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Lectures on the Contemporary Consumer Topic #5: Income, age, and culture in consumer behaviour

   

Added on  2019-09-26

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Reading for topicIf you have not already read Solomon et al. 4th or 5th edition chapters 2, 10-15, please do so after today’slecture2The Contemporary ConsumerTopic #5: Income, age, and culture (family, social class, reference groups, and brand communities) in consumer behaviourLecturer: Dr. Jason C. Healy Email: 1Plan and learningobjectivesIncomeAgeCulture:Social classFamilyReferencegroupsBrand communities3

4Income, culture, and social class (2)These differing consumption patterns are the result of differingcultures,norms,traditions,religions,andlegal systemsthathaveexistedforcenturies.Such cultural norms both enable and constrain individual consumers when they are making choices. We all consider what other people will think about us if we buy particular things or consume particular things. E.g. we may make judgments about people based on their clothing. If we see somebody wearing a tracksuit, we may think they are of a particular social class. If we see somebody wearing a suit, wemaythinktheyareofanothersocialclass.5Income, culture, and social class (1)Both personal (individual) and social (group) conditions and circumstances influence how consumers spendmoney.This can manifest itself in various ways. Consider the different ways of dressing in Ireland versus the Middle East. Men and women from these two geographical regions tend to dress quite differently.Income, culture, and social class (3)Such cultural norms or class-based-behavioural norms operate at the group level, at the level of societyorculture,ratherthanbeingtheremitofone individualconsumer.All consumers contribute to the creation/change/continuation of these cultural normsAll consumers are somewhat enabled and constrained by these cultural norms. We are enabled in that we get ideas from watching others and we have certain freedoms. We are constrained in that there are also expected ways to behave, as expected bysociety6

7Income, culture, and social class (4)An example of how these cultural norms can change. Even if we consider norms of clothing for Irish people now, versus 100 years ago, we can see cultural differences manifesting themselves in clothing styles and choices, such as, for example, women tending to wear dresses (instead of trousers) and men tending to wearflat-caps.Income, culture, and social class (5)This latter example of the flat cap was very much related to social class, traditionally. The wearing of a flat cap in the UK and Ireland tended to signify that the wearer was not a member of thenobility.During the 20th century, other types of hat also became linked to certain classes within society. E.g. the bowler hat was heavily linked to signifying that the wearer was an urban professional person, middle or upper class. This norm faded away during the 1980s. Now, such hats tend to signify (among younger wearers) a fashion statement rather than acting as a classsymbol8Income, culture, and social class (6)As evidenced by the hat discussion, consumers are grouped in social classes that say a lot about where theystandinsocietyandalsoinfluenceourconsumer behaviour.Actual or desired class influences buyer behaviour. A person’s desire to make a statement about their social class,ortheclasstowhichtheyhopetobelong,influences theproductstheylikeanddislike.Productsarefrequentlyboughtanddisplayedasmarkers of social class; they are valued as status symbols. E.g. do we express our social class in the clothes we wear? Thecarswedrive?Therestaurantsweeatat?Thebooks weread?Themusicwelistento?9

Income (1)Individual’sincomesinEuropeincreasedsubstantially grown between about 1950-1990. Real per capita income almost doubled between 1960 and 1990. However, not all groups shared this wealth increase. Suchatrendmaybeexplainedbythreefactors:1. A shift in women’s roles where more women work now than was the case in the 20th century (which means much higher childcare costs (e.g. today in before-tax- income terms it is not unusual to pay about Euro25000 per year for one child in childcare, or Euro50,000 for 2 children [for an individual earning say, Euro80,000])10Income (2)Increase in educational attainment where more and more people finish second level education and also go on to get degrees, which increasingly leads to people starting work later in life, so having less years to earn a salary, and they may also have large debts from their years of study. But it should also mean higher wages eventually, for the worker with higher educational attainment, but this is debatable nowadays with extremely highly qualified young people in many jobs earning less than older, less qualifiedpeopleUnequal distributions of income (higher earners have seen greater increases than lower earners)11Work (productivity) and income (1)GDP more than doubled and in some EU countries quadrupled between 1980 and 1995” (Solomon et al. 2016 p.469)Huge economic growth across Europe was largely enjoyed by companies and by the upper classes. However “this boom was by no means shared equally among all consumer groups” (ibid)12

Work (productivity) and income (2)While economies grew dramatically only some in society benefitted, with many others seeing only marginal increases in their wages while company profitssoaredhigherandhigherandmanyprices(e.g. houseprices)soaredevenhigheragainThis led to huge increases in personal debt, as the majority of people (the squeezed middle and the workingclasses)acrossEuropetriedtouseenormous bank loans and credit cards to fill the gap between their roughly stagnant wages and the soaring cost of living13Work (productivity) and income (3)Thistypeofeconomicmodel,highprofits,highprices, and low wages, led to high debt levels and an ever increasing gap between the rich and the poor where, in a free market, the rich get richer and the poor get poorer, as the rich simply buy everything in sight (e.g. houses, apartments, land) inflating prices to levels that most people cannot afford, unless they, once again, jump back on the overloaded personal debt bandwagon to live a life of penury indebted to the banks and off we go again to another financial collapse?14Income and buyingThere is a differencebetween:Willingnesstobuy(dowewanttobuysomething?)Abilitytobuy(wecannotallaffordeverythingwewant)Marketers need to consider that target marketing does not just mean targeting consumers who want our products. Target marketing must also consider who has the ability to buy. Hence, when deciding on target markets, marketers need to think about consumer’swealth/incomesandMOREimportantly...15

Discretionary income (1)Discretionaryincome=(totalaftertaxincome) minus(expensesforstandardliving)Many products and services target standard living expenses (e.g. mortgage, rental accommodation, education,healthcare,food,electricity,clothing,travel and various otheressentials)Other products/services target discretionary income (e.g. cigarettes, alcohol, luxury food, high fashion clothing,holidaytravelindustry,music,pay-television online/traditional, books, luxury cars, jewellery, gadgets)16Discretionary income (2)Discretionaryincome=(totalaftertaxincome)minus (expensesforstandardliving)When total after tax income stays the same, as it has done for manyconsumersoverthepast20years,ormaybeevenreduces, as it has done for many consumers particularly over the past decadeAnd/orwhenexpensesforstandardlivingincreaseThen the amount of discretionary income available shrinks, probably putting a lot of companies either out of business or at leastonverydifficulttimes(e.g.2007-2015)However, the line between the two is blurred and often things that were once considered discretionary can migrate to become seen as part of standard living expenses (e.g. Internet providers would have been targeting discretionary income during the 1990s but now they are targeting consumers who increasingly see the internet asessential)17DiscussionWho works in marketing (or wishes to work in marketing) of products that will involve providing products/services that appeal to discretionary income (as opposed to just a product required for ‘standard livingexpenses’)?18

20Discrimination in payIn Ireland, the employment equality legislation (Equality Acts 1998 & 2015) provide for equal pay for likeworkUnless of course you are a young person (e.g. a young teacher in an Irish 2nd levelschool)Or a woman (still earning 17% lower than their male equivalents in full timepositions)21Abandoned youth in the EU(1)Thediscretionaryincomesofmanyyoungerpeople(under35)are lowernowthanwouldhavebeenthecaseinthe1990sUnemployment rates have soared and are still high in several countries,mainlySpainandGreece[youthunemploymentisat 50%,in2014]”(Solomonetal2016p.470)Amongyoungpeople,inCroatiaandItaly,youthunemploymentis as high as40%Itisobviousthatsuchunemploymentratesseverelyinfluence income and consumption patterns”(ibid)Whichisleading,acrossEuropetoincreasesin:Young adults living with their parents for many years, because there is no otheroptionDisruptive changes in lifestyle including socialreclusivenessThe ‘working poor’: “people who are employed but making less than necessary to make ends meet”(ibid)19

22Discretionary income: high-end consumersInEurope...Incomedistributionsvarybetweenconsumersand countries.HouseholdsearningaboveEuro100kmakeupless than 5% offamilies.But,this5%offamilieshasover25%oftheEU’s discretionaryincomeMarketers: these consumers are specifically targeted by many luxury brands such as high end cars, luxury holidays, high priced fashions, jewellery, high end electronics/computing23Discretionary income andageStudies show that the highest levels of discretionary income exist for consumers between 30-55years ofageHowever, older consumers often have high levels of discretionary income too in high pensions, or maybe in savings/investments, often with very little expenses (mortgage paid off, no kids at home, car paid off, lower spending levels on things like high endfashion)24

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