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Chap 12: Income and Social Class - Coggle Diagram
Chap 12: Income and Social Class
12-1 Our confidence in our future, as well as in the overall economy, determines how freely we spend and the types of products we buy.
To spend or not to spend, that is the question
Discretionary income is the money available to a household over and above what it requires to have a comfortable standard of living.
Money has complex psychological meanings; we equate it with success or failure, social acceptability, security, love, freedom, and yes, even sex appeal.
Consumer confidence
Consumers’ beliefs about what the future holds are an indicator of consumer confidence.
The following are the types of questions they pose to consumers:
Would you say that you and your family are better off or worse off financially than a year ago?
Will you be better off or worse off a year from now?
Is now a good time or a bad time for people to buy major household items, such as furniture or a refrigerator?
Do you plan to buy a car in the next year?
A range of factors influence the overall savings rate including individual consumers’ pessimism or optimism about their personal circumstances.
Income inequality and social mobility
In the last few years the label One Percenter entered our nation’s vocabulary.
Today one of the biggest issues we hear about is income inequality, that is, the extent to which resources are distributed unevenly within a population.
Citigroup strategists coined the term plutonomy to describe an economy that’s driven by a fairly small number of rich people.
One indicator of income inequality is the CEO pay ratio, which compares the salary of a company’s chief executive to the earnings of a typical employee.
Social mobility refers to the “passage of individuals from one social class to another.”
The great recession and materialism
Even many fashionistas turned into frugalistas—they refuse to sacrifice style, but they achieve it on a budget.
This is as a result of what psychologists call hedonic adaptation; it basically means that to maintain a fairly stable level of happiness, we tend to become used to changes, big or small, wonderful or terrible.
Income – Based marketing
Two factors contribute to an (overall) upward income trajectory: a shift in women’s roles and increases in educational attainment:
Mothers with preschool children are the fastest-growing segment of working people. Unfortunately, the female-to-male earnings ratio is 0.78, which means that on average a woman earns 78 cents for every dollar a man brings home. The good news is that working wives account for almost half of household earnings today.
Although picking up the tab for college often entails great sacrifice, it still pays off in the long run. The college wage premium, which describes the gap between what workers with a college degree earn compared with those without one, has grown dramatically.
Targeting the top of the pyramid: High – income consumers
Many marketers try to target affluent, upscale markets because these consumers obviously have the resources to spend on costly products that command higher profit margins.
However, it is a mistake to assume that we should place everyone with a high income into the same market segment.
SRI Consulting Business Intelligence divides consumers into three groups based on their attitudes toward luxury:
Luxury is functional
Luxury is a reward
Luxury is indulgence
Mere wealth is not sufficient to achieve social prominence in these circles.
The label nouveau riche describes consumers who recently achieved their wealth and who don’t have the benefit of years of training to learn how to spend it. Pity the poor nouveau riches many suffer from status anxiety.
Targeting the bottom of the pyramid: Low – income consumers
Analysts refer to this vast number of consumers as the bottom of the pyramid.
Minimum wage–level households spend more than average on out-of-pocket healthcare costs, rent, and the food they eat at home.
12-2 We group consumers into social classes that say a lot about where they stand in society.
Pick a pecking order
In many animal species, a social organization develops whereby the most assertive or aggressive animals exert control over the others and have the first pick of food, living space, and even mating partners. This is exhibit a clearly defined dominance–submission hierarchy.
We use the term social class more generally to describe the overall rank of people in a society.
We tend to marry people in a social class similar to our own, a tendency sociologists call homogamy or assortative mating.
Social Stratification
The process of social stratification refers to this creation of artificial divisions, “those processes in a social system by which scarce and valuable resources are distributed unequally to status positions that become more or less permanently ranked in terms of the share of valuable resources each receives.”
Most groups exhibit a structure, or status hierarchy in which some members are better off than others.
In a system in which (like it or not) we define people to a great extent by what they do for a living, occupational prestige is one way we evaluate their “worth.”
A worldview is another way to differentiate among social classes.
Many well-off consumers seem to be stressed or unhappy despite or even because of their wealth, a condition some call affluenza.
Cosmopolitanism is an aspect of worldview that is starting to receive more attention by consumer behavior researchers, who define a cosmopolitan as someone who tries to be open to the world and who strives for diverse experiences
Income versus social class
Additional income does not necessarily propel someone to a higher class.
So, is social class or income a better predictor of consumer behavior? The answer partly depends on the type of product: Do people buy it largely for its functional value (what it does), or for its symbolic value (the impression it conveys to others)?
Social class is a better predictor of purchases that have symbolic aspects but low to moderate prices (e.g., cosmetics, liquor).aCosmopolitanism is an aspect of worldview that is starting to receive more attention by consumer behavior researchers, who define a cosmopolitan as someone who tries to be open to the world and who strives for diverse experiences
Income is a better predictor of major expenditures that do not have status or symbolic aspects (e.g., major appliances).
We need both social class and income data to predict purchases of expensive, symbolic products (e.g., cars, homes)
How do we measure social class?
Because social class is a complex concept that depends on a number of factors, it is not surprising that social scientists disagree on the best way to measure it.
Social scientists use the concept of status crystallization to assess the impact of social class inconsistency.
Marketing researchers were among the first to propose that we can distinguish people of different social classes from one another.
A related problem occurs when a person’s social-class standing creates expectations that he or she can’t meet.
Social class around the world
Every society has some type of hierarchical class structure that determines people’s access to products and services. Let’s take a quick look at a few important ones
China
An economic boom is creating a middle class of more than 130 million people that analysts project will grow to more than 400 million in 10 years.
Japan
Japan is a highly brand-conscious society where upscale, designer labels are incredibly popular.
The Middle East
In contrast to the Japanese, few Arabic women work.
This makes a search for the latest in Western luxury brands a major leisure activity for those with money.
A major expansion of Western luxury brands is under way across the Middle East, home to some of the fashion industry’s best customers.
If the 22 countries in the Arab League were a single country, it would be the world’s eighth-largest economy—bigger than India or Russia.
It’s also a young economy; more than half of the people are younger than 25 years of age.
The United Kingdom
England is an extremely class-conscious country, and at least until recently inherited position and family background largely predetermined consumption patterns.
Traditionally people defined three classes: upper, middle, and working.
India
India’s economy is booming despite the global recession, and affluent consumers prize higher-end global brands.
They exert a strong influence on the country’s rapid growth, especially because India’s population is relatively young; 54 percent of the people are younger than 25 years of age.
12-3 Individuals’ desires to make a statement about their social class, or the class to which they hope to belong, influence the products they like and dislike.
“ What do you use that fork for?” Taste cultures, codes, and cultural capital
A taste culture describes consumers in terms of their aesthetic and intellectual preferences.
Another approach to social class focuses on the codes (the ways consumers express and interpret meanings) people within different social strata use.
These two ways to communicate product benefits incorporate different types of codes:
Restricted codes focus on the content of objects, not on relationships among objects.
Elaborated codes, in contrast, are more complex and depend on a more sophisticated worldview.
Not all taste cultures are created equal.
Bourdieu concluded that “taste” is a status-marking force, or habitus, that causes consumption preferences to cluster together.
Social and cultural capital
Luminaries from Facebook, Amazon, Google, Twitter, Uber, and other hot Silicon Valley outfits go glamping in splendor with their entourages, and fees purportedly reach $25,000 per person.
The transformation of Burning Man from what used to be known as a countercultural celebration to a showcase for wealth illus
Bourdieu also reminds us of the importance of cultural capital.
Online social capital
Because we spend so much time in digital environments, it’s natural that the same social class dynamics operate in these spaces.
The “psychic income” we get when we post reviews that others validate creates a reputation economy, in which the “currency” people earn is approval rather than cold hard cash.
Like exclusive country clubs, online gated communities that selectively allow access to some people may offer a high degree of social capital to the lucky few who pass the test.
Status symbols
These products are status symbols.
For Veblen, we buy things to create invidious distinction; this means that we use them to inspire envy in others through our display of wealth or power.
Veblen coined the term conspicuous consumption to refer to people’s desires to provide prominent visible evidence of their ability to afford luxury goods.
This phenomenon of conspicuous consumption was, for Veblen, most evident among what he termed the leisure class people for whom productive work is taboo.
Today we refer to these women as trophy wives.
These so-called cougars (a term popularized by the TV show Cougar Town) are everywhere; surveys estimate that about one-third of women older than age 40 date younger men.
One set of researchers labels these differences brand prominence.
Gucci, and Mercedes vary in terms of how blatant their status appeals (e.g., prominent logos) are in advertisements and on the products themselves or in other words, in the type of status signaling they employ.
Social scientists call this sophisticated form of conspicuous consumption parody display.