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CUSTOMERS WITH NO MONEY

June 14, 2012

I participated yesterday in a webinar about the state of the travel industry. The news for my travel clients wasn’t good. Basically, people don’t plan to take more vacations in 2012 vs. 2011. The travel market is stalled.

Then this morning I read a story by Kevin G. Hall of McClatchy Newspapers about the “Survey of Consumer Finances,” which is conducted every three years by the government. The 2007 to 2010 study clearly shows why many local businesses are not growing. It’s really tough finding customers, no matter the age, that can afford to buy your product or service.

The Fed survey found that the median value of family income, when adjusted for inflation and before taxes, fell by 7.7 percent from 2007 to 2010. They also found that median net worth fell 38.9 percent — from $126,400 in 2007 to $77,300 in 2010. That essentially took net worth back to levels recorded in 1992, and reflects the steep erosion of housing wealth. Housing wealth (using home equity to buy things) was the driving force of consumer spending for decades! That’s gone. Now, you must rely on family income for consumer spending. More bad news; the average income, or mean income, for U.S. families has fallen 11.1 percent.

Enough with statistics. For most businesses, finding people who want your product/service is easy. Finding ones that can afford it is the real marketing challenge. Oh, it’s getting better, but even before the 2008 Great Recession, we were watching family incomes grow very slowly or outright decline, according to Ken Goldstein, an economist with the New York-based Conference Board, which publishes a closely followed survey of consumer confidence. The gap between the wealthy and the middle class is growing, not declining, and that is the ultimate marketing challenge. As Goldstein concludes: “Here we are in 2012, not only are we not closing that income gap”… we’re probably a good two or three years from beginning to close that gap.”

 

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