Today, data is becoming more and more influential. Consumer analytics is one of the most powerful enablers companies have to provide useful insights about their clients. One of the keys to creating and maintaining a successful company is understanding consumer markets at a granular level. When a business is able to understand consumer groups, they are able to identify opportunities to create more robust strategies for expansion.
Consumer analytics empower business strategy by enabling you to segment consumers and target specific income groups. It also allows an organisation to analyse the wealth of spending patterns, spot population niches and identify similar demographic territories.
This article highlights some of the key models used to build detailed consumer profiles and how organisations can use this information to formulate more robust business strategies and aid contingency planning.
Customise Income and Wealth Bands
Businesses can use the wealth and income distribution model to visualise disposable income, net wealth and joint-income wealth. Income and wealth are both drivers for consumer spending. Analysing income and wealth together provides a complete view of all personal economic resources to finance consumption. While income is one of the easiest ways to meet one’s needs and wants, accumulated wealth influences consumer purchasing decisions and allows sustained consumption over time.
Once an organisation has performed joint income and wealth analysis, they will be able to answer critical business questions such as what income and wealth segment is expected to grow the most? Should we follow a premium or mass-market strategy? How many indebted adults have sufficient income to serve their loans?
Understand Spending Patterns
Spending on consumer goods and services varies across household income levels, countries, time and how macroeconomic events impact household expenditure. This type of analysis is beneficial for companies and institutions in different spheres. Government bodies and academics can support poverty analysis by evaluating the share of budget spent on food or assessing the impact of inflation. While financial institutions can evaluate spending on necessities by income to understand their ability to obtain a loan.
A consumer goods company can use the consumer spending by income model to evaluate the size of their target groups and decide on product positioning strategies for different income segments. For example, the middle class in Romania is expected to rise by more than 1.0 million households over the next five years. This indicates the need to follow a mass rather than premium strategy in this country.
Project Future Demographic Shifts
Using the future demographic model, a business can spot demographic niches around the world and identify similar territories based on population patterns. For instance, a business interested in expanding into India can identify the Indian population aged 65 and over is projected to rise. It is important for the business to consider the strains of the ageing population on social welfare, public healthcare and labour productivity.
Demographic forecasts help answer a wealth of questions a business will want to know before expanding into a new market, income group or developing a new product. Which age segments are growing and declining? Do we need to broaden our consumer base? Which countries offer the biggest potential for age-dependant products?
Business strategies need to move away from generic, one-size fits all approach. Building comprehensive profiles of your consumers enables your business to create a more precise identification of target groups and spending patterns and prepare for demographic shifts. Understanding consumer markets in more detail will maximise existing potential and help discover new opportunities.
To learn more about why consumer analytics form a vital part of business strategy, download our white paper Why Consumer Analytics Matter for Business Strategy.