exercise 2
Chapter 12: income and social class
Dr. Jennifer Houston MAR4503
Income and consumer identity
Money has complex psychological meanings – we equate it with success or failure, social acceptability, security, love, freedom, and even sex appeal
Our expectations about the future and our overall consumer confidence impacts how much we are willing to spend
When consumers feel optimistic about the future, they reduce the amount of money the save (their savings rate), they take on more debt, and they splurge on discretionary items
Consumer demands for goods and services depends on both our ability and our willingness to buy
Spending habits can be dictated by the discretionary income available to a household once the bills are paid to maintain a household
Income inequality and social mobility
There is a tremendous gap between the “one percenters” at the top of the global economy and the poorest segments of our world's population
Income inequality is a huge issue, with the extent to which resources are distributed being very uneven within our population
Strategists describe an economy that’s driven by a fairly small number of rich people as a plutonomy
The CEO pay ratio (the difference between a CEO’s earnings and the average employee earnings within the company) is larger in the US than any other developed country
Income inequality and social mobility
Social mobility refers to the passage of individuals from one social class to another
Horizontal mobility occurs when a person mores from one position to another that’s relatively equal in status
Downward mobility and upward mobility are vertical movements in either losing or gaining social class
In order to avoid downward mobility, including joblessness, homelessness, and other symptoms of poverty, people must make shifts in spending to be more frugal and less materialistic in times of economic recession
Income-based marketing
Mothers with preschool children are the fastest growing segment of working people
Though women still earn .78 cents to a man’s dollar
As we recover from the Great Recession (2007-2009), the average American’s standard of living continues to improve
The college wage premium, or gap between what works with a college degree can earn compared with those without, has also grown dramatically
Targeting the top of the pyramid
Consumers can be divided into three groups base don their attitudes toward luxury:
Luxury is functional – high research, high longevity
Luxury is a reward – luxury products say “I’ve made it”
Luxury is indulgence – emotional approach, lavish and attention-seeking
Many marketers try to target affluent, upscale markets who have the resources to spend on costly products that command higher profit margins
Affluent individuals, however, do not necessarily fit into the same market segmentation
Researchers have noticed that many affluent people may indulge in luxury goods, but buy everyday items as cheaply as possible
Targeting the bottom of the pyramid: low-income consumers
The bottom of the pyramid of consumers is made up of most of the world’s consumer base – 78% of it!
The 4 A;’s model looks at ways of
making products more affordable,
making reduced cost products more available,
developing acceptable products for low-income consumers,
and promoting awareness of low-income consumers needs, pairing with outside sources and mixed outlets as necessary
Although less affluent people have less money to spend, they have the same basic needs and spend on certain products at the same level as those who make more
Social class and consumer identity
People, not online other animals, develop a pecking order that ranks us in terms of our relative standing in society
We use the term social class to describe the overall rank of people in a society, where people within the same class being approximately equal in social standing
Social class is as much a state of being as it is of having – it’s a matter of what you do with your money and how you define your role in society
Within the US, class structure can be divided into six social classes:
Upper Upper
Lower Upper
Upper Middle
Lower Middle
Upper Lower
Lower Lower
Social stratification
The process of social stratification refers to the creation of artificial divisions – the processes in a social system by which scarce and valuable resources are distributed unequally to status positions
Most groups exhibit a structure, or status hierarchy in which some members are better off than others
We live in a system that defines people to a great extent by their occupational prestige in what they do for a living
Income vs. social class
Is social class or income a better predictor of consumer behavior? The answer partly depends on the type of product, and whether someone is buying for functionality of social standing
Social class is a better predictor of symbolic purchases at low to moderate prices
Income is a better predictor of major expenditures that don’t have status or symbolism
We need both social class and income data to predict purchases of expensive symbolic products
How do we measure social class?
Marketing researchers were among the first to propose that we can distinguish people of different social classes from one another
Many of the methods they originally used to place consumers into classes are badly dated and have little validity today
Social class measures struggle to account for non-nuclear families, dual income households, households headed by women, the anonymity of our society, and status crystallization
Status symbols and social capital
We tend to evaluate ourselves, our professional accomplishments, our appearance, and our material well-being relative to others and use status symbols to depict our prestige to others
A major motivation (for the status-driven) to buy is not to enjoy the items but rather to let others know we can afford things
One study on loyalty programs found that we assign value to them based on our own high rankings compared to other members
A taste culture describes consumers in terms of their aesthetic and intellectual preferences, and helps to illuminate the important yet sometimes subtle distinctions in consumption choices and behavior among the social classes
Taste cultures and codes
The two ways to communicate proper benefits incorporate different types of codes
Restricted codes focus on the content of objects, not the relationship between them
Elaborated codes are more complex and depend on a more sophisticated worldview
Social and cultural capital reflect status symbols within everyday life and describes sets of distinctive and socially rare tastes and practices (refinement)
The prevalence of the internet also makes online social capital valuable
Social media & reputation economy
Another approach to social class focuses on the codes (the ways consumers express and interpret meanings) people within different social strata use
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