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There’s a great article by Sarah Mahoney on Mediapost’s Marketing Daily that highlights the spending power controlled by low-income households. The article is in response to the findings of a recent study published by IRI that showed:

These consumers–about 40% of the U.S. population–actually outspend more affluent types, and will shell out $85.3 billion on consumer packaged goods in 2007. In the next decade, IRI estimates this group will generate an additional $84 billion in incremental spending on packaged goods.

The article highlights that with the recent boom in luxury spending, marketers have been ignoring lower income consumers and that there is a clear risk in doing so.

Mahoney quotes Sean Seitzinger of IRI who points out that not all retailers have ignored this segment and he highlighted Target’s efforts as being spot on:

Certain of the dollar-store formats, he (Seitzinger) says, have gotten the formula right. And Target has also nailed it, managing to straddle a market position that not only welcomes middle-class shoppers willing to trade down for occasional bargains, but also entices lower-income shoppers to trade up. “These lower-income people go to Target to buy their nicest outfits,” he says.

But it’s also got an “understanding that the dialog with lower-income shoppers isn’t just about price,” he adds. Target’s Choxie chocolates, for example, cost far less than Godiva, but are a lot more interesting than a bag of M&Ms: “It’s offering lower-income shoppers a high-end indulgence in a form they can afford but still makes them feel luxurious.”

This is spot on with what we’ve learned and are applying at Barefoot. Trading-up is not limited to the affluent, and rocketing is a behavior that applies to everyone regardless of income level.