“Let me tell you about the very rich. They are different from you and me.” – F. Scott Fitzgerald (1926)
People in the western world have never been richer. We have more money, live longer lives and have more free time than ever before. With this increased wealth, people have more resources to spend on goods and services, which is worth considering in any international marketing strategy. This article will look at how financial affluence affects spending, why you should consider wealth perception to develop marketing insights and how this can vary on the international stage.
Income elasticity of demand (YED) is a term used to describe the responsiveness of demand in relation to change of income. Broadly speaking, there are three different types of goods that will be affected by income change, which are shown in the table below.
So, according to YED, organisations that produce and sell normal and luxury goods are most likely to profit from people who are wealthier and should focus on markets that have higher income per capita.
However, while financial affluence is a key driving factor that affects YED, a number of other factors will affect whether consumers are likely to buy a certain type of product. A vital element in this equation is wealth perception, i.e. how wealthy people actually think they are.
While affluence and wealth perception often come hand in hand, many other factors influence how wealthy people perceive themselves to be. This can, for example, be how they obtained their wealth in the first place, ‘safety nets’ such as welfare or even the wealth of people around them. This will likely distort the boundaries of what is considered wealthy, which in turn might affect the extent to which people buy normal and luxury goods.
If it is indeed the case that wealth perception should be taken into account, the next step is understanding how to apply this to an organisation’s strategy. Unlike financial affluence, there is no national body that can provide you with figures and statistics on how people really feel about their wealth for you to refer to for your international marketing strategy.
However, at fastmap, we recently conducted research in over 20 countries, consisting of over 10,000 participants aged 50 and over. The study contained a number of marketing insights, one of which was formed from asking people how comfortable they felt with their income. From the results illustrated in the graph below, you can see that how wealthy people think they are is relatively consistent throughout the countries with the exception of the UK, Spain and Finland.
To put these numbers into context, I have also included how each country ranks for their per capita income within this group. The results show that while more people in the UK believe they are comfortable with their financial position than say, Norway, they rank much lower on actual income. Likewise, only 27% of people from Finland believe they are comfortable with their wealth, yet they rank 7th for per capita income within this group.
Although more research is needed into the subject, this research does indicate that the perception of wealth changes per country, regardless of actual income. This could be a result of many socio- economic and political factors, but what is clear is that looking at per capita income alone when marketing goods is not necessarily sufficient. There is a need to understand perception of wealth, alongside actual income, when creating your international marketing strategy.
This article was written by Tom Burke, Insight Executive, at fastmap. To find out how fastmap can help you with your, international market research, campaign research and more, read our Creative Testing Guide or visit www.fastmap.com. You can also get in touch with David Cole, Managing Director, fastmap on +44 (0) 20 7242 0702 or firstname.lastname@example.org.SIGN UP TO OUR NEWSLETTER FOR MORE INSIGHTS AND INFORMATION