Why money matters.
Many marketers segment consumers using demographics, such as age and gender. Often, they also include variables such as income or wealth. The logic here is obvious – if you’re selling a product or service, your customers need the money to buy it. Psychologically though, there are many other reasons to consider the wealth of an audience.
Wealth can affect the way people think. Or at least, relative wealth can affect people psychologically. James Dusenberry’s (1949) ‘relative income hypothesis’ for example suggested that people compare their income to others, rather than objectively assessing their own spending power. Even people that we might describe as wealthy, might feel poor in comparison to a billionaire for example.
The psychological effect of money is perhaps seen most clearly though among those people with the least money – even within a relatively wealthy nation. Low socioeconomic status for example has been shown to drive purchase behaviour as people spend money to ‘compensate’ for their perceived differences (Rauber et al., 2024).
The effect of wealth and social hierarchy is a topic that Associate Professor Paul Piff’s lab has explored in detail. Among the findings of the lab, wealth seems to reduce compassion and empathy, people with lower incomes socialise more, and wealthy people give proportionately less to charity.
Importantly though, wealth is not the same as class. For me, class is a far more subjective understanding of relative status. I still tend to refer to the definitions of class that I learned in A-level sociology i.e. an understanding of class based on a person’s job. Working class usually have jobs involving manual tasks, the middle classes are managerial, and the upper classes own the companies that others work for. A wealthy builder may still consider themselves to be working class.
So, when you consider how to segment your audience, using income or wealth as one of your criteria, don’t just think about spending power. Think too about how money affects the way people think and behave i.e. their psychology.
Photo by Avinash Kumar on Unsplash
Duesenberry, James S. (1949). Income, saving and the theory of consumer behavior. Cambridge: Harvard University Press.
Rauber, G. N., Barros, L. S. G., Zambaldi, F., & Perin, M. G. (2024). When life throws curveballs: Unpacking consumers’ compensatory strategies. Psychology & Marketing, 41(10), 2525-2536.
