How do consumers decide what to buy? And how much money do they have to spend for what they want to buy?

Marketers have long tried to figure it out, and you're probably no exception in finding out that there haven't been any good answers. So you rely on things like household income data to measure the potential spending power of your prospects and customers. And, for a long time, that kind of "potential" was all that was available.

But today it is no longer enough if you are serious about targeting the right consumer, with the right product, at the right time.

Compounding the challenge is the reality of consumer "schizophrenia." Historically, consumers were more "class consistent" than they are today. Affluent consumers always bought premium, middle class bought value, and lower income bought on price. We marketers relied on that for a long time.

Those "truisms" are, quite simply, no longer true. Millionaires shop at Wal-Mart. And many people—perhaps more than ever—are living well beyond their means. The result is that you have to figure out not only who has spending power but also what they're willing to spend it on!

Spending power turns out to rely on a complex combination of forces that includes both sources of income and expenditure pulls. The percentage of influence each has can differ depending on the circumstances, but in the end consumers decide through a mostly informal analysis of the resources available to them and the conflicting demands on those same resources.

Traditional targeting solutions typically started with income measures (household, per capita, and disposable), followed by net worth (incorporating the value of assets held and subtracting major liabilities) and income-producing assets. While these solutions were initially considered "progressive" in that they provided the first level of discrimination of wealth in a previously homogenous world, it's now clear that these measures are constrained by the limitations of the underlying source data (e.g., 100,000 annual, self-reported consumer surveys projected to 114,000,000 households using ordinary demographics).

Compounding this challenge is that each measure provides only one component of the multi-dimensional puzzle of spending power.

Subscribe today...it's free!

MarketingProfs provides thousands of marketing resources, entirely free!

Simply subscribe to our newsletter and get instant access to how-to articles, guides, webinars and more for nada, nothing, zip, zilch, on the house...delivered right to your inbox! MarketingProfs is the largest marketing community in the world, and we are here to help you be a better marketer.

Already a member? Sign in now.

Sign in with your preferred account, below.

Did you like this article?
Know someone who would enjoy it too? Share with your friends, free of charge, no sign up required! Simply share this link, and they will get instant access…
  • Copy Link

  • Email

  • Twitter

  • Facebook

  • Pinterest

  • Linkedin


ABOUT THE AUTHOR

James A. Koppenhaver is group vice-president of business development for Echelon Marketing Group, a division of IXI Corporation, based in McLean, VA. He can be reached at 847.808.7652 or via email jkoppenhaver@echelonmarketing.com.