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Tuesday, January 11, 2011

Fracturing markets

Segmenting markets by income/expenditure is covered in marketing 101 textbooks. That doesn’t mean that it is something that marketers necessarily do, but it is basic stuff.

I don’t know what to call it, but I think we need to refine our thinking about income segmentation to reflect the reality of the chasm that is growing between the haves and the have nothings.

Yesterday I read a Grade 1 depressing article. The Daily Telegraph looked at what was happening in the US. Here are a few of the observations:

Luxury outlets saw an 8.1% rise from a year ago, but discount stores catering to America’s poorer half rose just 1.2%. Sales of Cadillac cars have jumped 35% and Porsche’s US sales are up 29%
Cartier and Louis Vuitton have helped boost the luxury goods stock index by almost 50pc since October. Yet Best Buy, Target, and Walmart have languished.
The numbers of people on food stamps have reached 43.2m, an all time-high of 14% of the population. 
The “labour participation rate” for working-age men over 20 dropped to 73.6%, the lowest the since the data series began in 1948.
“Corporate America is in a V-shaped recovery,” said Robert Reich, a former labour secretary. But most American workers are trapped in an L-shaped recovery.”

The situation is the same in the UK, it might even be worse. The combination of manufacturing moving to the East (soon to be joined by higher value tasks) – low levels of investment the rapid ramping down of public spending will leave large parts of the country with high percentages of economically inactive people.

In my view marketers will need to abandon large tracks of the UK as effectively being an economic desert. Of course this ‘flight’ from poor geographic areas has the effect of speeding up the process as it depletes the areas of support infrastructure. Despair breeds a self-fulfilling prophecy of doom.

As evidence of this flight there are widespread nursing home closures, in the US, over the past decade that has resulted in a 5% drop in available nursing home beds, with poor, urban neighborhoods hardest hit. In the UK, care companies are doing their level best attract private clients and to ditch the low fee clients paid for by local authorities.

Now mix the ‘age factor’ into this equation and you have a real marketing challenge. I am not offering any solutions but I am acutely aware that the structure of the market is undergoing a seismic change. Dick Stroud

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