P&G’s Hour Glass Strategy: Shrinking Middle Class

[Coronita]

Imho…interesting read. Basically, P&G is updating their marketing strategy into an hour glass, anticipating there won’t be much of a middle class left… 🙁

http://finance.yahoo.com/blogs/daily-ticker/america-middle-class-shrinks-p-g-adopts-hourglass-145429009.html?sec=topStories&pos=9&asset=&ccode=

As America’s Middle Class Shrinks, P&G Adopts “Hourglass” Strategy

The statistics are grim but bear repeating:

* The top 1% of Americans control nearly a quarter of all the country’s income, the highest share controlled by the top 1% since 1928, according to The Stanford Center for the Study of Poverty and Inequality.
* The U.S. ranks #3 among all the advanced economies in the amount of income inequality.
* In 2007, the top 10% of American earners pulled in 49.7% of total wages, the highest since 1917.
* The top 5% of Americans by income account for 37% of all consumer outlays, according to Citigroup.
* On Tuesday, the Census Bureau reported the U.S. poverty rate rose to 15.1% in 2010, up from 14.3% in 2009 and its highest level since 1993. In addition, real median household income fell 2.3% last year to $49,445.

I could go on, but you get the picture and sometimes statistics can’t tell the whole story. This week brought a different kind of evidence that brings home (literally and figuratively) the trend of America becoming a two-class society. Among other companies, Procter & Gamble is adopting an “hourglass” marketing strategy, with products aimed at high- and low-end consumers, but not much in the middle.

In a marked shift from P&G’s historic focus on middle-class households, “the world’s largest maker of consumer products is now betting that the squeeze on middle America will be long lasting,” The WSJ reports.

This is no small matter or a minor change by a second-tier firm: P&G has at least one product in 98% of U.S. households, The WSJ reports. U.S. sales totaled about $30.5 billion in its latest fiscal year, about 37% of its total, while accounting for 60% of the firm’s $11.8 billion profits.

The company is engaging in what The WSJ calls a “fundamental change” in how it markets products in the U.S. “We’re going to do this both by tiering up in terms of value as well as tiering down our portfolio down,” CEO Robert McDonald says.

As noted above, P&G isn’t the only company coming to the same conclusion: Heinz is following a similar strategy to P&G while Saks is focusing its attention more on high-end consumer vs. ‘aspirational’ shoppers.

[NotCranky]

Very interesting post,Flu.

[Fearful]

One point from the article: There is a measure of the “hourglassness” or income inequality cited in the article. The U.S. is quoted as having reached banana republic or third world levels of income inequality. Sad.

[The-Shoveler]

hmmm well I can tell you I know a lot of people making well over 100K who shop at 99 Cent only stores,

Cheap cheap cheap.

[The-Shoveler]

I bet if they open a 99 cent store in CV it would be the busiest store in CV.

[blahblahblah]

[quote=Nor-LA-SD-GUY2]hmmm well I can tell you I know a lot of people making well over 100K who shop at 99 Cent only stores,

Cheap cheap cheap.[/quote]

$100K is the new $50K.

$200K is the new $100K.

[Huckleberry]

Agreed. Obama (and cronies) are setting the new “higher taxation threshold” at $200K for single filers, meaning if you make less than that you are considered middle to low income.

At $200K ($250K married) and above you can consider yourself as just squeezing into the lowest tier of the high income group.

[The-Shoveler]

I should open a 99 cent store in la jolla,

I bet it would be packed.

Still 100K is above the 25% mark.

[NotCranky]

“Upper lower class” has a nice ring to it. The upper lower class market; .99 cent stores that don’t yet accept EBT.

[bearishgurl]

[quote=Huckleberry]Agreed. Obama (and cronies) are setting the new “higher taxation threshold” at $200K for single filers, meaning if you make less than that you are considered middle to low income.

At $200K ($250K married) and above you can consider yourself as just squeezing into the lowest tier of the high income group.[/quote]

As it should be. I’ve always considered these figures to be about right (as to identifying lower MC/MC/upper MC).

The reasons we’ve seen so many HH’s with $100K – $200K annual income in recent years live like they’re making $300K to $500K yr is due to loose credit and living off “manufactured home equity” that has since dissipated into thin air (a byproduct of “loose credit”).

If the $100K – $200K HH income group are deriving all their income from W-2 wages and are supporting 2+ children, they’re likely just eeking by in SD County, often due to the housing choices they made. In less-expensive housing markets of the country, most of these families are actually able to save for college and retirement.

[briansd1]

The term middle-class has an interesting history.

In England, where it began during the industrial revolution, middle-class has a different meaning. Over there, the middle-class is more like the merchant class.

In emerging countries, middle class means people with education and access to global goods.

P&G has a lot of experience in the developing world. They can apply their experience to America. Go to Cincinnati now and you’ll see P&G executives and managers from around the world. P&G is no longer an America centric company.

The American middle-class as it exists in the Heartland is withering away in great part because of policies they themselves voted for.

[CAwireman]

In other countries, the hourglass economic demographic has been in place for a long, long time. Basically the rich/powerful class including those who serve them consitute the Upper classes.

Then, a non-existent MC. Then, lower classs.

As China and India begin to develop an MC, the US is giving theirs up.

I have heard talk that some upper class folks want the middle class gone, stating that the middle class is just a pain in the ass.

Overall, my thought is that regardless of what the UC has done, the MC itself has a lot to answer for. We all buy Japanese, or otherwise foriegn cars, we buy Chinese or foriegn-made furniture, we don’t dig too deeply into where our appliances are manufactured, and so on. We hire illegals to keep our lawns or remodel our homes. All that helps to cut out part of the very class most of us here are part of. And yet we do nothing to correct it.

[joec]

I think the hourglass has more to do with how we spend. People will still spend a lot on things they really like or hobbies and be cheap in other areas they don’t care about.

People in CV spend for stuff they don’t care about at 99 cent stores, but will still buy nice Lexuses, send their kids to private schools, property investments, fine dining, trips, etc…on the high end.

Like I use cheap 1 dollar shampoo and wear mostly cheap/free shirts. A $10 haircut is $10 too much. But I don’t mind spending on a lux car or nice tech toys…

[flyer]

Another stat to support this strategy reveals that less than 5% of US households have “investable assets” (obviously excluding real estate) of $1M+. It really amazes me that this percentage is so low.

[The-Shoveler]

The Automation economy, I coined it first I think, anyway it does not matter.
This will be the main cause, not offshoring in the future, Robots don’t have citizenship.

Robotic Labor Taking Over the World? You Bet – Here Are the Details

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