Chapter 12: Income, Social Class, and Family Structure Flashcards
12.2 We group consumers into social classes that say a lot about where they stand in society.
12.2 We group consumers into social classes that say a lot about where they stand in society.
Social Class
The overall rank of people in a society; people who are grouped within the same social class are approximately equal in terms of their social standing, occupation, and lifestyle
People who belong to the same social class have approximately equal social standing in the community. They work in roughly similar occupations, and they tend to have similar lifestyles by virtue of their income levels and common tastes. These people tend to socialize with one another and share many ideas and values regarding the way life should be lived
The place a person occupies in the social structure is an important determinant not just of _______ money is spent but also _______ is spent.
how much
how it
Old money
People who have had money for a long time and do not need to prove it
Aka: they dont need to spend their money to show they have money to spend
New money
In contrast, consumers who are relative newcomers to affluence might allocate the same amount of money very differently
Example of careful spending based on income status
The moissanite market is projected to hit $50 million by 2025. So, after all is said and done, are diamonds “still a girl’s best friend?
Fake wedding rings so you can go on a nice honey moon or pay for a mortgage
Pecking order
Not the chicken example
But the fact that society has a pecking order ranked in terms of their relative standing in society
Our standing determines our education, housing, consumer goods
The German sociologist Max Weber showed that the rankings people develop are not one-dimensional;
some rankings involve prestige or “social honour” (he called these status groups), some focus on power (or party), and some revolve around wealth and property (class)
homogamy or “assortative mating
We tend to marry people similar in social class to ourselves
Social stratification
The process in a social system by which scarce and valuable resources are distributed unequally to status positions that become more or less permanently ranked in terms of the share of valuable resources each receives
reputation economy
this term refers to the “currency” people earn when they post comments online and others recommend their comments
Achieved status
Your hard work has led you to be better off
“Every hair in my mink coat represents a toilet I’ve cleaned.”
Ascribed status
Born with the silver spoon
Some socialites, such as Paris Hilton and Kim Kardashian, have been criticized because their fame seems to have more to do with ascribed status than with their talent or hard work.
Status hierarchy
A ranking of social desirability in terms of consumers’ access to such resources as money, education, and luxury goods
Income inequality
the extent to which resources are distributed unevenly within a population
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 is 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 when displaced workers are forced to go on social assistance or people join the ranks of the homeless
The top three countries for encouraging mobility were
Denmark, Austria, and Norway
China Class Structure
Nike shoes are a a symbol of success
Items in China are not as expensive meaning a family that makes under the North American poverty line can still have nice clothes and fancy items
Japan Class Structure
Tsunami hurt their economy but japan also cares for high quality items.
They like to splurge to give the illusion of wealth to help reduce their anxieties
Single working women buy the most luxury items
Middle East Class structure
Few arab women work
But many arab women like to shop with their friends
The United Kingdom Class Structure
- Very class conscious
- Marketing chavs’ as a group
India Class Structure
- Half of population lives on less than $1.25 a day
- Dogs are a symbol of wealth
Brazil Class Structure
- Showing off wealth is important as it commands respects
- Work of arts is important
Mass class
This segment comprises the hundreds of millions of global consumers who now enjoy a level of purchasing power that enables them to afford high-quality products—except for big-ticket items such as university educations, housing, or luxury cars
Examples: Latin Americans have their Volkswagen Beetle (affectionately called el huevito, the little egg); Indian consumers had their Maruti 800 in production for almost thirty years75 (selling for as little as $5720); and the Fiat Palio, the company’s “world car,” targeted people in 40 countries worldwide
Occupational prestige
the notion that some occupations are more respected than others
Stable over time and similar across cultures
Single best indicator of social class
Social Class facts
How Income Relates to Social Class
Whether social class or income is a better predictor of a consumer’s behaviour depends on the type of product:
Social class is a better predictor of purchases that have symbolic aspects but low-to-moderate prices (e.g., cosmetics and liquor).
Income is a better predictor of major expenditures that do not have status or symbolic aspects (e.g., major appliances).
Both social class and income data are needed to predict purchases of expensive, symbolic products (e.g., cars and homes).
Potent actors
those who believe they have the ability to take actions that affect their world
For example, the professionals in the study who were likely to be potent actors set themselves up for financial opportunity and growth
Impotent reactors
those who feel they are at the mercy of their economic situations
Affluenza
Many well-off consumers seem to be stressed or unhappy despite or even because of their wealth
three groups on the basis of their attitudes toward luxury:
1) LUXURY IS FUNCTIONAL
2) LUXURY IS A REWARD
3) LUXURY IS INDULGENCE
1) LUXURY IS FUNCTIONAL
Summary: Logical purchases, not impulsive
These consumers buy things that will last and have enduring value. They conduct extensive pre-purchase research and make logical decisions rather than emotional or impulsive choices.
2) LUXURY IS A REWARD
Summary: Younger people…I’ve made it!
These consumers tend to be younger than the first group but older than the third group. They often use luxury goods to say, “I’ve made it.” The desire to be successful and to demonstrate their success to others motivates these consumers to purchase conspicuous luxury items, such as high-end cars and homes in exclusive communities.
3) LUXURY IS INDULGENCE
Summary: Lavish and self-indulgent
This group is the smallest of the three and tends to include younger consumers and slightly more males than the other two groups. To these consumers, the purpose of owning luxury items is to be extremely lavish and self-indulgent. This group is willing to pay a premium for goods that express its individuality and make others take notice. These consumers have a more emotional approach to luxury spending and are more likely than the other two groups to make impulse purchases
Old Money Famalies
(e.g., the Bronfmans, Westons, Killams, McCains) live primarily on inherited funds
And they are secure in their status. In a sense, they have been trained their whole lives to be rich
the working wealthy
In contrast to people with old money, today there are many people—including high-profile billionaires such as Bill Gates, Mark Cuban, and Richard Branson
Nouveaux riches
describes consumers who recently achieved their wealth and who don’t have the benefit of years of training to learn how to spend it.
loyalty programs
e.g., when airlines award you special status according to the number of miles you fly)
Status Symbols
Products that are purchased and displayed to signal membership in a desirable social class
Luxury goods often serve as status symbols, but the proliferation of inexpensive counterfeit products threatens to diminish their value
(“Hey buddy, wanna buy a genuine Rolex for $20?”)
Fakes are a major headache for many manufacturers, especially in Asia: Officials estimate that ____ percent of counterfeit goods found in the United States, Europe, and Japan are made in China (and counterfeit goods make up 8 percent of China’s GDP)
72
Researchers who interviewed consumers who purchased luxury fashion brands in India and Thailand identified three coping strategies:
1) Flight
2) Reclamation
3) Abranding
1) Flight
They stop using the brand because they don’t want to be mislabelled as a lesser-status person who buys fake brands.
2) Reclamation
They go out of their way to emphasize their long relationship with the brand but express concern that its image will be tarnished.
3) Abranding
They disguise their luxury items in the belief that truly high-status people do not need to display expensive logos, and those who do so betray their lower status
Conspicuous Consumption
refer to people’s desire to provide prominent, visible evidence of their ability to afford luxury goods
Leisure Class
People for whom productive work it taboo
Brand prominence
Degree to which a consumer desires to conspicuously display a brand, product, logo, to others
Status crystallization
The extent which different indicators of a person’s status (income, ethnicity, occupation) are consistent with one another
Overprivileged
Having an income at least 25 to 30 percent greater then the median for one’s class
Underprivileged
Those who earn at least 15 percent less than the median of their social class,
must often allocate a big chunk of their income toward maintaining the impression that they occupy a certain status
Household living arrangements
whether or not the person lives with another person or persons and, if so, whether or not he or she is related to that person or persons
Census Family
a married couple and the children, if any, of either or both spouses; a couple living common law and the children, if any, of either or both partners; or, a lone parent of any marital status with at least one child living in the same dwelling. . . . A couple may be of opposite or same sex. Grandchildren living with their grandparent(s) but with no parents present also constitute a census family
Extended Family
Several generations live together
Grandparents, aunts, uncles, cousins etc
Nuclear Family
a mother and a father and one or more children
Total fertility rate (TFR)
the average number of children that would be born per woman if all women lived to the end of their childbearing years and bore children according to a given fertility rate at each age.
Many factors affect what a family spends, including:
the number of people (children and adults) in the family, their ages, and whether one, two, or more adults are employed outside the home
Two especially important factors that determine how a couple spends time and money are
(1) whether they have children and
(2) whether the woman works outside the home
Family Life Cycle
A classification scheme that segments consumers in terms of changes in income and family composition and changes in demands placed on income
2) whether the woman works outside the home
Families with working mothers, for example, must often make allowances for expenses such as daycare, a work wardrobe for the woman, and home-cleaning services
Twenty-somethings
People in their 20’s spending habits
spend less than average on most products and services because their households are small and their incomes are low, especially today
______ consumers spend more per capita on luxury items, such as gourmet foods and upscale home furnishings
Older
A life-cycle approach to the study of the family assumes that pivotal events alter role relationships and trigger new stages of life that alter our priorities.
These events include couples moving in together, the birth of a first child, the departure of the last child from the house, the death of a spouse, retirement of the principal wage earner, and divorce
It’s particularly useful to get a handle on longitudinal changes in priorities when we want to predict demand for specific product categories over time.
For example, the money spent by a couple with no children on dining out and on vacations will probably be diverted for quite different purchases after the birth of a child.
Have researches found a successful model to describe family life-cycle stages?
Ehh, no
Researchers have proposed a number of models to describe family life-cycle stages, but their usefulness has been limited because, in many cases, they have failed to consider important social trends, such as the changing role of women, the acceleration of alternative lifestyles, child-free and delayed-child marriages, and single-parent households.
Baby showers, for example, may be considered a rite of passage to motherhood, fatherhood, or parenthood, depending on the gender ideologies and work orientation of one or both parents.
Word
Four variables to Measure the Family Life Cycle Effects on Buying
(1) age,
(2) marital status,
(3) the presence or absence of children in the home, and
(4) the children’s ages
Young bachelors and newlyweds
are more likely to engage in exercise; go out to bars, concerts, movies, and restaurants; go dancing; and drink alcohol. Perhaps reflecting the bounty of wedding gifts, newlyweds are the most likely to own appliances, such as toaster ovens and electric coffee grinders.
The dollar value of homes, cars, and other durables is lowest for bachelors and single parents but it increases as people go through the full-nest and childless-couple stages.
Couples with children
generally have higher expenses, such as for food and utility bills
Families with young children
are more likely to consume health foods, such as fruit, juice, and yogurt, while families made up of single parents and older children buy more junk food
Babysitters and daycare are, of course, highest among single-parent and full-nest households, while home-maintenance services (e.g., lawn-mowing) are most likely to be used by older couples and bachelors.
Facts
Income Patterns
- A larger proportion of people of working age are in the labour force
- 2015, employment trends for women showed an increase from 47 to 69 percent
- 40 percent of wives in dual-earner couples make more than half of the family income
- In couples with children 75 percent are dual-earning couples
Consumer demand =
Willingness to buy + Ability to buy
Discretionary income
Is the money available to a household over and above that required for a comfortable standard of living
Changes as a household ages
Older households spend a much larger share of budget on shelter and transportation, and less on food and apparel
Households are spending more now on entertainment and education
Walmart study identified three distinct groups of consumers:
–Brand aspirationals: on low incomes but obsessed with names like KitchenAid.
–Value-price shoppers: who like low prices and cannot afford more.
–Price-sensitive affluents: wealthier shoppers who love deals.
Behavioural economics / economic psychology
Is concerned with the “human” side of economic decisions
Consumer confidence:
Extent to which people are optimistic or pessimistic about the future health of the economy
Influences how much discretionary money we will pump into the economy
Overall savings rate is affected by:
The extent to which one saves money
–Pessimism/optimism about personal circumstances
–National and World events
–Cultural differences in attitudes toward savings
Income in equality
The extent to which resources are distributed unevenly within a population.
The education one has is directly related to?
Both occupation and income
Taste culture
Differentiates people in terms of their aesthetic and intellectual preferences
Upper and upper-middle class
more likely to visit museums and attend live theatre
Middle-class Middle class
More likely to go camping and fishing
Invidious distinction
We buy things to inspire envy in others through a display of wealth/ power
How Do We Measure Social Class?
It is difficult to measure social class complexities
- Index of Status Characteristics and the Index of Social Position developed by August Hollingshead
- Blishen – Socioeconomic index for Occupations in Canada may be used when occupation is the most appropriate variable to use to collect information on socioeconomic status
1971, the average Canadian family comprised close to 4.0 people, but in 2017 that slipped to 2.47
Therefore average family sizes are shrinking
Sandwich Generation
Adults who care for their parents as well as their own children
Boomerang kids:
Adult children who return to live with their parents
–Canadian young men are far more likely than young women to live with their parents.
–Spend less on housing and staples and more on discretionary purchases such as entertainment
