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The crisis of the middle class and how consumption and corporate strategy are changing

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The crisis of the middle class and how consumption and corporate strategy are changing

One of the central elements in brand strategy during the 20th century has been the middle class. Perhaps at the beginning of the 20th century its importance was relative and its weight in consumption was also relative, but as the decades progressed it became a crucial element. So crucial, in fact, that the positioning strategy of the second half of the 20th century had them in their sights and made them the primary consumer. The US market was possibly the one that first started with this idea of ​​selling to the middle classes and the one that established that ‘middle class dream’, but the issue became global and general. In fact, the great marker of development was the growth of the middle classes.

But is the middle class in crisis? And what does this mean for the strategy of the brands and for their ideas of sales and positioning? The crisis of the middle class has become the dominant element in the discourse since the emergence of the 21st century. It is not a reality marked by the turn of the century but rather by the economic crisis that has  united arab emirates phone call  accompanied it. If the crash of 29 had already had an impact on the society of the time (and served to understand many of the political and social elements that followed), the great recession of a few years ago hit, touched and for many sank the middle class.

Consumers are not fully aware of the state of affairs. A study from a few months ago by Pew pointed out that 70% of Americans were in the middle class, although economic data indicated that only 50% were. The middle class was in crisis , causing the economic situation and therefore consumption patterns to change.

The data of the crisis of the middle class
The studies do not stop also giving indicators that show this situation. A study by the Organization for Economic Cooperation and Development (OECD) pointed out that in the last three decades the middle class had seen its standard of living either stagnate or fall (while that of the upper classes improved in the same period). According to the study’s findings, middle-class households are “increasingly distressed by their economic situation,” which makes them increasingly see their environment as “unfair.” The elements that defined the consumption patterns and lifestyles of the middle class are increasingly expensive, although their income is not. Housing is one of the gauges that the OECD used to demonstrate this point.

“Many middle class households face considerable risk of becoming lower class … this risk has increased over the past two decades in many countries,” the report concluded, noting that the middle class was at risk of became increasingly smaller and fractured, separating the upper and lower middle classes a lot.

In Spain, the middle class is , in fact, smaller than it is in the average of the OECD countries. In Spain, 55% of the population would enter the middle income. In the OECD it is 61%. Things are worse for millennials, where the gap is ten percentage points from the OECD average (worse than for baby boomers or Generation X). If you take into account that housing costs in Spain have skyrocketed (as anyone who lives for rent can point out), things become clearer.

How consumption changes
All of this has social implications, but also consumer implications. “The cost of living and expenses have risen faster than the incomes of the middle class, so many households are having to make efforts to make ends meet, deal with financial vulnerability and reduce their savings,” pointed out in the conclusions of the report. It is not only that things are more expensive, but also the middle class has to be increasingly careful with what they buy and what they consume.

The crisis of the middle class is changing the playing field for brands and the relationship they establish with companies and their products. Consumers no longer buy as they used to, because they can no longer maintain that rate of spending and consumption.

In fact, some of the key changes of the economic crisis have already become recurring characteristics of consumer decisions. It is the case of the low cost. Low cost airlines had grown significantly before the recession, reaching especially younger consumers. The crisis, however, made the low cost reach many more markets and popularize its presence in many more areas.

The examples of Lidl or Primark in the food or fashion markets are clear examples of how things have changed. Not only has the way people shop in these spaces changed, but also the vision of these brands and their values. Lidl stopped being a supermarket with a certain Soviet air and undesirable to be a kind of space full of secret brands of very good quality at low prices, which in the end you recommend to others.

What the fast food giants show
All this means that brands and companies have to reinvent their offer and their prices, especially those that had their large consumers in the middle class. Fast food chains are one of the great examples, launching great deals and changing their pricing  united arab emirates phone call  structure to try and connect with the market. The American case is where this process is clearest, but it can help to understand how things are changing in general.

As explained by the CEO of Yum Brands (owners of Taco Bell, KFC or Pizza Hut), Greg Creed, and as collected by Business Insider , the US economy is forking. That is, while some are doing very well, others are doing poorly. Fast food companies have to adjust their offer, they explain in the US media, to survive the crisis (and debacle) of the middle classes, which are in the bag of those who do things badly.

More and more people do not have money to spend on things that are not necessary, which forces to reinvent the offer. It is what makes chains in recent years have launched very low prices or great offers. Taco Bell has products for one dollar and KFC is bidding like two products for six dollars. McDonald’s is also playing two for $ 5. They have eliminated the one dollar stuff, true, but they are trying to get consumers to pay more without leaving the offer.

The fast food giants have to raise prices, because their costs go up, but at the same time they have to stay at low prices and in attractive offers to be able to continue connecting with their consumers, that middle class in crisis that is not going to pay much more for their products. This leads to them having to increase in value when prices rise … but also not being able to raise them too much.

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