Income & Social Class

Consumer Behavior Week 10

LECTURER: PROF. DR. ADI ZAKARIA AFIFF, SE, MBA
GROUP 1:
AGUS WINARTA 1906329606
DANIEL CHRISTIANTO K. 1906419835
DI GUSTI AYU MIRAH 1906420231
MARIA MARGARETH H. 1906330255
INCOME AND
CONSUMER IDENTITY

TO SPEND OR NOT TO SPEND?

Consumer demand for goods and services

depends on both our ability and willingness
to buy

Although demand for necessities tends to

be stable over time, we postpone or
eliminate other expenditures if we don’t
feel that now is a good time to spend
money

Discretionary income is the money

available to a household over and above
what it requires to have a comfortable
standard of living. How much money do
people need to be “comfortable?”
SPEND OR NOT TO SPEND?

SPEND DON’T SPEND

Wealth level Saving person

Spendthrifts Tightwads

Spendthrifts : Enjoy nothing more than buying everything in sight

Tightwads : Experience emotional pain when they hand over their cash

Research on this issue finds that (stereotypes aside) U.S. tightwads outnumber spendthrifts.
Men are more likely than women to be tightwads, as are older people and those with more
education
CONSUMER CONFIDENCE
The extent to which people are optimistic or pessimistic about the
future health of economy and how they predict they’ll fare down
the road.

The Survey Research Center at the University of

Michigan survey of consumer confidence:
1. Would you say that you and your family are better or
worse off financially than a year ago?
2. Will you be better or worse off a year from now?
3. Is now a good or bad time for people to buy major
household items such as furniture or a refrigerator?
4. Do you plan to buy a car in the next year?
Indonesia Consumer Confidence Data 2020
Source: https://tradingeconomics.com/indonesia/consumer-confidence

Overall savings rate is affected by:

◦ Pessimism/optimism about personal circumstances
◦ World events
◦ Cultural differences in attitudes toward savings
 INCOME
INEQUALITY
Today one of the biggest issue we hear about is
income inequality

Income Inequality is the extent to which resources

are distributed unevenly within a population.

Ex: a researcher who conducted an in-depth study

of residents of a rural trailer park identified one
segment of consumers she called the Reluctant
Emigrants. These people once lived in fixed-site
homes but various economic problems forced them
to move to the more affordable trailer park.
Because their lives are on a downward trajectory,
their primary concerns focus on security and
protection
 SOCIAL MOBILITY
The movement of individuals from one social class to another.

Horizontal mobility occurs when a person moves from

one position to another that’s roughly equivalent in
social status; for instance, a nurse becomes an
elementary school teacher

Downward mobility movement none of us wants, but

unfortunately we observe this pattern fairly often, as
farmers and other displaced workers go on welfare
rolls or join the ranks of the homeless

Upward mobility where the middle and upper class

reproduce less than the lower class so that the lower
status must fill positions of higher status.
 INCOME BASED
MARKETING
 The average American’s standard of living
continues to improve due to:
◦ A shift in women’s roles (working women/working
moms)
◦ Increases in educational attainment (college wage
premiums)

Targeting the top of the pyramid: High-income

it is a mistake to assume that we should place everyone
with a high income into the same market segment

Targeting the bottom of the Pyramid: low income

 Although poor people obviously have less to spend
than do rich ones, they have the same basic needs as
everyone else. And of course the market size is huge!
TARGETING THE RICH
Affluent consumers’ interests/spending priorities are affected by where they got their money,
how they got it, and how long they have had it

Luxury is functional Luxury is a reward Luxury is indulgence

TYPE OF RICH PEOPLE

OLD MONEY THE WORKING WEALTHY

TARGETING THE POOR
Some multinational companies have
woken up to the potential of this
huge market. They focus on
engineering innovations that allow
them to produce inexpensive
products that still function as people
need them to.
SOCIAL CLASS AND CONSUMER IDENTITY
SOCIAL CLASS
Overall rank of people in a society
“A state of being as it is of having; a matter of what
you do with your money and how you define your
role in society”

• Factors including
education,
occupation and
income determine
the class to which we
belong

Solomon, M., 2018. Consumer Behavior: Buying,

Having, And Being (Global Edition). 12th ed.
Pearson Education Limited.
SOCIAL STRATIFICATION
Creation of artificial divisions, when most groups
exhibit status hierarchy (some members are “better”
off than others; more authority or power)
Occupational
Worldview Cosmopolitan
prestige
• Defining people to • The world of the • Open to the world
a great extent by working class (e.g and strives for
what they do for a the lower-middle diverse
living to evaluate class) is more experiences,
their “worth” intimate and respond well to
constricted brands that have a
international/global
image

Solomon, M., 2018. Consumer Behavior: Buying,

Having, And Being (Global Edition). 12th ed.
Pearson Education Limited.
INCOME VERSUS SOCIAL CLASS
Although we equate money with social class, they are by no means
synonymous

Do people buy a product largely for its functional

value (what it does), or for its symbolic value (the
impression it conveys to others)?

Social class is a better predictor of purchases that have symbolic

aspects but low to moderate prices (e.g: cosmetics, liquor)

Income is a better predictor of major expenditures that do not

have status or symbolic aspects (e.g: major appliances)

Social class and income data are needed to predict purchases of

expensive, symbolic products (e.g: cars, homes)
Solomon, M., 2018. Consumer Behavior: Buying,
Having, And Being (Global Edition). 12th ed.
Pearson Education Limited.
SOCIAL CLASS AROUND THE WORLD

China Japan The Middle The United India

• Middle class of • Highly brand- East Kingdom • Young economy
>130mio people conscious • Major expansion • Extremely class- (54% people are
(will be >400mio society; upscale, of Western luxury conscious country < 25 years of
in 10 years) designer labels brands; home to • Distinct classes: age) – strong
• Costs are low, are incredibly some of the elite, technical influence on the
family with an popular fashion industry’s middle class, country’s rapid
annual income < • Three-quarters of best customers emergent service growth
USD 14,000 can Japanese women • Growing middle workers, • Middle-class
enjoy middle- aged 25-29 work class (>150mio) precariat currently
class comforts outside home -> and young (precarious represent < 15%
responsible for economy (>50% proletariat) of India’s
fueling Japan’s people are < 25 population (5-
luxury-goods years of age) year projection:
spending approx. 267mio,
about 67%
growth)
Solomon, M., 2018. Consumer Behavior: Buying,
Having, And Being (Global Edition). 12th ed.
Pearson Education Limited.
STATUS SYMBOL AND SOCIAL CAPITAL

It’s getting more difficult to clearly link certain brands or stores with a
specific class. That’s because a lot of “affordable luxuries” now are within
reach of many consumers who could not have acquired them in the past
Rising incomes in many economically
developing countries, such as South
Korea, and China, coupled with
decreasing prices for quality
consumer goods and services, create
explosive demand for luxury
products or at least “affordable”
versions of these goods.
Mass class describes the hundreds of
millions of global consumers who
now enjoy a level of purchasing
power that’s sufficient to let them
afford high-quality products—except
for big-ticket items such as college
educations, housing, or luxury cars.
“WHAT DO YOU USE THAT FORK FOR?” TASTE
CULTURES, CODES, AND CULTURAL CAPITAL

A taste culture describes consumers in

terms of their aesthetic and intellectual
preferences. This concept helps to
illuminate the important, yet sometimes
subtle, distinctions in consumption
choices among the social classes
the codes describe the ways consumers
express and interpret meanings people
within different social strata use
These two ways to communicate product benefits incorporate different types
of codes.
Restricted codes focus on the content of objects, not on relationships among
objects.
Elaborated codes, in contrast, are more complex and depend on a more
sophisticated worldview
SOCIAL AND CULTURAL CAPITAL

Bourdieu’s concept of social capital and cultural capital.

Social Capital is a durable network of more or less institutionalized
relationships of mutual acquaintance and recognition
Cultural Capital is something that one acquires for equipping oneself and is
reproduced by economic capital.
ONLINE SOCIAL CAPITAL

In the online world, many people hold

others in high regard for their opinions as
much as, or maybe even more than, for
their money. The “psychic income” we
get when we post reviews that others
validate creates a reputation economy, in
which the “currency” people earn is
approval rather than cold hard cash
 STATUS SYMBOLS
We tend to evaluate ourselves, our professional accomplishments, our
appearance, and our material well-being relative to others.
STATUS SYMBOLS
A major motivation to buy is not
to enjoy these items but rather
to let others know that we can
afford them. These products are
status symbols.

Status-seeking is a significant
source of motivation to procure
appropriate products and services
that we hope will let others know
we’ve “made it.”
STATUS SYMBOLS
The particular products that count as status symbols vary across
cultures and locales:

IRAQ RUSIA

CHINA INDONESIA
CONSPICUOUS CONSUMPTION

We buy things to create invidious

distinction; this means that we use
them to inspire envy in others
through our display of wealth or
power.

Conspicuous Consumption to refer

to people’s desires to provide
prominent visible evidence of their
ability to afford luxury goods.
CONSPICUOUS CONSUMPTION
Consumers engage in conspicuous One set of researchers labels
consumption as a way to display these differences brand
status markers, yet the prominence prominence.
of these markers varies from
products with large recognizable
emblems to those with no logo at all.

QUIET SIGNALS

LOUD SIGNALS