In a previous page, Socio-Economic Level in Latin America, we provided a pan-regional definition of socio-economic level and we pointed out that socio-economic level is an important consideration for marketing applications because of the significant differences in spending power among different socio-economic levels. For many luxury consumer goods, the target audience is likely to be only from the upper socio-economic strata. However, some consumer goods cut across the socio-economic spectrum and permeates everywhere. In this page, we will demonstrate one graphical method of documenting how product usage differs by socio-economic level, if at all.
This method depends on the the fact that socio-economic classes are calculated from socio-economic scores based upon products, services and statuses for the consumer households. From these scores, we can classify households into deciles (top 10%, 10%-20%, 20%-30%, etc). Now, if a product is used uniformly across all socio-economic levels, then we would expect the top 10% to account for 10% of the volume, the top 20% to account for 20%, etc. In this case, if we plot the product volume by cumulative socio-economic deciles, we would see a 45-degree straight line.
If a product is used more frequently by the upper-socioeconomic groups, then we would expect the plot of product volume by cumulative socio-economic deciles to show a rapidly decelerating curve that begins high above the 45 degree straight line.
In the following plot, we showed these curves for five product categories:
Camcorder / video camera recorders (number purchased in the last 12 months)
Athletic shoes (number of pairs purchased in the last 12 months)
Beers (number consumed in the last 7 days)
Cigarettes (number of packs consumed in the last 7 days)
Soft Drinks (number consumed in the last 7 days)
Toothpaste (number of times used in the last 7 days)
(Source: Los Medios y Mercados de Latinoamérica, 1997)
From this plot, we observe the camcorders are obviously an upscale item, with 56% of the volume accounted by the top 10% and 87% accounted by the top 30% of the population. while the bottom 40% contribute nothing. Athletic shoes are slightly upscale. The other product categories are very much common consumer items whose consumption is not related to socio-economic level.
We should point out that just because a product category appears to be unrelated to socio-economic level, we cannot infer the same to be true for all brands within the category. For example, import beer may be luxury items.
(posted by Roland Soong on 10/25/98)
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