Income and Social Class

13-2

Consumer Spending and Economic Behavior

General economic conditions affect the way we allocate our money

• A person’s social class impacts what he/she does with money

• Choices reflect one’s place in society

• Products can be status symbols

13-3

Individual Attitudes Toward Money

• Wal-Mart study on how consumers think about money and brand names

• Three distinct groups of consumers:• Brand Aspirationals: people with lower incomes

who are obsessed with names like KitchenAid;• Price-Sensitive Affluents: wealthier shoppers who

love deals• Value-Price Shoppers: like low prices and cannot

afford much more.

13-4

Consumer Confidence

• Consumer Confidence: the extent to which people are optimistic or pessimistic about the future health of the economy• Influences how much discretionary money we will

pump into the economy• Measured by economists and closely tracked by

Wall Street, consultants, retailers, etc.

• Overall savings rate is affected by:• Pessimism/optimism about personal circumstances• Local and world events• Cultural differences in attitudes toward savings

13-5

Social Class

• Social class is determined by income, family background, and occupation

• Social class determines access to resources like education, housing, consumer goods and positions of power

• Marketing strategies focus on the desire for social mobility

• Homogamy: We tend to marry people in similar social class

13-6

Class Structure in the United States

13-7

Class Structure Around the World

• China / India: rise of middle class• “Affordable luxuries” within reach

of many consumers

• Japan: status- and brand-conscious society

• Arabic cultures• Women treated differently

than men

• U.K.: rigid class structure still exists, but the dominance of its aristocracy is fading (Chavs)

13-8

Relationship Between Income and Social Class

• Whether social class or income is a better predictor of a consumer’s behavior depends on the type of product being purchased:• Social class is better predictor of lower-to-moderately

priced symbolic purchases (perfume, I-Phones)• Income is better predictor of major non-status / non-

symbolic expenditures (“functional” medical procedures)

• Need both social class and income to predict expensive, symbolic product purchases (i.e. houses, cars and weddings)

13-9

Class Differences in Worldview

World of the working class is intimate and constricted

• Immediate needs dictate buying behavior

• Dependence on relatives/local community

• More likely to be conservative/family-oriented

• Maintaining appearance of home/property is ultra-important

• Many feel that an upper-echelon lifestyle is NOT worth the effort• Affluenza concerns• Fears of pressure to maintain upper-echelon

status – “hedonic and self-presentational treadmill”

13-10

Living Room Clusters and Social Class

13-11

Targeting the Poor

• Poor people have the same basic needs as others• Staples/food, clothing, health care, shelter

• Residents of poor neighborhoods travel more to have same access to supermarkets, banks, etc.

• Redlining

13-12

Targeting the Rich

• Affluent consumers’ interests/spending priorities are affected by • where they got their money• how they got their money, and• how long they’ve had their money

• Three different consumer attitudes toward luxury:• Luxury is functional: buy things that will last and have

enduring value • Luxury is a reward: luxury goods say “I’ve made it” or

encourage one to keep achieving• Luxury is indulgence: extremely lavish and self-indulgent

items

13-13

Old Money

• Families that live on inherited funds

• Family history of public service and philanthropy

• “Trained to be rich”

13-14

The Nouveau Riche

• The working wealthy…“rags to riches”• Newcomers to the world

of wealth• Horatio Algers story• Internet billionaires

• Status anxiety leading to symbolic self-completion (overbuying and bad investment decisions)

13-15

Status Symbols

• “Keeping up with the Joneses/Satos”

• What matters is not wealth or fame itself but having more wealth or fame than others

• Status-Seeking: motivation to obtain products that will let others know that you have “made it”

• Invidious Distinction: we buy things to inspire envy in others through our display of wealth or power

• Conspicuous Consumption: people’s desire to provide prominent visible evidence of their ability to afford luxury goods

• Is this changing?

13-16

Status Symbols (cont.)

Status-symbol products vary across cultures and locales• Brazil: owning a private helicopter to get around

horrible traffic• China: showing off pampered only child• Russia: cell phones with gems, expensive ties• Indonesia: retro cell phone the size of a brick

13-17

Parody Display

Parody Display: deliberately avoiding or mocking status symbols – a form of backlash…

Examples:

• Ripped jeans