The Incredible Shrinking Middle Class and Its Effect on Research

Goodbye middle class.

The vast middle class that has dominated our economy since WWII is shrinking rapidly. The research titans who once grazed on research focused squarely on the large number of “average” consumers will have to re-think their strategy and hone their segmenting skills.  A Wall Street Journal article this week detailed how P&G is introducing more product extensions aimed at the upper and lower ends of the economic ladder. The days of huge volumes of household products commanding a higher prices based on quality claims are slipping away. More and more consumers are buying on price; that requires a strategy re-think for the largest CPG firm and the largest research buyer in the world.

As P&G goes, so goes the research industry. What are the implications of P&G gaining more of its revenues from price-competitive products?  First, researchers will need to understand the lower-end market as well as they have come to understand the middle class market in the past 40 years. Second, and maybe more ominously, margins must be lower in price-competitive categories. With lower margins but constant pressure from shareholders, will P&G spend as much on research? If P&G research spending declines, what are the implications for the industry?

So, a significant shift in income distribution could have dramatic implications. It’s a lot to ponder. But for now, you will have to excuse me.  I’m off to Dollar General to do a little shopping.

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