Using Consumer Spending Data to Target Your Audience
More than one-quarter of American consumers have little or no credit. Experian research finds that 40.4% of adults who have a household income of $100,000 or higher have less than $20,000 to spend a year on discretionary goods and services.
What does this mean for marketers who rely on data to identify those consumers who have not only the willingness, but also the ability to spend on goods and services?
It simply means that marketers should leverage the vast pool of data and analytical tools available today to help identify and effectively target consumer segments that are spending on nonessential purchases—and reach them early with messages that resonate with them.
Some economic trends today to consider:
Consumer confidence is falling, and economic uncertainty remains.
While consumer spending, which accounts for roughly 70% of our economy, looked strong for the fourth quarter of 2010, predictions for the rest of the year have a downbeat tone. The latest data from the Experian Consumer Expectation Index shows that while consumer spending remained steady in January and February of this year, confidence continued to fall in March 2011.
As consumers age, they are becoming more pessimistic about the health of the economy. According to an analysis of the Experian Consumer Expectation Index, there is a near-perfect negative correlation between age and economic pessimism.
Deal hunting reigns across all income segments, no matter what the state of our economy.
Today’s consumer will likely engage in online deal hunting regardless of economic conditions. Lower income segments, however, become more active in finding online deals as confidence in the economy decreases, exhibiting behaviors that reinforce the theory of affordable luxury.
Here are key points to consider if you’re looking to use discretionary spending predictors to target your audience:
1. Don’t let price-cutting be the solitary solution in reaction to economic decline. The reaction to the recession over the past three years—when marketers slashed prices across the board in a race to attract cautious consumers—needs to be replaced with a more rational pricing approach that is tailored to their target consumer.
2. Consider using age as a segmentation factor for pricing. When marketing to consumers between the ages of 18 and 49, deep price discounts are less important than when marketing to consumers over the age of 50. Focusing on price when marketing to 18- to 24-year-olds will most likely result in leaving money on the table. Remember, however, age is just one of the many factors to consider.
3. Ensure that the financial inputs to your data models are current. Confirm discretionary spending predictors are recalibrated throughout the year to take into account econometric changes that are often regionally based.
4. If you don’t have household spending data, go out and get it! Make sure you know the total dollar amount each household is projected to spend on discretionary products and services in order to best target the appropriate product or service offer.
5. Know what your audience is buying. We all know this is easier said than done, but, insight on consumer spending is very important to your business. Work to understand what other discretionary spending categories your target consumer might be interested in; these categories are your competition, as other marketers are also fighting for a portion of consumers’ discretionary dollars.
Erin Geoghegan is a marketing manager at Experian Marketing Services.
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