Core Concepts of Marketing

EXTERNALFACTORSTHATAFFECTPLANNING 111

ConsumerBuyingPower
A consumer'sbuyingpowerrepresentshislherabilitytomakepurchases.Theeconomyaffects

buyingpower.Forexample, if pricesdecline,consumershavegreaterbuyingpower.Ifthe

valueofthedollarincreasesrelativetoforeigncurrency,consumershavegreaterbuying
power.Wheninflationoccurs,consumershavelessbuyingpower.Alistofseveralaspects
ofconsumerbuyingpoweris presentednext.Eachcanbemeasuredrelativetoa marketer's
externalenvironment.

• Buyingpower:A consumer'sabilitytomakepurchases.


• Income:Theamountofmoneyanindividualreceivesfromwages,rents,invest-
  ments,pensions,and/orsubsidies.


• Disposableincome:Theincomeavailableforspendingaftertaxeshavebeenpaid.


• Discretionaryincome:Disposableincomeavailableforspendingorsavingafterbasic
  necessities(e.g.,food,housing,clothing)havebeenpurchased.


• Credit:Anindividual'sabilitytobuysomethingnowandpayforit later.


• Wealth:Theaccumulationofpastincomeandotherassetsincludingsavingsaccounts,
  jewelry,investments,realestate, andthe:ike.


• Willingnesstospend:Anindividual'schoiceofhowmuchdisposableincometo
  spendandwhattospendit on.
  oConsumerspendingpatterns:Amountofmoneyspentoncertainkindsofproducts
  andserviceseachyear.


• Comprehensive spendingpatterns:TheamOiJntofincomeindividualsallocateto
  expendituresforclassesofproductsandservices.


• Productspendingpatterns:Theamountofincomespentforspecificproductsina
  productclass.

SeveraloftheseconceptsareillustratedintheNewslinethatfollows.

NEWSLINE:EVERYONESEEMSTOHAVEMONEY

It'sbeencalledmysteryprosperity.Thenation'seconomyisgrowing

ataratenotseensincethe1960s,unemploymentandinflationare

thelowestindecades,andthestockmarketissettingrecordswith

regularity.Someeconomistsexplainou;:goodfortunebyclaiminga

neweconomyisatwork,onedrivenbydeficitreduction, lowinterest

rates,andtechnologicaladvances.Otherspointtothingslikethe

Asiancontagionandtheinevitablelimitsofthebullmarket,andwon-

derhowlongthiscanlast(infactitendedin2000).

Butdespitemarketjitters,atleastwecantakecomfortinknowing

thattheeconomymaybemorestablethanmanyfear, if onlybecause

consumerspending-whichaccountsfortwo-thirdsofthenation's

economicoutput- hasbeenconsiderablymutedinthepastdecade.

Talkaboutunconventionalwisdom.Howcanthisbe?Hasn'tthe

mediabeentrumpetingAmerica'srunawayspendingspree?

It'struethatconsumerspendinghasbeengrowing,butonlyatthe

aggregatelevel:thepopulationisgrOwing,thenumberofhouseholds

isincreasing,andthebaby-boomgeneration-theyoungestofwhich

isnow35-hasentereditspeakspendingyears.Buta closelookat

trendsinspendingbyindividualhouseholdstellsa differentstory.