Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e

5. Demographic
   Dimensions of Global
   Consumer Markets

Text © The McGraw−Hill

Companies, 2002

Demographic Dimensions of Global Consumer Markets 145

There is heated debate about what will happen to consumer incomes—and

income distribution—in the future. Some business analysts feel that the lack of sig-

nificant income growth signals worse things to come. They think that a decline in

the manufacturing sector of the economy threatens America’s middle-class standard

of living. These analysts argue that in industries with traditionally high wages, firms

are replacing workers with technology—to be able to compete with low-cost for-

eign producers. At the same time, new jobs are coming from growth of the

lower-paying service industries. But other analysts are not so pessimistic. They agree

that the percentage of the workforce earning middle-income wages has declined

recently—but they think this is a temporary shift, not a long-term trend, and that

over time the efficiencies that come from new information technologies will “lift”

the whole economy.

What happens to income levels will be critical to you—and to American con-

sumers in general. It is easy for both consumers and marketing managers to be lulled

by the promise of a constantly increasing standard of living. Both consumer think-

ing—and marketing strategy—will have to adjust if growth does not resume.

Higher-income groups in the U.S. receive a very large share of total income, as

you can see in Exhibit 5-8, which divides all families into five equal-sized groups—

from lowest income to highest. Note that although the median income of U.S. families

in 1999 was about $48,950, the top 20 percent of the families—those with incomes

over $88,082—received over 47 percent of the total income. This gave them extra

buying power, especially for luxury items like cellular phones, memberships in coun-

try clubs, and yachts. Well-to-do families with incomes over $155,040—the top

5 percent nationally—got more than 20 percent of the total income.

At the lower end of the scale, over 14 million families had less than $22,826

income. They account for 20 percent of all families but receive only 4.3 percent of

total income. Even this low-income group is an attractive market for some basic

commodities, especially food and clothing—even though almost half of them live

below the poverty level of $17,029 for a family of four. These consumers may receive

food stamps, medicare, and public housing, which increases their buying power.

Some marketers target this group, usually with a lower-price marketing mix.

We can’t stress the importance of income distribution too much. Many compa-

nies make serious marketing strategy errors by overestimating the amount of income

in various target markets. Marketers can easily make such errors because of the nat-

ural tendency for people to associate with others like themselves—and to assume

The higher-income

groups receive a

big share

How much income is

“enough?”

Percent of total income

50

40

30

20

10

$0 22,826 39,600 59,400 88,082

Lowest 20%

income group

Middle 20%

income group

Top 20%

income group

4.3%

9.9%

15.6%

23.0%

47.2%

Exhibit 5-8

Percent of Total Income

Going to Different Income

Groups in 1999