Lower-income consumers snap up big brands

People who say they are price-conscious are, in fact, sticking to big-name brands and shunning discounts, according to new research seen by Marketing Week.

kelloggs
Crunch time: consumers buy premium brands if they can find value

People who say they are price-conscious are, in fact, sticking to big-name brands and shunning discounts, according to new research seen by Marketing Week.

You might think that how much someone earns might correlate with their attitude to how much they are willing to pay for goods – but new research shows that those with low household incomes are actually less likely to shop around or be driven by cheaper prices.

In fact, those with a claimed family income of £14,000 consciously prefer premium, branded goods and services.

The research, from Kantar Media TGI, looks at why people choose particular brands and how this correlates to ‘economic capital’ – household income, savings and property ownership – and ‘cultural capital’ – how educated or knowledgeable someone is. Even though these factors may not have a conscious bearing on someone’s decisions, they influence what they do, the study finds.

Anne Benoist, a director at Kantar Media, says those with higher cultural capital are better at bargain hunting and are more price-driven than those with lower cultural capital.

“It is a sociological concept where if you have a degree, you have a high cultural capital. That is what is driving purchase behaviour and price-orientation. It goes against the classic economic belief that if you don’t have a lot of money, you are going to be price-orientated.”

Many people with lower incomes select price as a conscious factor of choice and claim it is the most important criterion affecting their buying decisions across all categories. In the food category, 18 per cent say price is the deciding factor when purchasing. In electronics it is 16 per cent and for toiletries and cosmetics 14 per cent. Yet when asked what they actually buy, consumers with lower incomes prefer more premium branded goods. They over-index on their preference for buying Bird’s Eye foods, Irn Bru and McCain, for example. Brands such as Kellogg’s do well, with 22 per cent saying they buy the brand most often, as well as Coca-Cola (35 per cent) and Ben & Jerry’s (16 per cent).

Benoist says: “Something quite fundamental is happening here. What really drives price-orientation is not so much the money or lack of it, but your cultural capital.”

She suggests the cultural aspect also relates to asserting social position. Buying premium brands enables consumers in this group to assert their social position when other means – such as surroundings, incomeand education – are inaccessible to them.

poundland
Savvy shopping: Poundland’s customers seek out the best prices

Instead of buying cheaper goods, lower income groups shop at a retailer they perceive to be cheaper, such as Asda or Iceland, without using coupons or trying to find deals. So, 39 per cent say Asda is the place where they do their main supermarket shop, followed by Iceland with 19 per cent.

But Nick Canning, director for people and customers at Iceland, doesn’t agree that social status drives lower-income shoppers’ choices.

“Customers select across categories in terms of what they need or don’t need and will buy up and down across the different ‘architectures’ retailers offer, from value packs all the way to top tier. They seek out value and when they know they have found it – value being a combination of price and quality – they will buy.

“They are quite happy buying value products – I don’t think there is any social status to it.”

Canning claims Iceland offers value for money and that because the prices remain constant, it makes for an easy shop.

But Jo Ruddock, head of consumer and market insight at Kellogg’s, says branded goods may also be bought by lower income families because of status. “This is a hugely complex area with a large number of factors at play but I think there is an element of ‘what a brand says about us’ that determines brand choices.

“This will apply more in some categories than others – for example, those more ‘public’ categories, where brand choices are more likely to be seen by others. Those with budget challenges often shop in a very savvy way to be able to choose branded options in those categories that matter most to them.”

This view resonates with low-income consumers as they often go with the simple option and can be unquestioning in how they shop, according to the research. As Benoist says: “It’s the idea of shopping strategy: these consumers are more likely to claim they live on a budget, they find a supermarket that is known to be a bit cheaper and buy their usual products and brands in that store.

“They tend not to be so cynical about brands. They do believe there is a difference between brands and retailer own label, whereas it would be the opposite in the higher capital [earning] group. The latter are more likely to say supermarket brands are made by the same manufacturer, so why pay more for the brand.”

David Coxon, trading director at Poundland, agrees that brands provide people of all incomes with social status. He says: “Brands work hard to build an emotional connection with their audience and, in return, customers love and trust these brands.”

Coxon claims that Poundland’s customers

are savvy shoppers – they know how to shop around for the best price and incorporate the store into the shops they go to because they know they can make savings while buying the top brands.

Another aspect driving these brand decisions is the alignment with ‘codes’ that are given off by higher-end brands. The research shows that some lower income groups are attracted to brands such as Lacoste, D&G and Calvin Klein because they reflect an inverted picture of their values. Where these consumers are faced with the harsh reality of not having much spare cash, they like brands whose codes revolve around dreams, determination, glamour and sensuality.

Benoist says: “They go for glamorous brands because they are in modest environments. The brand fills something in their life that they wouldn’t otherwise have access to.”

She adds: “These brands correspond very well to the subconscious values of the low income groups. A brand like Calvin Klein, for example, has a lot of sensuality in its communication codes – a trait that low income groups are more likely than average to find appealing.”

Upmarket brands that want to exclusively target higher-end consumers should watch the codes they give off in their communication because those related to glamour, or dominance, appeal more to people with less disposable income, suggests Benoist.

Taking into account the psychological and sociological aspects of shopper behaviour, Benoist claims lower income consumers “want to fit in – they want something universal and they would feel inadequate with a brand that looks too different from the rest of the population”.

So is this good news for marketers? Having mass appeal is no bad thing for a brand such as Coca-Cola, but higher-end companies might need to target a more select group.

The Frontline

We ask marketers on the frontline whether our ‘trends’ research matches their experience on the ground

rice krispies

Jo Ruddock
Head of consumer and market insight
Kellogg’s

Kellogg’s has a really strong heritage and people remember the brand fondly from their own childhood – we all grew up with it. This brings trust and reassurance, which are especially important attributes in today’s economic environment.

Those who have to manage their budget carefully don’t want to take risks with their food purchases. They want to minimise waste and so quality is very important. By choosing Kellogg’s, they know there is something to suit everyone in the family, they know it will get eaten and they know exactly what to expect.

Kellogg’s is a down-to-earth, inclusive and optimistic brand that believes that a better breakfast leads to a better day. Our product range offers something for everyone, all underpinned by its heritage.

As well as quality and trust, the heritage and nostalgia associated with the brand are also important because of the comfort and reassurance they bring.

nick canning

Nick Canning
Director for people and customers
Iceland

The lower-income consumer group is more disposed to shop at Iceland because of the overall proposition we offer, which is clarity.

We have far fewer promotions than other retailers and we have a round number price policy, which allows people to shop and budget very easily.

poundland

When you put that all together in a smaller shop – we tend to be on the high street, near to where our customers live and work – it all adds up to a place they can get to easily and know what the price is going to be. The price is not going to change week on week – there is no yo-yo of promotions going on – and they won’t have to spend on fuel going in and out of town.

If you look across the spectrum, not just at food, these consumers are driven by brands that they can get across fashion, electrical and any number of categories, and it’s normal that this follows into food. In tough times, people buy what they can trust. They would rather buy something they know the quality and the taste of, as opposed to something they are not 100 per cent sure about.

richard

Richard Murfitt
Head of brand marketing Just-Eat.co.uk

There are two things going on here: one is around social status. Those brands that differentiate will be successful, particularity with young people, because they are at a place in their lives where they want to assert their individuality and social status. That has more worth than the value of the brand. They want to keep the value aspect to themselves.

There are brands with a strong personality and positioning that might have a value offering at the same time, but there’s a lot more to those brands than that price proposition.
Second, there are also brands that appeal to either end of the spectrum. If you take mobile phone operators, you can have a businessperson spending £200 a month on the latest phone, and at the other end you can have a value proposition with a £5 contract.

Brands also have their own sub-brands. For example, Waitrose has some brands with a value proposition, such as the Essential range. This will appeal to people who want value but at the same time want to buy from a particular brand.

During the recession, a lot of brands realised their value proposition wasn’t strong enough and they have had to deal with the fact that people are starting to trade down. There are brands such as Lidl and Aldi that do well in this area but brand loyalty, ironically, strengthened during the recession because of value proposition. People stick to the brand they know when the value is good.

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