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Over-indexing by black consumers is missed learning opportunity for
marketers By Ken Smikle
Target Market News
(April 21, 2010) One of the under-reported and consist patterns in the
spending habits of African-American consumers has been in how they've
outspent their white counterparts in key categories.
For the last 15 years, Target Market News has been reporting on the
expenditures of African-American consumers in the annual report, The Buying
Power of Black America. In the report's 100-Plus Index section,
we have highlighted all the categories which black households
over-indexed, or outspent white households. Over the years, some
revealing and undeniable patterns have been seen.
There are a number of items, for example, in food and apparel products
in which black households have always spent more per capita than whites.
This fact comes from data collected in the annual Consumer Expenditure
Survey conducted by the Department of Commerce, and is the source of
data reported in the Buying Power report. The CES is celebrating
its 30th anniversary this year, and the so-called "over-indexing" by
black consumers in the food and apparel categories has been true for the
past three decades that the survey has been taken. Some of the other
items that always shown over-indexing include:
- Personal Care Products and Services
- Men's and Boys' Footwear
- Telephone Products and Services
- Computer Internet Service
- Home Repair Equipment and Services
The concept of over-indexing by African-Americans, however, has been
misleading, and has distracted marketers, advertisers and others from
seeing a unique opportunity in the American marketplace. Consumer
expenditure indices have always compared what black households spent
against the spending of white households or the general population.
Thus, when the CES shows blacks have an index of 124 on purchases of
men's suits, it means African-Americans spent 24 percent more for that
item than whites did.
A curious marketer or manufacturer might wonder, "Why do blacks spend
more for men's suits than whites?" A better question would be, "Why do
whites spend so much less than blacks?" And why does this happen year
after year? Research would likely show a very different perception
between the two races about clothing purchases in general.
For African-Americans clothes are not simply a necessity, but an
investment in changing how the world is predisposed to see you. Racial
stereotypes, self esteem and being a trendsetter all factor into apparel
purchasing decisions for African-Americans. This should cause marketers
to re-examine the psychographics of all of their customers. It will
likely yield better insights and ideas into the role of cultural, racial
and generational differences in consumer behavior and today's
Asking questions about why blacks outspend whites can be especially
important during a down economy. Conventional wisdom holds that price
generally trumps other product benefits with today's consumer.
African-Americans, who as a group, historically have had less income
than whites, are none the less spending more for the things that have
always been priorities in their homes and lifestyle. Understanding why
these products are important to them may provide a competitive advantage
when price is a sensitive issue for everyone.
Annual Edition 'Buying Power of Black America' report
breaks down billions in expenditures Black
consumers are responding to tighter economic condition by focusing more
of their spending on items and services that improve their homes and
lifestyle. That's one of the trends revealed in the 15th annual report,
"The Buying Power of Black America," published by Target Market News.
The report analyzes spending for black households in 2008 and finds that