Lower-income households represent a high growth opportunity sector for retailers and manufacturers. Over the next ten years, more people will move into the lower-income group, which is expected to grow twice as fast as total households. Over the next ten years, the total number of households in the U.S. is expected to grow by eight percent; however, households closer to the poverty level will grow twice as fast, at 17 percent. To better understand consumers across the economic spectrum, Nielsen conducted an analysis of media usage and purchasing behaviors. Results revealed dramatic differences in the media consumption patterns and delivery platforms across income levels. The same differential was found in CPG shopping behavior, alongside notable similarities in some categories.
Understanding both the similarities and differences in consumer goods purchasing patterns is the key to successfully reaching and marketing to both economic groups.
"Retailing may be evolving into an extreme sport thanks to the growing popularity of extreme value outlets. All shoppers patronize all channels, but certain formats attract a disproportionately high percentage of shoppers from specific income groups," says Jeff Gregori, vice president, Consumer and Shopper Analytics-Retail at Nielsen. “Club stores and e-commerce, as expected, attract more affluent shoppers with the right combination of value and one-stop convenience. Conversely, dollar stores are attracting a broad base of shoppers who are primarily low and middle income.”
Grocery store and mass merchandisers, on the other hand, attract shoppers at both ends of the income spectrum. Branded products make up a similar fraction of purchasing for both upper and lower-income groups. Private-label products are also more similar than different across income groups in most product categories.
Spending on consumer packaged goods varies by income level, with higher-income households spending nearly $1200 more per year than lower-income households. Shopping behaviors also vary, as lower-income shoppers shop more frequently and have smaller baskets, while higher-income shoppers spend more than $10 per trip. Gregori added that, “Value will remain an operational by-word for the foreseeable future across all income strata. Shopping strategies differ across income groups, so manufacturers and retailers need to tailor offers to meet the needs of each segment.”
Income levels influence media purchases and the means by which content is accessed.
"Technology may prove to be the great economic leveler, advancing in new directions that will empower consumers, improve media access and device affordability, and in turn facilitate efforts to engage consumers across economic polarities," says Peter Katsingris, vice president, Industry Insights, Media and Advertising Analytics at Nielsen.
While higher-income consumers are unique in their access to various devices and media types, lower-income consumers are distinguished in their consumption of the media they do have access to, including digital media. The average American devotes 151 hours and 58 minutes to TV viewing each month. Lower-income consumers exhibit a huge appetite for media, logging almost 15 more daytime TV hours than middle income consumers, and about 25 more hours than higher-income consumers. Reaching consumers at the economic polarities requires an understanding of their media usage and adjusting marketing strategies accordingly. Retailers and manufacturers face the challenge of deciding how best to advertise to each income group in such a fragmented media setting.
For more insights and information, download The Economic Divide: How Consumer Behavior Differs Across the Economic Spectrum here.