themselves to be optimists. Throughout the economic turbulence that started in 2008, Indonesians remained confident and positive about the country’s economic outlook according to Nielsen’s Consumer Confidence Index. Even among businesses, despite the hard times in 2009, the majority (52%) said that year on year conditions had improved, according to the Nielsen Business Barometer.

Indonesia’s economy is growing, with GDP at 6.1 percent in 2010 with consumption contributing 2.7 percent, according to Indonesia’s Bureau of Statistics. Businesses expect conditions to further improve over the next one to two years, and FMCG companies are even more positive than average. This confidence can be attributed to their experience that Indonesian consumers tend to shop their way out of everything!

In the midst of the global financial crisis in 2008, consumer spending in Indonesia flourished, almost seemingly as if the word “crisis” was not a part of the vocabulary in the country. Sales of FMCG products increased 21 percent in 2008, car sales were up 39 percent and cellphone penetration reached 48 percent in Indonesia’s big cities. Consumers spent even more in 2010, with sales of FMCG products rising 12 percent from 2009 levels and car sales blazing a trail with a whopping 58 percent increase. Businesses took a cue from that optimism and spent 29 percent more on advertising in 2010, marking the highest growth in five years.

All is not picture-perfect, however. Even as consumers continued to spend, they are not spending the same way. As the crisis hit and economic conditions deteriorated, they became more budget conscious and showed a high propensity to save on spending related to basic needs so that they could allocate the savings to satisfy their lifestyle purchases.

Businesses were quick to respond, wooing consumers with many new innovative offerings such as downsized products, cheaper and more flexible telecommunication tariffs and low-cost airfares. An example: for just Rp. 10,000 (around US$1), a consumer could purchase fresh coffee from 7-Eleven, buy a ticket to Kuala Lumpur or even do a “top-up” for two-days’ worth of unlimited BlackBerry service.

The new era

With per capita GDP set to hit US$ 3,000, Indonesians’ buying behavior is very likely to change as a result, as consumers adjust to more affluence and spending power and look at options to satisfy their increasingly sophisticated lifestyle needs. There are three emerging trends worth looking at that will help businesses fine-tune the way they engage their consumers.

• Time poor, cash rich
  With the worsening traffic in Indonesia’s big cities, we saw a defined emergence of “time poor, cash rich” consumers: those who are hard-pressed for time and want to do as many things as possible in the shortest period of time. These consumers are mostly from the middle to upper classes, working in the heart of the big cities but living in the suburbs. They are value conscious: they are willing to pay more for higher quality ingredients – even during downtimes – if they can see the value of the products in their lives. Private label products are unlikely to attract them.

  As a group of consumers with high purchasing power but little time, businesses have a good incentive to make their products and services more convenient and within easy reach of these consumers.

• Increasingly more connected
  The growth of Internet penetration in the country has been phenomenal. In 2005, Internet penetration in Indonesia’s nine largest cities was only 8 percent; today, penetration has tripled in these big cities, making it the only media that saw growth in the last six years.

  Just two years ago, a tiny three percent of consumers surveyed by Nielsen had made an online purchase in the past six months. Now, 80 percent say they will buy something online in the next six months. Although it is below the average of the Asia Pacific region, Indonesian consumers have a very high propensity toward online shopping – perhaps higher than many would have expected.

  The telecommunications industry in Indonesia is aggressively adding more consumers to their networks, as evidenced by the 58 percent increase in advertising spend in 2010 as measured by Nielsen. Mobile penetration in Indonesia has also tripled over the past five years, aided by the kaleidoscope of offerings.

  The rapid upward trend of Internet and mobile penetration will result in another new phenomenon in the country: real time information will become the “oxygen” for consumers as they interact and share information, via social networking and other sites.

  Consumers increasingly expect to be able to interact with companies in cyberspace or via mobile channels. Companies who offer consumers the ease of “shopping at your finger-tips” or receiving promotional offers via these new communications channels stand to win, and the time for companies to offer these options is “soon,” if not “now.”

• Family time matters
  Indonesians have strong family values and like to spend time together. One popular way for parents to spend time with their children is by shopping. Increasingly, modern retail formats are adding a recreational solution for families by providing one-stop shopping-and-entertainment centers with restaurants, arcades and cinemas in addition to the usual stores. And with many creative and attractive in-store promotions, consumers are engaging in retail therapy more frequently. One sign of this trend is that sales of consumer goods have doubled since 2006. But don’t count out the traditional retail establishments yet. They continue to play an important role in the retail scene, with 80 percent of Indonesian consumer spending allocated to this channel.

In conclusion, a new era is coming soon, if it’s not already here. It offers FMCG manufacturers and retailers an immense opportunity to engage the “new” Indonesian consumer in new, “fresh” ways. Key to winning the hearts of these consumers is a complete review of how and where consumers want information and offerings presented to them, what unmet needs they have and what digital conversations they are having in the online space. Product and channel innovation will need to start with these key considerations.

Inflation is becoming a critical issue in many parts of the world, but, especially in emerging markets such as Indonesia.  But while prices rose 7.9 percent in 2010, household spending increased at an even faster rate – up 19.3 percent in major cities and 18.5 percent in rural Java – making the year a good one for manufacturers of Fast-Moving Consumer Goods (FMCG) in the country.

In major cities such as Jakarta, Bandung, Surabaya, Semarang and Medan, household spending was more than Rp. 3.7 million, up 33 percent from 2007, while in rural Java, spending was more than Rp. 2 million, an increase of 36 percent from 2007.

More Variety = More Spending
Manufacturers have spoiled consumers by offering new products and variants so that consumers can choose different products that are most suited to their needs. This, and intensified marketing activities from manufacturers have driven consumers to try new variants or products and in some cases increased their consumption. Despite spending more overall, shoppers were actually making fewer trips. In the cities, the average shopper made 239 trips in 2010 (-9% from 2007) and spent approximately Rp. 15,800 each trip, an increase of 46 percent from 2007. Meanwhile, consumers in rural Java made 255 visits (-5% from 2007), but spending less than Rp. 10,000. While still low, that figure represents an increase of 41 percent compared to just Rp. 6,300 in 2007.

Instant Shopping Gratification
Consumers in rural Java visited the store 7.5 percent more than the consumers in urban cities because traditional trade channels such as warungs and tokos are usually just next door to their homes. It’s almost effortless to shop. Due to the convenience and proximity of the stories, consumers’ shopping trips happens almost immediately as soon as they need something, so it’s not surprising that spending per trip is only around Rp. 9000. ‘Top-up shopping’ is definitely an emerging trend to watch.

These traditional retail channels remain prominent in Indonesia: 81 percent of rural household spending occurs there, while even in the cities, 52 percent of trade continues to occur there.  The remaining urban households are spending at modern channels such as mini-marts, hypermarkets and supermarkets.

So what are Indonesians buying? In the cities, households are spending on powdered milk while in rural Java, essentials such as cooking oil and instant noodles are key items. Personal care posted the highest growth for 2010 at 20 percent, followed by beverages (18%) and foods (17%).

“The Indonesian telecommunications market is unique. While consumers in most countries progress from ‘no connections’ to adopting landlines and subsequently cellular or mobile devices, consumers in Indonesia have mostly headed straight to mobile phones as their communication tool. This is a key reason why landlines or fixed lines have never really taken off in the country, with penetration remaining relatively flat over the years,” said Viraj Juthani, Director Telecom Practice Group, The Nielsen Company, Indonesia.

Much of this growth is being driven by teens, with more than 70 perecent having a mobile phone connection, while the number of tweens aged 10-14 having mobile phones increased more than five times during the five year period. Instant messaging or chatting is the top use of the phones for today’s young Indonesians, who prefer this use of the devices over voice calls or texting.

What’s more, Indonesian mobile subscribers are spending less now than they were five years ago, with 58 perecent of consumers spending less than Rp. 50,000 (@USD 5) per month in 2010 compared to only 18 perecent in 2005.

“The decline in average monthly spending is driven by two factors: Tariffs over the last few years have headed south and, more importantly, new consumer segments with limited spending capacity are entering the market,” said Viraj.

Low rates remain the top factor for consumers when selecting a service provider, but most consider the reputation of networks and recommendations of friends and family, indicating that while dropping tariffs are starting to drive operator choice, consumers continue to be concerned about service quality when making their choice.

TV continued to be the media of choice for advertisers, accounting for more than 60% of ad spending, followed by newspapers (34%) and magazines (3%). All media showed growth during the year, but TV led the way with a 26% increase due largely to the World Cup. Newspapers were up 19% while magazine ad spending grew 10%. The telecom sector was the top advertiser, spending more than Rp 5 trillion in 2010, up 43% from 2009. Seven of the top 10 spenders in all media were telecom providers.

Indonesian TV viewers spent an average of 4:22 (hr:min) watching TV each day, an increase of 5 minutes from 2009. Sports programming saw an up tick in viewing (from an average of 33 hours viewed a year in 2009 to 42 hours in 2010) while soap operas saw a decline (from an average of 204 hours viewed a year in 2009 to 139 hours in 2010). TV ratings were relatively stable throughout the year, with the fourth quarter showing an 8% increase.

“The end of the year saw a number of events that boosted TV viewing. Natural disasters in Mentawai and Merapi occurred in October and November, President Obama visited Indonesia in November and of course, the live broadcast of the AFF Suzuki Cup at the end of the year all drew in more viewers,” explained Irawati Pratignyo, Managing Director, Audience Measurement for Nielsen in Indonesia.