03/14/11

Report on the ‘Wannabee Effect’

The greatest challenge facing marketers

The middle class is declining — of that have no doubt. And, the middle class largely has supported — by their votes — cutting taxes on the rich, curbing the federal deficit now despite the effect on economic recovery, eviscerating the new national healthcare law and wiping out union rights. Agree or not with their actions, these voters are actually working against their own interests.

Is the middle class simply putting its needs aside for the greater good? Or, have they been bamboozled by large corporate-owned media and, as demonstrated by the U.S. Supreme Court’s decision in Citizens United vs. Federal Election Commission, corporate ownership of the political process?

My theory is middle class Americans are largely “wannabees.” They want to be rich and believe they are voting now to protect themselves later when they join the 1 or 2 percent of wealthiest Americans. Like those that play the lottery, however, the odds are overwhelmingly against them. The vast majority of the middle class, even in this great land of opportunity, will never be rich. No matter the motives, a great redistribution of wealth has taken place and this is the greatest challenge for marketers targeting middle class prospects.

Getting the facts out of the way

The numbers of middle income households — those earning between $35,000 and $99,999, adjusted for inflation — have dropped every decade since 1969. In 1969, 53% of the population comprised the class compared to 43.7% in 2009. The drop is not simply the effect of the current recession since the numbers have been consistently declining every decade. There is no reason to believe this trend will change.

“The middle class is a lot farther away from the very top than they were 40 years ago. So even if typical households were gaining ground in absolute terms, they’d be losing out relative to households at the top,” said economist Heidi Shierholz, as quoted by U.S. News and World Report last October.

On the other hand, as filmmaker Michael Moore claimed earlier this month, “Four hundred obscenely wealthy individuals, 400 little Mubaraks — most of whom benefited in some way from the multi-trillion-dollar taxpayer bailout of 2008 — now have more cash, stock and property than the assets of 155 million Americans combined.” When Moore made his outrageous assertion these richest Americans (from the Forbes 400) have more wealth than half of all Americans combined, his claim was fact checked. It was found to be … true.

Impacts of a declining middle class

When I was growing up in the mid-1960s, my father was the sole proprietor of a small plumbing and heating business. Even though my mother was a stay-at-home mom, we enjoyed a nice single-family home in a good neighborhood, two cars, the best health insurance and enough to eat. Gasoline was comparatively cheap, utilities were regulated, the typical savings account earned 5.25% and the most expensive home in the neighborhood was worth $50,000. Physicians made house calls and we shopped at local merchants.

We had two hard-wired telephones from Ma Bell and watched free, over-the-air color television. Cell phones and the Internet had not been invented yet and cable television had not yet reached our neighborhood. Education was much less expensive and also not so much the prerequisite it is today to find meaningful employment.

Compare and contrast that to today’s family situation. Two earners are almost essential to make ends meet, health insurance costs have skyrocketed, gasoline is approaching $4-a-gallon, savings accounts earn around a single percent and cell telephone, Internet and cable television bills often amount to hundreds of dollars a month. The break-up and deregulation of utilities seemed to have enriched stockholders and broken ratepayers.

Worse, most of those who bought a home in the years just before the Great Recession found prices artificially inflated by Wall Street speculators. Many of these are now unfairly accused of buying houses they couldn’t afford or using them as ATMs. However, the vast majority were afraid of being edged out by even higher prices, or simply wanted to provide for their families. As homeowners, though, they were good for the economy — buying repair services, furnishings and improvements.

To offset these higher costs and diminishing incomes, the middle class turned to the Internet and discount retailers for bargains. They weren’t so much being disloyal to local businesses as they were instead feeling squeezed. Small businesses disappeared and large box stores came on the scene. A bad cycle was set in motion. Big retailers needed cheaper wholesale prices and manufacturers sent jobs offshore to meet the cost criterion. Mom and pop businesses closed because they either could not compete or were not large enough to market to the Wal-Marts, JP Morgan Chase-sized banks or other conglomerates. Then layoffs began and so on.

Those Americans still working are price-conscious and time starved. Children who once played in the backyard under the watchful eye of a parent are now shipped off to extracurricular activities. Even “doggie day care” services have exploded. Adults are out working overtime — many without required overtime pay since they are neither protected by unions nor regulators. Each day these folks fail to achieve riches, they become more jealous of those they think are holding them back

Success selling to wannabees

There. You have all of the criteria needed to market to the middle class. Provide low-cost goods and services and time-saving convenience. Make customers feel special and of greater value than their indigent neighbors. Goods must seem fancy and services high-brow since, after all, you are marketing to the future (wannabee) super rich.

Sure, this means even thinner margins for you, squeezing ever-distant vendors for greater discounts, paying employees less and making them work more. Even then, despite your aspirations, you most likely won’t be joining those 400 richest Americans at black tie galas. Of course, there’s Social Security later. Then again, maybe not.

Or, is there a better way?

Submit your comments to creative@cocoboston.com.

Tim Coco is president and chief executive officer of COCO+CO., Inc.

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