Marketers Are Failing to Personalize to Lower Income Consumers

Lower earners have untapped spending potential, new study contends

Covid-19 is subverting conventional expectations about low-income consumers. Getty Images

Less than one fifth of consumers making less than $31,000 per year felt that the marketing they see from brands is personalized to them, compared to around half of people in top income brackets of $188,000 or more.

That was the finding of a new survey from marketing personalization platform, which asked some 2,000 U.S. consumers about brand loyalty and the quality of tailored marketing they receive. While lower income consumers have less disposable income, the report contends that they still spend an average of 40% of their budget on what economists consider luxury products and services.

“Brands that write off this audience are missing a huge opportunity for engagement and loyalty,” according to the report.

The report noted an upward trend among income brackets in terms of whether or not they saw marketing touch points “extremely frequently” reflected messages personalized them. Perhaps as a result, a similar portion of each bracket said they were more likely to buy from brands that used more personalization tactics.

Formation co-founder and CEO Christian Selchau-Hansen said the best way for marketers to remedy this blind spot is to remove financial demographics from the equation completely. “By using 1:1 personalization at scale, brands can have robust loyalty programs that boost engagement by showing the most relevant offers and promotions on an individual level, straying away from standard segmentation efforts,” he said.

Selchau-Hansen also cautioned that many of the assumptions brands tend to make about lower-income shoppers are being subverted due to the effects of the quarantine on consumer behavior.

“It’s intuitive to assume that lower-income renters may visit a hardware store less often than high-income homeowners. But given quarantine lockdowns, this assumption is flipped upside down as home improvement projects increase—especially among apartment renters, who are seeking comfort with more time spent inside a smaller space,” Selchau-Hansen said. “Ditching segmentation and adopting hyper-personalization is the best way for retailers to cater to customers of all financial demographics, because their needs will be met on an individual level.”

Among other overlooked audiences outlined in the report were baby boomers and less frequent online shoppers. While younger generations reported seeing personalized marketing messages about a quarter of the time, that rate was 14% for baby boomers, despite being the biggest spenders of any age group. The report authors attribute the blind spot to gaps in digital adoption, but they say that difference may have shrunk as quarantine has forced more homebound older consumers to adopt new technology.

While frequent shoppers report feeling well-served by personalization tactics like loyalty programs and email marketing, the report outlines an opportunity for ecommerce companies to reach customers who aren’t as active with specifically tailored rewards, noting that the number of shoppers who report buying online once a year (9%) outstrips those who shop once a day (7%). The biggest segment reports shopping online around once a month.

“Even though a customer might only buy your product a couple of times a year, you can retain their engagement with content relevant to their lifestyle throughout the year, ensuring you’re top of mind the next time they buy,” the report noted.

Like all of the trends at play here, however, those numbers are subject to change as the Covid-19 pandemic drives more people to online shop more frequently. Selchau-Hansen notes that the company began conducting the survey just as the United States began locking down earlier this year, scrambling consumer trends and online behavior.

@patrickkulp Patrick Kulp is an emerging tech reporter at Adweek.