As Middle Class Shrinks, P&G Marketing Aims High and Low – WSJ.com


As Middle Class Shrinks, P&G Marketing Aims High and Low – WSJ.com.

This is a story recently run in the Wall Street Journal. At first, I almost dismissed it. But the first four words were so compelling to me, “As middle class shrinks…” Born in the mid 60’s the concept that the middle class would be shrinking is just something that that is so alien to me and my cohort. Reading the article, I was even more shocked to learn the income disparity in this country is as wide as the Phillipines and Mexico. Read up on the Gini Index. It is a measure of income disparities within countries. Citigroup has given this phenomena a name, the “Consumer Hourglass Theory.”

P&G has been monitoring this Gini Index and reconciling the data to their internal trends. The middle class is indeed shrinking. P&G has adjusted their marketing strategy toward these trends. And it is safe to say the trends will be in place for a while to come. When comparing the returns in stock prices for Dollar General and WalMart over the last two years, you will see the stock returns from DG outpace the stock returns from WMT by more than a 6 to 1 ratio. The other evening I saw a retailer running an ad touting their lay-a-way plan. When was the last time anyone bragged about a lay-a-way plan?

What do these trends indicate will be emerging trends business managers need to watch. Businesses whose strategy depends on the middle class consumer (defined as those consumers in households with annual incomes between $50,000 and $140,000) should reconsider their business level strategy.

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