"It seems like everything got more expensive. And for me, personally, I got the same pay rate that I've had for five, six years. So I'm being paid the same—and the gas prices aren't helping much, either." -- Alfredo, a married father with a son in middle school and a daughter in high school -- Los Angeles County, Calif.
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"We can't really help [our daughters in college.] We just can't afford to. So they've got a lot of student loans that they'll be paying off for a long time." -- Frankie, a married mother with three daughters -- two in college and one more on her way -- Teton County, Montana.
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"I was living paycheck to paycheck with that job and so as much as a 5% [pay cut] sounds, well, "it's just 5%,' it was enough of a significant difference that I was like, "Oh, my God.' So I actually started [working] part time for a radio station so that I could make up for it." -- Liz, an unmarried 26-year-old --Champaign County, Ill.
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Perhaps there's no more fitting signpost for where America is economically headed than dish soap.
Procter & Gamble, a marketer with its finger closely on the pulse of the American public, last year introduced a bargain-priced dish soap under the Gain name. The move was seen as an acknowledgement of the changing profile of the American middle class. Its price was a nod to the strained economy and its branding under a name popular among Hispanics pointed to the growing diversification of what was once the "traditional" middle class.
In short, America's backbone is bending toward the breaking point. In the last decade, consumers overall cut spending 4.2% in 2010 dollars, and the brunt of that was felt by the middle class, which slashed spending between 10% and 13%. Meanwhile, the upper 20% of earners curbed spending only 6%. The blame can't be pinned on the recession, either. In real dollars, median family income is now what it was in 1997.
Meanwhile, Census data show us a much more diverse picture as well: 16.3% of the population is now Hispanic. The number of black/white biracial Americans has doubled in the past decade. The Asian population is the fastest-growing by percentages. The number of African-American households earning more than $100,000 grew 88% in the past decade helping propel African-Americans to a trillion-dollar buying force, according to Nielsen.
Take the trends together—changes in income, shifts in family types, and the remapping of the racial and ethnic make-up of the population—and what emerges is a very different middle class.
This America looks like neither the Cosbys nor the Jeffersons; it does not resemble the Conners or the Bunkers. Perhaps it looks a little like "Modern Family" without the spending power. Today, half of all households have less than $10,000 in annual disposable income, according to Experian Simmons.
While these changes haven't happened overnight, marketers are grappling with how to keep up. Walmart has stopped adding upscale merchandise and put back the bargain bins known as Action Alley. Layaway programs are in full swing at Kmart, Sears, Best Buy and Toys R Us. Hallmark even has greeting cards for the unemployed.
Food marketers are shrinking pack sizes as a means of providing lower prices for consumers with less to spending power. "We're seeing a lot more paycheck-to-paycheck buying and so in those instances you're talking to consumers with limited dollars," said Rick Shea, a food-marketing consultant and former Kraft Foods marketer.
But consumers aren't oblivious to the change. They are watching the price per portion and their food bill. With less for staples like food, the shrinking middle class is thinking more about private-label products, even if they have different thresholds of compromise.
Frankie, in Teton County, will only buy Del Monte corn, not the generic. "There are certain products that I won't skimp on because I just like them better, but not very darn many." Chris in Clark County sticks with General Mills cereal, but thinks store-brand ice cream is just fine.
Through it all, there's hope. Always a hallmark of the middle class, there's this notion that sometime, somehow, things will get better. Through the hardship and the cutbacks, these families and millions like them are still going about their daily lives, driving to their jobs, cooking more at home, being good parents and making sure their kids are provided for -- no matter what their household looks like.
We see this reflected in the families and in the data.
Clearly, people are still spending money and buying products. Just not as many or as often.
Some marketers take this as a cue to refocus on the affluent. Not a bad idea, they still have money. But there are 5% fewer of them than there were before the recession.
In Howard County, one of the most affluent in the U.S., Rosemary, a married mom with a 10-month-old daughter, didn't see many effects of the recession firsthand. Her family's subdivision, in a rural-esque suburb of Baltimore, seems a lot like what middle class used to look like. It just takes a lot more income to get them there.
"In the early 1970s, the median family lived on one paycheck. Today the family in the middle brings home two paychecks. The shift from one income to two has had seismic implications for families across America," said Senate candidate Elizabeth Warren, whose pithy sound bites on middle-class decline have often gone viral online. This may not be one of her better quotes, but it's certainly one more relevant to marketers and planners.
Indeed, the majority of the income growth over the past 35 years has taken place in two-income families. The problem is that there just aren't that many of them anymore. For the first time, married-couple families are not the majority of American households.
Married couples with kids have fallen to just one in five households, and dads are taking a bigger role in household chores and child rearing. Hispanic millennials are changing the conversation -- literally -- by shifting seamlessly between English and Spanish. Populations are leaving the suburbs and clustering in urban cores. Single persons, single parents, and couples who are shacking up for economic reasons -- often with one of them jobless -- are all on the rise.
So what are marketers doing to understand and target this new consumer?
Here's what Ad Age is doing. We are embarking on a yearlong study of the American Consumer, using two tools that segment all of America: ESRI's Tapestry framework and the Patchwork Nation, a project by journalist Dante Chinni, which looked at each of America's 3,141 counties and classified it into different broad segments.
We've mashed up two of them to give us a more complete picture—one that encompasses demographic and economic characteristics but also dives into politics and religion. We're then able to layer in dataset after dataset from other sources to create a data-rich look that maps out (literally) the changes to the American Consumer.
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"When my 18-year-old was growing up ... there was concern about crime, but not to the extent that it is now. So I think I'm more protective of my [4-year-old]. Where we go, who she sees. Who I will let her stay with. Things like that. Just because of the way the world is changing." --Sandra, a 42-year-old single mother -- East Baton Rouge Parish, La.
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"All our homes here where we live, it's like, "Wow, what happened to our ... investments?'" --Basha, a married empty-nester -- Lake County, Fla.
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