The Role of Social Class in Purchasing Decisions

Craig Barrett & Faizan Khan

What is Social Class?

• In a society, social class refers to an individual's financial and educational standings. These standings are determined by a number of factors, including income, family background, and occupation.

• Social class can be classified with various market segments, such as upper,

middle, and lower class. • Social class groups relate their purchase decisions to their purchasing power,

which is dependent upon the group’s disposable income.

Social Class History

• Social class structures begin to evolve from the moment an individual is born

into a particular family structure. • Societies are divided into the “haves” and the “have-nots”, resulting in social

stratification. • Social stratification is the process by which scarce and valuable resources are

distributed unequally to status positions (Solomon, Zaichkowsky, Polegato, 2004).

World Social Class Structure

• Society around the world holds a hierarchical class structure that defines people’s access to products and services as well as defining their spending patterns.

• A common motivation to consume for the sake of consuming is known as conspicuous consumption

• Defined, conspicuous consumption means items are purchased merely for an individual to provide evidence that they can afford them.

• This provides a major reason for the purchase of a product, being that goods and services are consumed for the deliberate purpose of inspiring envy in

others.

Social Class Components

• Social class is comprised of three major components: occupation, income, and education.

• Educational attainment is strongly linked to income and occupation (Solomon, Zaichkowsky, Polegato, 2004), since a good education tends to lead to better

and higher paying jobs. • Occupational prestige is not just common in North America but plays a critical

factor in consumer spending in Asian countries.• An individual’s occupation specifies their leisure and living patterns which in

turn help marketers understand which products appeal to a specific social class and the social class member’s purchasing power.

• Income itself is not a strong indicator of social class, but how that income is spent is. A large number of Canadian consumers are getting older and wealthier (i.e. baby boomers), resulting in changes to consumption preferences.

Measuring Social Class

• Social class is measured or determined by occupation, family income, place of residence, and education.

• Despite social class being an important way to segment and identify target consumers, it is difficult to measure social class as the social class approach fails to appropriately utilize social class information.

• Social class information is difficult to validate for the following reasons:– Status inconsistencies are not recognized and are ignored

– The status of working women i.e. wives in a family is ignored

– Subjective measure of social class is ignored (income doesn’t necessarily reflect an individuals' social class, rather dynamic cultural influences and family makeup do)

Targeting the Affluent

• Marketers focus on targeting the affluent (upper) social class as this upscale market is

comprised of individuals with significant resources to spend on expensive products. • An affluent social class is defined by their standard of living, where they receive their

income, how they got it, and how long they have had it (Solomon, Zaichkowsky, Polegato,

2004). • The affluent social class can be divided further into three groups based on their attitudes

toward luxury: – Luxury is a functional requirement:

– Luxury is a reward:

– Luxury is an indulgence:

Targeting the Poor

• Approximately 14 percent of Canadian families live below the poverty line (Kendall, Lothian, Linden, 2004). This group of people, referred to as "the real

lower-lower" class, is generally ignored by marketers. • Although they obviously spend significantly less than the more affluent

classes, they have the same basic needs as all social classes (i.e. food, housing, etc.). Unfortunately, even these basic items are difficult for poverty-stricken individuals to obtain, since most businesses are reluctant to open in low-income areas. Many residents of very poor neighbourhoods must travel vast distances to have access to supermarkets, drug stores, etc. (Solomon,

Zaichkowsky, Polegato, 2004).

Status Symbol

• A major component of social class is impacted by the status symbols associated with certain products, such as prestigious cars. Members of affluent social classes associate their status with purchases of major status symbols,

which can display their wealth. • Status symbols imply the cultural values of a society and are products that are

valued by the society because they demonstrate how much money or prestige

a person has (Solomon, Zaichkowsky, Polegato, 2004). • Status symbols vary between countries, based on the states of their economic

and technological development, and common status symbols change over time with societal and cultural changes.A few years ago... Now...

Social Class Marketing Implications

• Social class has a significant impact on purchasing decisions. Consumer behaviour is heavily reliant on the concept of social class, which defines

consumer consumption patterns. • As such, social class is associated with the values and life-styles of consumers,

both of which significantly determine the consumption structure and behaviour

for numerous products. • It is becoming increasingly important for marketers to begin marketing to lower

income earners, especially in rapidly developing areas (i.e. China, India, etc.). By developing ways of producing high quality products at a lower cost, lower-income consumers will be able to purchase products that were until then out of their price range. This appeals to organizations, since they are able to turn a profit while having a positive affect on society; assisting with future growth while creating new markets over time (Kendall, Lothian, Linden, 2004).

Conclusion

• Patterns in the behaviour of who-consumes-what and how products are

advertised depends heavily upon social classes. • Individuals purchase products based upon the values that their class prescribes

to them. • Understanding the educational and financial standings of individuals can help

categorize them into these social groups, and assist marketers in determining ways of influencing their buying habits.

• While most marketing is directed towards those who can afford higher-end products, finding ways to provide similar products to lower class consumers could open new markets, and introduce new ways of marketing to consumers.