layout: true background-image: url(figs/tcb-logo.png) background-position: bottom right background-attachment: fixed; background-origin: content-box; background-size: 10% --- class: title-slide .row[ .col-7[ .title[ # Consumer Behavior ] .subtitle[ ## Income and Social Class ] .author[ ### Dennis A.V. Dittrich ] .affiliation[ ] ] .col-5[ ] ] --- # To Spend or Not to Spend .row[ .col-7[ Our confidence in our future, as well as in the overall economy, determines how freely we spend and the types of products we buy. **Discretionary income** is the money available to a household over and above what it requires to have a comfortable standard of living. How we spend varies, based in part on our attitudes toward money. **Frugality** seems to be driven by a **pleasure of saving**, compared to **tightwaddism** which is driving by a **pain of paying**. Consumer research on attitudes toward money found eight segments: * crash dieters who would try to cut out all nonessential spending until things improved * ... * vultures who circle the market looking for bargains. ] .col-5[ **Tightwads**: hate to part with their money and actually experience emotional pain when they make purchases. **Spendthrifts**: enjoy nothing more than spending. ] ] --- # Consumer Confidence .row[ .col-7[ Behavioral economics is closely related to **economic psychology**: the study of the human side of economic decisions. **Consumers’ beliefs** about what the future holds are an indicator of **consumer confidence**. * a measure of how optimistic or pessimistic people are about the future health of the economy ] .col-5[ Factors affecting savings rate: * Pessimism/optimism * When people are optimistic about the future, they tend to reduce their savings rate. * World events * Cultural differences in attitudes toward savings ]] --- # Income Inequality .row[ .col-7[ **Income inequality**: the extent to which resources are distributed unevenly within a population. **Plutonomy**: economy that’s driven by a small number of rich people. ![](img14/122.jpg) ] .col-5[ **One Percenter**: a term used to describe the top 1% of income. * The wealthiest 160,000 U.S. families have as much we as the poorest 145 million families. * The wealthiest 1% of Americans control around 20 percent of the national income. ] ] --- # Social Mobility .row[ .col-7[ **Social mobility**: the passage of individuals from one social class to another. **Horizontal mobility** occurs when a person moves from one position to another that is roughly equal. * when a nurse becomes an elementary school teacher, horizontal mobility has occurred. **Upward mobility**: moving to a higher status. **Downward movement** losing social status. Overall most people remain in their social class. * The improvements people make are not sufficient to shift them into a whole other class. * The exception is when someone marries someone who is much richer. ] .col-5[ Two factors contribute to an (overall) upward income trajectory: 1. A shift in women’s roles * Mothers with preschool children are the fastest-growing segment of working people. * 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. 2. Increases in educational attainment * The college wage premium, which describes the gap between what workers with a college degree earn compared with those without one, has grown dramatically. ] ] --- class: practice-slide # For Discussion .col-8[ How have women contributed to the overall rise in income in our society? ] ??? One reason for this increase in income is that there also have been a larger proportion of people of working age participating in the labor force. Mothers with preschool children are the fastest-growing segment of working people. Furthermore, many of these jobs are in high-paying occupations such as medicine and architecture that used to be dominated by men. Although women are still a minority in most professional occupations, their ranks continue to swell. The steady increase in the numbers of working women is a primary cause of the rapid growth of middle- and upper-income families. There are now more than 18 million married couples making over $50,000 a year. However, in almost two-thirds of these families, the wife’s paycheck is propelling the couple up the income ladder --- # Consumer View of Luxury Goods .col-7[ Luxury is **functional** * Consumers who use their money to buy things that will last and have enduring value view luxury as functional. Luxury is a **reward** * Those who use luxury goods to say “I’ve made it” view luxury as a reward. Luxury is **indulgence** * Those who seek out luxury goods in order to illustrate their individuality take an emotional approach to luxury spending and view luxury as indulgence. ] --- class: practice-slide # For Discussion .col-8[ How do you differentiate between “old money” versus “nouveau riche” consumers? ] ??? We call consumers who have achieved extreme wealth and have relatively recently become members of upper social classes the nouveau riches, a term that many people use in a derogatory manner to describe newcomers to the world of wealth. --- # The Income Pyramid .row[ .col-6[ **Old money families** (e.g., the Rockefellers, DuPonts, Fords, and others) live primarily on inherited funds. **Nouveau riche**: consumers who recently achieved their wealth and who don’t have the benefit of years of training to learn how to spend it. We typically assume that marketers are targeting consumers at the top of the pyramid. * Those are consumers with the highest incomes but they are also a small percentage of the world market. There are also marketers targeting the bottom of the pyramid. * 78% of the global population is low income consumers whose purchasing power is under $10,000 per year. ] .col-6[ ![](img14/124.png) ]] --- .row[.col-10[ ![](img14/125.png) ] .col-2[ ## The 4A **awareness** **affordability** **availability** **acceptability** .caption[Anderson and Niels Billou, “Serving the World’s Poor: Innovation at the Base of the Economic Pyramid,” __Journal of Business Strategy 28__ , 2: 14–21, reprinted in A. T. Kearney, __Serving the Low-Income Consumer: How to Tackle This Mostly Ignored Market,__ 2011.]]] ??? This figure illustrates how marketers can market to low-income consumers. The As include awareness, affordability, availability, and acceptability. --- class: practice-slide # For Reflection .col-8[ How does your own attitude toward spending affect your general shopping patterns? ] ??? You may wish to consider the types of spending and saving categories shown in the Marketing Opportunity box in this segment. Is your own spending reflected in one of the types? --- # Social Class Structure .row[ .col-6[ We group consumers into **social classes** that describe the overall rank of people in a society. 1. Upper Upper 2. Lower Upper 3. Upper Middle 4. Lower Middle 5. Upper Lower 6. Lower Lower People who belong to the same social class have approximately equal social standing in the community. * They work in similar occupations and tend to have similar lifestyles. * We tend to marry people in a similar social class to ours, a tendency that sociologists call **homogamy** or **assortative mating**. ] .col-6[ “Haves” versus “have-nots” **Dominance-submission hierarchy**: in many animal species (including humans), a social organization develops whereby the most assertive or aggressive animals exert control over the others. **Social class** is determined by income, family background, and occupation Universal pecking order: relative standing in society Social class affects access to resources ]] --- # Picking a Pecking Order .row[ .col-7[ **Social stratification**: the creation of **artificial divisions** among people such that some members get more resources than others by virtue of their relative standing, power, or control in the group. ]] .row[ .col-5[ **Achieved status** some resources are earned through hard work ] .col-2[ versus ] .col-5[ **Ascribed status** some resources are granted because of who they are ]] .row[ .col-6[ ![](img14/126.jpg) ] .col-6[ Most groups exhibit a **status hierarchy** where some members are better off than others. ] ] --- # Components of Social Class .col-7[ **Social class** includes multiple determining factors but two highly influential factors are occupational prestige and income. **Occupational prestige** * Is stable over time and similar across cultures * Single best indicator of social class: strongly linked to use of leisure time, allocation of family resources, aesthetic preferences, and political orientation **Income** * Wealth not distributed evenly across classes (top fifth controls 75% of all assets) The distribution of wealth determines which groups have the greatest buying power and market potential. * How money is spent is more influential on class than income ] --- class: practice-slide # For Discussion .col-8[ Why might a person’s social class not change when he or she earns more money? ] ??? One problem is that even if a family increases household income by adding wage earners, each additional job is likely to be of lower status. A homemaker who gets a part-time job is not as likely to get one that is of equal or greater status than the primary wage earner’s full-time job. In addition, the extra money earned is often not pooled toward the common good of the family. Instead, the individual uses it for his own personal spending. More money does not then result in increased status or changes in consumption patterns because it tends to be devoted to buying more of the usual rather than upgrading to higher-status products. --- # Social Stratification .row[ .col-7[ The process of **social stratification** refers to this creation of **artificial divisions** * 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 **Status hierarchy**: structure of a group in which some members are better off than others. * Some may have more authority or power, or other members simply like or respect them. **Occupational prestige**: evaluating someone's value based on what they for for a living .col-9[ ![](img14/127.jpg) ]] .col-5[ Different social classes may have a different **worldview** * the world of the working class (i.e., the lower-middle class) is more intimate and constricted * **cosmopolitan** someone who tries to be open to the world and who strives for diverse experiences **Affluenza**: well-off consumers seem to be stressed or unhappy despite or even because of their wealth ] ] --- # Predicting Consumer Behavior .col-7[ Social class is better predictor of lower to moderately priced symbolic purchases Income is better predictor of major nonstatus/nonsymbolic expenditures Need both social class and income to predict expensive, symbolic products ] --- ## Problems with Social Class Segmentation .col-7[ Social class remains an important way to categorize consumers. However, marketers fail to use social class information as effectively as they could because social class segmentation: * Ignores status inconsistencies * Ignores intergenerational mobility * Ignores subjective social class * Ignores consumers’ aspirations to change class standing * Ignores the social status of working wives ] --- class: practice-slide # For Reflection .col-7[ How do you assign people to social classes, or do you at all? What consumption cues do you use (e.g., clothing, speech, cars, etc.) to determine social standing? ] ??? As discussed in the text, people are assigned to social classes by virtue of their social standing in the community. People are grouped according to their occupation, lifestyle, ideas and values, and income. Consumption cues that may be used to determine people’s social standing include their cars, homes, clothing, speech, and types of people with whom they socialize. --- # Taste Cultures .col-7[ Individuals’ desire to make a statement about their social class, or the class to which they hope to belong, influences the products they like and dislike. It’s becoming more difficult to identify social class from product choices. **Taste culture** differentiates people in terms of their aesthetic and intellectual preferences * This concept may helps to understand subtle distinctions in consumer choices. * Upper- and upper-middle-class are more likely to visit museums and attend live theater * Middle-class is more likely to go camping and fishing ] --- .row[ .col-8[ ![](img14/129.png) ] .col-4[ ### Living Room Clusters and Social Class .caption[Adapted from Edward O. Laumann and James S. House, “Living Room Styles and Social Attributes: The Patterning of Marerial Artifacts in a Model Urban Community,” __Sociology and Social Research__ 54 (April 1970): 321–342.] ] ] ??? In one study of social differences in taste, researchers catalogued home owners’ possessions as they sat in their living rooms and asked them about their income and occupation. They identified clusters of furnishings and decorative items that seemed to appear together with some regularity. They found different clusters based upon social status as shown in the figure. --- # Social and Cultural Capital .row[ .col-6[ **Social capital**: Exclusivity functions * a nightclub bouncer who decides who gets past the velvet rope. * an important form of “currency” is access to exclusive networks where business and political deals happen. **Cultural capital**: a set of distinctive and socially rare tastes and practices * knowledge of “refined” behavior that admits a person into the realm of the upper class. * **Glamping**: glamorous camping in which participants use luxury RVs and create private enclaves accessible only to them. ] .col-6[ Online social capital * Reputation economy * 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. Very important in the Open Source community. * **Online gated community**: only selectively allow access to some people may offer a high degree of social capital to the lucky few who pass the test. ]] --- class: practice-slide # For Reflection .col-8[ In 1899, Thorstein Veblen argued that because women used to be spoils of war captured by raiding barbarians, in contemporary society, the unemployed housewife is an economic trophy that attests to a man's socio-economic prowess and therefore men used women as “trophy wives” to display their wealth. Is this argument still valid today? ] ??? In having a wife without an independent economic life (a profession, a trade, a job) a man can display her unemployed status as a form of his conspicuous leisure and as an object of his conspicuous consumption. Student responses will vary based on their opinion of trophy wives. To Veblen, wives are an economic resource. He criticized the “decorative” role of women, as rich men showered them with expensive clothes, pretentious homes, and a life of leisure as a way to advertise their own wealth. Today we refer to these women as trophy wives. In recent years the tables have turned as older women—who increasingly boast the same incomes and social capital as their male peers—seek out younger men as arm candy. These so-called cougars are everywhere; surveys estimate that about one-third of women older than age 40 date younger men. --- .row[ .col-7[ # Status Symbols **Invidious consumption**: buying things to inspire envy in others through the display of wealth or power **Conspicious consumption**: people’s desires to provide prominent visible evidence of their ability to afford luxury goods. **Leisure class**: people for whom productive work is taboo. **Trophy wives** **Brand prominence** **Status signaling** ] .col-5[ ![](img14/1210.jpg) ]] ??? 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. Although status seeking through product consumption and display is a worldwide phenomenon, some find the best tactic is to do the opposite. In that case, status is attained by avoiding it. Social scientists call this form of conspicuous consumption parody display. This phenomenon of conspicuous consumption was, for Veblen, most evident among what he termed the leisure class people for whom productive work is taboo. In recent years the tables have turned as older women—who increasingly boast the same incomes and social capital as their male peers—seek out younger men as arm candy. In contrast, some people may feel the need to almost hit others over the head with their bling; they use “loud signals, one set of researchers labels these differences brand prominence. Brands like Louis Vuitton, 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. --- ## How Brand Loyal Consumers Deal with Counterfeiting .row[ .col-5[ How do people who buy luxury goods handle it when that brand is counterfeited? 1. **Flight**: stop using the brand 2. **Reclamation**: trying to establish their long-term relationship with the real brand. 3. **Abranding** minimize the visibility of luxury goods so that only those who also have the real thing know that they also have the real thing. ] .col-7[ ![](img14/1211.jpg) .caption[Young Jee Han, Joseph C. Nunes, and Xavier Drèze (2010), “Signaling Status with Luxury Goods: The Role of Brand Prominence,” __Journal of Marketing__ 74 (July), 15–30, from Figures 2 and 3.] ]] --- .row[ .col-8[ .col-11[ ![](img14/1212.png) ]] .col-4[ ## A Typology of ## Status Signalling ] ] ??? Consumers engage in conspicuous consumption as a way to display status markers, yet the prominence of these markers varies from products with large recognizable emblems to those with no logo at all. Those in the know can recognize a subtle status marker. In contrast, others may try to use loud signals to ensure others spot their status markers. These differences are labeled brand prominence. Consumers in this typology are assigned to one of four consumption groups based on their wealth and need for status. These are patricians, parvenus, poseurs, and proletarians. --- class: practice-slide # For Reflection .col-8[ Provide examples of quiet versus loud brand signals used among your reference groups. What do these signals say about social class and lifestyle? ] --- # Summary .col-7[ Our confidence in our future, as well as in the overall economy, determines how freely we spend and the types of products we buy. We group consumers into social classes that say a lot about where they stand in society. Individuals’ desire to make a statement about their social class, or the class to which they hope to belong, influences the products they like and dislike. ]