A new study finds that 16 percent of the population lives in poverty. What does this mean for your business? Should You Go Down Market In This Economy?
The U.S. Census Bureau recently published a shocking study about the financial condition of consumers, which could have a significant impact on the future of small business. The study calculated the number of Americans that are living in poverty, which the Census classifies as a family of four living in the continental U.S., having a total household income at or below $22,350. This poverty limit of course varies depending on where you live and the size of your family.
It’s also measured a little differently than it has been in the past. Unlike previous estimates, this study uses a refined formula that takes into account rapidly rising costs, like medical expenses, to obtain a more accurate picture of who is living in poverty. As a result, over 49 million people—equivalent to 16 percent of the overall population—are living in poverty. In some regions of the country, like the West, one in five residents is living at or below the poverty line.
With such a significant percentage of the population living in poverty, small business owners must consider the implications for their customer base. Current economic trends indicate that this number will unfortunately get worse before it gets better. Given this reality, it may make sense for your business to consider going down market and providing more affordable products and services that specifically cater to disadvantaged consumers. If you feel it makes sense for your company to pursue this type of opportunity, consider the following recommendations.
Don’t dilute your brand
Expanding your offerings to less fortunate consumers should not come at the expensive of your existing business. Repackaging, resizing and reformulating what you sell should also include a rebrand. Don’t mix your high-priced items with low-price-point items because doing so will prove confusing to consumers and will ultimately cost you business from both markets.
Understand the demographics of the poor‘
The demographics of the poor in the U.S. have certain characteristics that go beyond just a lack of money. Twenty-eight percent of Hispanics live in poverty, as do 25 percent of African-Americans. These are large percentages compared to the total number of Hispanics and African-Americans that compose the U.S. population (50.5 million and 38.9 million, respectively, according to the 2010 Census). Addressing cultural diversity in your product development and marketing are critical for approaching these key segments.
