Income to be more useful than social class for segmenting markets

Most of the research that has been conducted has found income to be more useful than social class for segmenting markets. One study showed that for a number of low priced consumer packaged goods, both income and social class were found to correlate wit buying behavior. However, product usage generally proved to be more closely related to income than to social class. A follow up study included certain durable goods items plus a few services and confirmed the earlier study by showing income to be superior to social class in segmenting the market for nearly all items. Thus, some products appear to be classless in their appeal. For example, in the hot southwest, income not social class largely determines whether a family buys air conditioning. If the family can afford to purchase air conditioning it does so. On the basis of such findings, it would appear that social class, although useful as a concept has often not been as successful as other approaches in segmenting markets.

Much of the earlier research however based its findings on use or nonuse of a product or service rather than on how often that product or service was used. Since there are many products or services that abroad spectrum of consumers would buy or use at least once, one research study examined the role of frequency of use in selecting the superior segmentation bases among income, social class, age, and stage in family life cycle for various entertainment activities. This research showed that income and stage in the lifecycle were more highly related to use of all the entertainment activities than age and social class. However, all four variables especially social class showed strong associations with the frequency of use of these entertainment activities. More research is needed on a broad variety of products before a generalization of this finding is made.

Several explanations have been suggested for the apparent lackluster performance of social class as a basis for market segmentation. One factor is the recent and dramatic changes which have taken place in our society’s economic, social and cultural climate and which have diminished the differences in consumer behavior between the classes.

Another explanation for the poor showing of social class is that researchers have failed to account for the diversity within classes. That is, individuals although in the same social class, may show considerable discrepancy in their ratings on the variables the class consists of. For examples, some may have high education with low income or vice versa, yet may be members of the same social class. This inconsistency in strata variables, known as status in-congruency or low status crystallization presents difficulties not only in ranking individuals but also in understanding their behavior.

The diversity within social classes is particularly evident with income level variations. For example, it has been suggested that there are over privileged and under privileged members within each class. The over privileged families in each class are those with incomes 25 to 30 percent above the class median, who have money left over to spend after acquiring the standard package of shelter, clothing, and transportation for their class. Some families are in the middle of the class income range for their situations. Other families are under privileged, having incomes at least 15 percent below the class median. While not really poor (unless in the lower classes) they find it difficult to exhibit the standard of living expected from people of their status and must scrimp, save and sacrifices to have the proper appearance. In 1983 the income minimums for class average status were $100,000 for the upper class, $45,000 for the upper middles, $24,000 for middle class, $16,000 for working class, and almost $10,000 for lower class Americans . Thus, an upper class family earning $80,000 a year is under privileged by the standard of its level. That family can’t own a mansion and a second home and obtain private schooling. It has to sacrifice.