Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Chapter 12:
Income and Social Class
CHAPTER OBJECTIVES
When students finish this chapter they should understand why:
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.
2. We group consumers into social classes that say a lot about where they stand in society.
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.
CHAPTER SUMMARY
Our confidence in our future, as well as in the overall economy, determines how freely we spend
and the types of products we buy.
The field of behavioral economics studies how consumers decide what to do with their money.
Consumer confidence—the state of mind consumers have about their own personal situation, as
well as their feelings about their overall economic prospects—helps to determine whether they
will purchase goods and services, take on debt, or save their money.
We group consumers into social classes that say a lot about where they stand in society.
A consumer’s social class refers to his or her standing in society. Factors including education,
occupation, and income determine the class to which we belong.
Virtually all groups make distinctions among members in terms of relative superiority, power,
and access to valued resources. This social stratification creates a status hierarchy where
consumers prefer some goods to others. Income is an important consideration of social class but
it is not a perfect predictor.
Factors such as place of residence, cultural interests, and worldview also determine social class.
As income distributions change around the world, it is getting more difficult to distinguish
among members of social classes—many products succeed because they appeal to a newly
emerging group marketers call the mass class (people with incomes high enough to purchase
luxury items, at least on a small scale).
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.
Conspicuous consumption, where a person flaunts his status by deliberately using up valuable
resources, is one way to “buy up” to a higher social class. Nouveau riches, whose relatively
recent acquisition of income rather than ancestry or breeding accounts for their enhanced social
mobility, are the most likely to do this. We use status symbols to communicate our standing to
others. Parody display occurs when we seek display by deliberately avoiding fashionable
products.
CHAPTER OUTLINE
A. Income and Consumer Identity
Income patterns are being shaped by a shift in women’s roles toward higher paying
occupations and increases in educational attainment.
To Spend or Not to Spend, That Is the Question
1. Consumer demand for goods and services depends on ability to buy and willingness
to buy.
2. Discretionary income is the money available to a household over and above that
required for a comfortable standard of living.
3. The most noticeable change in the way the population spends its money when ages
and income levels rise is that a much larger share of the budget is spent on shelter and
transportation and less on food and apparel.
B. Individual Attitudes toward Money
1. People have different attitudes toward money. These might range from tightwads
who hate to part with money to spendthrifts who enjoy spending and buying.
2. Money has complex psychological meaning; we equate it with success or failure,
social acceptability, security, love, freedom, and yes even sex appeal. There are
therapists who specialize in treating money-related disorders, and they report that
some people even feel guilty about their success and deliberately make bad
investments to reduce this feeling! Some other clinical conditions include atephobia
(fear of being ruined), harapaxophobia (fear of becoming a victim of robbers),
peniaphobia (fear of poverty), and aurophobia (fear of gold).
Discussion Opportunity—Ask: How do you feel about money? What does it represent to you?
Would you classify yourself as a saver or a spender? Do you think other people would agree with
this? On a scale of one to ten, where does money fall on your personal scale of priorities?
Discussion Opportunity—Ask: What are your greatest fears with respect to money? Explain.
What do you expect of a spouse with respect to money? Are you stingy or sharing with respect to
money? Where do you think this feeling comes from?
C. Consumer Confidence
1. A consumer’s beliefs about what the future holds is an indicator of consumer
confidence, which reflects the extent to which people are optimistic or pessimistic
about the future health of the economy and how they will fare down the road.
2. The Survey Research Center at the University of Michigan has developed the
following questions to survey consumer confidence:
a. Would you say that you and your family are better off or worse off financially
than a year ago?
b. Will you be better off or worse off a year from now?
c. Is now a good time or a bad time for people to buy major household items such as
furniture or a refrigerator?
d. Do you plan to buy a car in the next year?
3. The overall savings rate is influenced by the individual consumer’s pessimism or
optimism about his or her personal circumstances, world events, and cultural
differences in attitudes toward saving.
Discussion Opportunity—Ask: Do you think these four questions are good for measuring
consumer confidence? Do you think people would truthfully answer all these questions? Would
you? What other questions might be added to the list? Why?
D. Income Inequality and Social Mobility
1. Income inequality if the extent to which resources are distributed unevenly with a
population. This has created the new label “one percenter” where the most affluent
one percent of people worldwide control more than half the globe’s total wealth.
2. Plutonomy describes an economy that is driven by a small number of wealthy
people.
3. Social mobility refers to how individuals move from one social class to another.
a. Horizontal mobility occurs when a person moves from one position to another
that is roughly equivalent in terms of social status.
b. Downward mobility refers to movement to a lower economic status.
c. Upward mobility is the movement to a economic status that is wealthier than
your current status.
E. The Great Recession and Materialism
1. Frugalistas refuse to sacrifice style but they achieve it on a budget.
2. Plutonomy is an economy that is driven by a small number of rich people.
3. In spite of less demand for luxury goods in the U.S. and greater demand for goods and
services that are part of the Poor Getting Poorer Index, there is a growing emphasis on
corporate social responsibility.
4. Many consumers have reconsidered the value of possessions due to economic troubles.
But bad economic conditions also seem to be related to happiness. Research shows
that people are happier when they spend money on experiences rather than on material
objects.
5. People also tend to get more joy from buying many smaller things rather than fewer
big purchases. This is called hedonic adaptation.
F. Income-Based Marketing
1. The female-to-male earnings ration is 0.78.
2. The college wage premium describes the pay gap between what a worker with a
college degree earns compared to those without one. This gap has grown to about 80
percent or more.
3. Consumers can be divided into three groups based on their attitudes towards luxury.
a. Luxury is function, and purchases should last and item an enduring value.
b. Luxury is a reward and luxury goods should be used to show success.
c. Luxury is an indulgence and should express individuality and make others take
notice. Luxury tends to be more emotional for this group.
4. Marketers also need to provide for the bottom of the pyramid, those who have less to
spend than the rich, but who have the same basic needs as everyone else.
5. Old money families live primarily on inherited funds and tend to be discreet about
exhibiting wealth.
6. Social prominence in old money circles comes with money, a family history of public
service and philanthropy, and tangible markers of these contributions that enable
donors to achieve immortality (e.g. Carnegie Hall).
7. Old money consumers distinguish among themselves in terms of ancestry and lineage
rather than wealth and are secure in their status.
8. The working wealthy or nouveau riche recently achieved wealth and do not know how
to spend it. Many suffer status anxiety so they monitor the cultural environment to
make sure they are consuming the right goods and services. Their flamboyant
consumption is an example of symbolic self-completion because they display class
symbols to make up for lack of assurance about correct behaviors.
9. A worldview is one way to differentiate among social classes. Working class people
have different behavioral patterns than do the wealthy. Affluenza is a condition which
describes wealthy people who are unhappy despite their wealth. Cosmopolitanism is
an aspect of worldview that considers a person’s openness to the world and their desire
for diverse experiences.
Discussion Opportunity—Ask students to evaluate how each of the following groups feels about
savings and the general state of our economy (and their position in it): (a) a teenager, (b) a
senior in college, (c) your parents, and (d) your grandparents (or other people in this age
range).
G. Social Class and Consumer Identity
1. Pick a Pecking Order
a. In most animal species the most assertive or aggressive animals exert
control over the others and have their first pick of food, living space, and
even mating partners. People are not so different in that we too have a
hierarchy of social class. In a dominance-submission hierarchy, each
individual is submissive to individuals above him/her and dominates those
below (pecking order). People develop a pecking order that ranks
resources like education, housing and consumer goods.
b. A consumer’s standing in society, or social class, is determined by a
complex set of variables, including income, family background, and
occupation. The place one occupies in the social structure is an important
determinant not only of how much money is spent, but it also influences
how it is spent.
Discussion Opportunity—Ask: What other variables can you think of that might have a strong
association (determinant of) with social class?
2. According to Karl Marx, the “haves” control the resources and the means of
production and the “have-nots” provide the labor.
3. According to Max Weber, multidimensional people are ranked by social honor (status
groups), power (party), wealth, and property (class).
4. We use the term social class to describe generally the overall rank of people in a
society. People who belong to the same social class have approximately equal social
standing in the community.
5. The tendency to marry within one’s own social class is known as homogamy.
Discussion Opportunity—Have your students comment on the phrase “Social class is as much a
state of being as it is of having.” How important is social class to you? Explain.
Discussion Opportunity—Ask students to think of examples of achieved status and examples of
ascribed status. Have them use real people for their example illustrations.
H. Social Class in the United States
1. One of the most famous social class scales is the one developed by Lloyd Warner in
1941. Warner’s six divisions are:
a. Upper Upper (old rich)
b. Lower Upper (new rich)
c. Upper Middle (professionals and owners)
d. Lower Middle (lower-paid, white-collar workers and high-paid, blue-collar
workers)
e. Upper Lower (blue-collar workers)
f. Lower Lower (underemployed and unemployed)
*****Use Figure 11.2 Here; Use Consumer Behavior Challenge #30 Here *****
Discussion Opportunity—Ask: Which of Warner’s social class divisions most accurately describe
where you are with respect to social class? To which class do you aspire? How will you achieve
this change?
Discussion Opportunity—Ask students to give one example of dramatic social class change
wherein a person moved dramatically up or down the social class scale. Explain your example.
What changes did this movement cause?
2. Class Structure Around the World
a. Every society has some type of hierarchical class structure that determines people’s
access to products and services.
b. In China, a middle class is rapidly developing. This has made a market for all kinds of
goods and services.
c. Japan is a very brand-conscious society where upscale, designer labels are quite
popular. This is especially true with the large working female demographic.
d. In the Middle East, shopping is a major leisure activity for women with money, most
of who do not work outside the home.
e. The United Kingdom is very class-conscious, with class structure being traditionally
preordained. The Great British Class Survey found that the distinct classes in the U.K.
has grown from three to seven, ranging from the elite, to the precariat.
f. Thanks to a booming economy, Indian consumers are embracing the high-end brands
and consumerism of the West and using credit cards to spend their way into luxury.
3. How Do We Measure Social Class?
a. Social scientists disagree on the best way to measure social class.
b. Figure 11.3 shows an example of a computerized status index.
c. One problem in assigning people to a social class is that many people are not equal in
standing on all relevant dimensions. Social scientists use the concept of status
crystallization to assess the impact of social class inconsistency.
d. Some people make less money than their class expects, which means they are
underprivileged, while others may make more than their class expects, which means
they are overprivileged.
e. We still tend to assume that husbands define a family’s social class and that wives
achieve their class through their husbands. Attractive women are likely to be able to
“marry up” which is called hierogamy.
I. Status Symbols and Social Capital
1. Social Capital
a. In addition to economic capital, French theorist Bourdieu noted that people compete
for social capital too.
b. Cultural capital is the set of distinctive and socially rare tastes and practices like
knowledge of “refined” behavior.
c. This is true of the online world as well such that Twitter members with the most
followers have more social capital than those with fewer followers.
d. Mass marketers have found ways to serve a class called the mass class with everyday
products that suggest luxury.
2. What Do You Use That Fork For? Taste Cultures, Codes, and Cultural Capital
a. A taste culture describes consumers in terms of their aesthetic and intellectual
preferences.
b. Figure 11.4 shows the clusters of furnishings and decorative items found based on
social class.
c. Another approach to social class focuses on the codes, the ways consumers express
and interpret meanings, people within different social strata use.
d. There are two ways to communicate product benefits that incorporate different types
of codes. Restricted codes focus on the content of objects, not on relationships among
objects. Elaborated codes are more complex and depend on a more sophisticated
worldview. Table 11.1 explains some differences between the two types of codes.
3. Status Symbols
a. A major motivation to buy is to let others know that we can afford them. The products
serve as status symbols.
*****Use Consumer Behavior Challenge #25 Here *****
b. Imitations of status symbols prompted three coping strategies from luxury fashion
brand consumers in India and Thailand:
c. Flights – stop using the brand to avoid association with lesser-status person who buys
fake brands.
d. Reclamation – emphasize long relationship with the brand and express concern for
the brand’s image.
e. Abranding – they disguise their luxury items in the belief that high-status people do
not need to display expensive logos, so those who do betray lower status.
4. Thorstein Veblen felt products were used to inspire envy in others through a display of
wealth or power.
a. Veblen coined the phrase conspicuous consumption to refer to people’s desire to
provide prominent visible evidence of their ability to afford luxury goods.
b. The phenomenon of conspicuous consumption was most evident among the leisure
class, for whom productive work is taboo (idle rich).
c. Cougars are women who date younger men, presumably to use the men as arm
candy.
*****Use Consumer Behavior Challenge #24 Here *****
5. 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 logos at all. Those with highly visible signals are called loud signals
while those with more subtle signals are said to have quiet signals. The differences in the
level of visibility of a product as a status symbol is called brand prominence. When
people choose a brand based on brand prominence, they are said to be status signaling.
Figure 11.5 provides a typology of status signaling.
Discussion Opportunity—Have the class create a list of ten status symbols that are important to
them. Then have them share their lists with the class. How are these symbols linked to success?
If a marketer knew your list, how would it affect their strategy for marketing to you?
Discussion Opportunity—Ask: What brands have the greatest brand prominence for you?
*****Use Figure 11.5 Here *****
J. Lifestyles
1. Lifestyle: Who We Are, What We Do
a. Lifestyle refers to a pattern of consumption reflecting a person’s choices of how he
or she spends time and money. It is (in an economic sense) how one elects to allocate
income.
b. A lifestyle marketing perspective recognizes that people sort themselves into groups
on the basis of the things they like to do, how they like to spend their leisure time, and
how they choose to spend their disposable income.
c. Other terms used to describe lifestyle are taste public, consumer group, symbolic
community, and status culture.
Discussion Opportunity—Ask: What are some different lifestyles that people about your age
(those attending and not attending college) tend to follow? What are the differences between
your lifestyle and someone who is a returning student (or a normal undergraduate if you are a
returning student)? A graduate student?
2. Product Complementarity and Co-Branding Strategies
a. People, products, and settings combine to express a consumption style. The adoption
of a lifestyle-marketing perspective implies that we must look at patterns of behavior
to understand consumers.
*****Use Figure 11.6 Here; Use Consumer Behavior Challenge #31 Here *****
b. Co-branding strategies are used by marketers to combine products that appeal to
similar patterns of behavior.
c. Product complementarity occurs when the symbolic meanings of different products
are related to each other. These products, termed consumption constellations, are
used by consumers to define, communicate, and perform social roles.
*****Use Consumer Behavior Challenge #32 Here *****
K. Psychographics
1. Psychographics involves the use of psychological, sociological, and anthropological
factors to determine how the market is segmented by the propensity of groups within the
market and their reasons to make a particular decision about a product, person, ideology,
or otherwise hold an attitude or use a medium.
2. How do perform a psychographic analysis?
Psychographic studies take several forms including lifestyle profiles, product-specific
profiles, general lifestyle segmentation, and product-specific segmentation studies.
3. AIOs
a. Most contemporary psychographic research attempts to group consumers according
to some combination of three categories of variables: activities, interests, and
opinions.
b. Table 11.2 lists lifestyle dimensions which can be used in psychographic profiling.
c. Marketers use the results of psychographic studies to do things such as:
Define the target market
Position the product
Better communicate product attributes
Develop product strategy
Market social and political issues
d. The best known lifestyle segmentation system is the Values and Lifestyles System
(VALS2). Figure 11.8 illustrates VALS2. VALS segments are grouped according to
resources and self-orientation. Self-orientation is either based on ideals, achievement,
and self-expression. The results include the following types:
Innovators
Thinkers
Achievers
Experiencers
Believers
Strivers
Makers
Strugglers
*****Use Figure 11.8 Here *****
End-of-Chapter Support Material
SUMMARY OF SPECIAL FEATURE BOXES
1. Marketing Pitfall
A person’s credit score based on outstanding debt has become a symbol of a person’s
worth. Credit scores are considered in hiring decisions, dating, and loans.
2. Marketing Opportunity
The appeal of living in urban environments continues to grow, causing housing prices in
many cities to skyrocket. Micro-loft are economical and ecofriendly alternatives to more
costly housing.
3. The Tangled Web
The digital dived between the rich and poor is still a reality. People who don’t have
access to the internet can be at a real disadvantage.
4. CB As I See It: Paul Henry, University of Sydney Australia
We tend to associated with and work with people who share our values and priorities, as
well as our cultural and social preferences. Class is related to income and wealth, but it
also distinguished how people plan finances and manage money, as well as financial goal
setting.
5. Marketing Pitfall
In China, the quality of life has improved dramatically for many. In the past, people were
fairly equal, and the ratio of males to females was about even. Today, incomes are higher,
and more women are postponing marriage to pursue careers. The one child policy has
resulted in as many as 24 million unmarried men.
6. Marketing Pitfall
The term “chav” refers to young, lower-class men and women who mix flashy brands
with track suits. They spend a lot of disposable income on fashion, food, and gadgets.
7. Marketing Pitfall
Research shows that people who identify with a relatively low-status category desire
objectives they associate with high status to enhance social standing. However, this
policy works against them in the long run.
8. CB As I See It: Benjamin G. Voyer, ESCP Europe Business School & London School of
Economics, United Kingdom
Luxury goods constitute a unique product and service category in marketing. Luxury
consumption has been linked to wealth, social class, and economic power. Luxury goods
have also been associated with unsustainability or unhealthiness.
9. Marketing Pitfall
Luxury goods serve as status symbols, but counterfeit products threaten to diminish their
value.
