April 2013

connecktionsThe Hard-Working-Class: An American Evolution of the Middle-Class Mom

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A Consumer That Can’t Be Ignored

A Consumer That Can’t be Ignored 3

The spoTlighT shone brighTly on America’s struggling middle class during the run-up to the 2012 presidential election. Amidst the conversation and endless debate around class wars, “the 99%,” “the 47%” and the progress (or lack thereof) of economic recovery, it seemed everyone was focused on the plight of the middle class and how best to solve the problems they face. But there’s a disparity between the political lip-service paid to the struggling middle class and really understanding who they are. This is a group that’s largely misunderstood and often ignored by marketers who assume they don’t have the income or influence to be worth their time or investment. But they are also a large segment that is growing rapidly. In fact, half of U.S. households now have incomes of less than $50,000, and this segment is growing nearly three times faster than any other segment.1

At C-K, we saw an opportunity to better understand this segment – and specifically those at the eye of the storm – moms whose families earn between $30,000 - $50,000 – an income level that generally doesn’t qualify for government assistance. We found they are re-defining themselves into a new social class and social mindset.

If sheer size alone isn’t enough for marketers to sit up and take notice, their potential influence on other consumer segments should. More specifically, in many ways we found these consumers behaving as early adopters - a group of women who are leading the way at a time when everyone is a value consumer. And while yes, they are price- sensitive, they have many smart strategies for making ends meet that marketers can leverage to build relationships in a forever-changed climate.

At C-K, we saw an opportunity to better understand this segment – and specifically those at the eye of the storm – moms whose families earn between $30,000 - $50,000 – an income level that generally doesn’t qualify for government assistance. We found they are re-defining themselves into a new social class and social mindset.

1 U.S. Census Bureau, Current Population Survey, 2008-12 Annual Social + Economic Supplements; Futures Company Analysis 2012

A Consumer That Can’t be Ignored 4

An Evolution in Progress

What do polar bears have in common with struggling American moms? Scientists have confirmed that due to climate change and the melting of the polar ice caps, polar bears are moving inland and mating with grizzly bears.

This has created a new hybrid called the “Grolar” or “Pizzly Bear” that is able to hunt on land as well as in the sea—finding a way to survive in a forever-changed environment.

At C-K, we believe we’re seeing a similar adaptive process among struggling consumers due to the economic climate change, the effects of which we predict linger long after the economy recovers.

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A New ‘Self-Defined’ Social Class and Social Mindset

Death of Middle America and a Rising Social Class 6

in seTTing ouT To gAin A beTTer undersTAnding of this increasingly influential group, we didn’t just uncover an evolving consumer, but an evolving social class. Only 25% of these technically middle-class consumers identified themselves as such:

“I don’t see myself as middle class, lower class or blue collar…all I know is I work hard.”

For them, the middle-class promise is not their reality. Said one woman we spoke with:

“I’m technically middle class, but I don’t feel that way. If you’re middle class, you should be able to have a home, be able to save for college. I’m barely able to make ends meet. Every day is just a struggle.”

They don’t associate with the 99% either. While aware of the movement, only 2% of those we surveyed aligned with this label. Perhaps this is because overwhelmingly they take responsibility for their financial situation, believing that their life decisions got them to where they are. If anything, they blame their current circumstances on not furthering their education, starting a family too soon or simply bad luck. Said one:

“The 99% movement is all about assigning blame. I know what got me here. I take responsibility for my situation.”

Discovery 1 These struggling consumers cannot identify their “class” in the traditional classification system. They don’t feel any of the current labels accurately reflect their realities.

Discovery 2These women may not qualify for government assistance, but they don’t want it either.

Discovery 3These women have more in common than just an income bracket.

Death of Middle America and a Rising Social Class 7

Key uniting factors are an incredible work ethic and a sense of perseverance. The women we spoke with aren’t on government assistance, and are proud of it: 79% feel they are doing everything they can to keep their family above the poverty line. Said one:

“We live paycheck to paycheck—doing the best that we can to make ends meet without having to ask for help. That’s the way we want it.” Said another: “We want to provide for ourselves, so we have to work twice as hard, usually just so we can make ends meet.”

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Meet The Hard-Working-Class

Meet The Hard-Working Class 9

ThIS DIvErSE AnD groWIng grouP doesn’t picture themselves as part of the middle class “American Dream.” Instead, 77% of those we surveyed identify them-selves with a new class called the Hard-Working-Class, defined not by what they do, but how hard they work.

“I am not the working class. I am the hard-Working-Class. I’m above the poverty line, working over 60 hours a week to keep my family above water.”

It’s surprisingly difficult to define them by age, ethnicity, region or education level, too. Hard-Working-Class moms can be found everywhere. They shop where you shop – although never without a sale or coupon. They take their kids to museums and family activities – but certainly know the free days. And they’re next to you on the soccer field – although their kid is likely on the payment plan.

Identify with being in the middle class.25%

Currently feel that the U.S. economy is improving.15%

Identify themselves with a new class called the “Hard- Working-Class.”

77%

Meet The Hard-Working Class 10

Demographic Snapshot

Number of Children

45%

36%

19%

Marital Status

73%

27%Not Married

Married

Ethnicity

Caucasian

Hispanic

African American

82%

8%

8%

Asian/Pacific Islanders1%

Other1%

Employment Home Ownership

43%

16%

32%

Full Time

Part Time

Stay at home

10%Unemployed

Education

32%

65%

42%

31%

College Grads

Own

Some College

Rent

22%

4%

High School

Other

While there tends to be a higher number of children in the household, there’s no one “typical” profession among them. We spoke to nurses, office administrators, housekeepers, speech specialists, entrepreneurs, waitresses, and stay-at-home moms—many of whom are college educated.

Meet The Hard-Working Class 11

Regardless of profession, as a group they’ve been hit hard, going through a lot of employment flux over the last five years:

• 35% Lost their job • 35% Experienced a pay cut • 33% Began working multiple jobs • 19% Went from full-time to part-time

In light of this, over half of the women we spoke to felt worse off financially than before the recession. And although many Americans are getting back to a sense of normalcy, only 15% of our Hard-Working-Class respondents currently feel the U.S. economy is improving.

Even when it does, these consumers consider themselves forever changed. Of those we spoke with, 84% said they wouldn’t go back to their old spending habits, even if the economy were to rebound or their circumstances were to change.

Lost their job

Experienced a pay cut

Began working multiple jobs

Went from full-time to part-time

35%

35%

33%

19%

Forever Changed

Meet The Hard-Working Class 12

Snapshot of our hard-Working-Class Moms

Single mother of one. Caretaker for parents. Salon manager. Sei Im is an example of the “Comfort in Cohabita-tion” trend of moms who support and care for both their children and elderly parents. She never went to college, but worked her way up from salon recep-tionist to managing five salons in a growing business. She is finally begin-ning to focus on her own life and look to the future.

“I’m adapting to change. All the hard work has been paying off. I just got a promotion. Now I have to focus on not being such a workaholic and try to have more balance between my work and personal life.”

Divorced mother of two. College graduate. Nicole lost the support of her family and friends after having her first child at 15. She managed to finish col-lege, but hasn’t been able to break out of maintenance jobs and really leverage her degree due to financial pressures after a divorce. She was forced to ma-ture at a young age, and still feels stuck as a “teen mom” statistic.

“I’ve always felt like a statistic having a child at 15. It dragged me down a bit. It’s just me, I don’t have support. I try not to look at the past and just look at the future. It could have been easier if I didn’t have a child so young, but I’m very proud of my accomplishments. It could be better, but it could always be worse.”

nicole, 34 Home Housekeeper

Single mother of two boys. Part-time retail salesperson who hopes to go back to school for radiology one day. Lives in a single-family home with her younger sister and helps her take care of her daughter while she’s going to college. Has a huge support network that she relies on and that relies on her.

“I’ve never been an ‘I,’ I’ve always been a ‘we.’” Having less brings you more fam-ily togetherness. It’s how I remember growing up.”

Bessie, 42 Retail SalespersonSei Im, 28 Salon Manager

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Five Things To KnowAbout These Women

Five Things to Know About These Women 14

They’re In TransitionThese women feel they are in a state of evolution. Our study found 54% feel they’ve adapted and evolved as a result of the recession.

They’re Strong And DurableThey’ve been through many obstacles, and haven’t been broken. Seventy-two percent agree their strength and resilience have helped them through tough times. One woman we spoke to described herself as a crayon,

“because you can break it, sharpen it, peel away the layers, but the vibrant color still remains.”

They Strive For SecurityThese moms are living on the lower levels of Maslow’s Hierarchy of Needs right now, worrying constantly about money (63%) and struggling every day to make ends meet (51%). Said one:

“Life is paycheck to paycheck. We are stressed constantly, because things are getting more and more expensive while my paycheck remains the same.”

Security for this group is hoping that the furnace will make it through another winter. Or that the gas company will wait another month on the payment so that they have funds for school supplies. And it’s putting aside enough money to have pizza for her kid’s birthday party next month.

We asked them to create headlines for chapters in their autobiographies—chapter one being where they are now, chapter two where they are going. This example underscores the state of evolution we kept hearing about.

1 2 3

Five Things to Know About These Women 15

They’re Living In The Moment Relentlessly focused on fulfilling their families’ basic needs, these women take it one day at a time. They told us that if they let their minds get too far in the future, the stress can be overwhelming. Said one:

“I want to look ahead, but you have to be in the here and now, or things get out of control.”

They Make the Most of What They haveThey keep a positive outlook as best they can. They’re realists who recognize it could always be worse – in fact, 87% said there is always someone out there who has it worse than them. Said one:

“It would be nice to live the dream, but that just isn’t an option.”

This group doesn’t have the traditional safety nets to fall back on. So they rely on friends, family and credit cards for unexpected wrenches. And unfortunately, those wrenches happen all the time.

We asked our moms to pick one wish, either more security or more

excitement in their lives.

Say a $1,000 expense would be a major financial hardship.

Say they would have no way to pay for such an expense.

83%

38%

More stability and control

78%

More excitement and discovery

13%

Neither9%

4 5

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Life As A Balancing Act

Life as a Balancing Act 17

iT TAKes A loT of juggling and strategizing for the Hard-Working-Class to stay above water. Especially in the past few years, life has been a constant balancing act of calculated tradeoffs. We asked these women about how their behaviors have changed since before the start of the recession – what they’re doing more of and what they’re doing less of. We heard they’re doing more budgeting, staying at home and being more creative with resources. But we also heard that they are getting less sleep and even seeing fewer old friends because they don’t have the money to go out like they once did. For the hard-Working-Class

consumer, life is a constant balancing act of calculated tradeoffs.

Less:Sleep, Cable, Haircuts, Shopping, Fresh Food, Traveling

And Less going out:Dining, Girls Night, Movies, Old Friends

More:Work, Budgets, Coupons, Generics

And More Staying home:Cooking, Reading, Family Time, Creativity

Life as a Balancing Act 18

The pAyCheCK journey Seventy-four percent of Hard-Working-Class consumers say they live paycheck to pay-check. We sought to better understand what that means.

Based on feedback from our Hard-Working-Class moms, C-K charted the “Paycheck Journey” for a typical family, month to month. The top line represents the rare good month when things go as planned and there might even be money left over to go out for $5 pizza or save for that birthday party.

But for most, a good month is a rarity. Often car trouble, a broken appliance, or an unexpected medical or school expense takes them down the second track. For Hard-Working-Class moms, the “unexpected wrench” has come to be expected. In these cases, 90% of those we surveyed said they stay home and make do with what they have until payday.

Borrow or Default on Payments

pAydAy!pAydAy! CheCK bAlAnCe CheCK bAlAnCe

Paycheck splurge on Must-haves & round 1 Bills

round 2 Bills & nice-to-haves Save? Treat? or Empty

Slim Week hibernation

un

ExPECTED W

rEnCh

!

Life as a Balancing Act 19

Part of this paycheck-to-paycheck reality for the Hard-Working-Class is food insecurity. Some of the women we spoke to told us they are never certain where the next meal will come from, and more groceries are at the top of the list of things they would buy if the economy were to rebound. Said one: “When I go to the grocery store, I feel so poor. When I go to the government website, they tell me I’m not.”

We asked our Hard-Working-Class moms to tell us where their money goes after payday. groceries are one of the last things to get funded, as it’s a variable expense.

Vacation

Dining Out

53%

53%

32%

What they’d do if the economy rebounded:

Extra Groceries

Life as a Balancing Act 20

As we got to know some of these women, we were struck by how remarkably resourceful and resilient they are. Here are some of the ways they surprised us:

• Many single and early moms • Lives in underprivileged areas • Puts her personal care last• Her kids are her priority • Struggles to make ends meet• Lives paycheck to paycheck• Aware of financial inequalities• Anxious and feeling the stress• Catching up

Yes-what you might think

• No typical age, education or ethnicity • Lives in the suburban house next door• Can’t pick her out by her looks• Her kids aren’t kept from tough realities• Doesn’t blame anyone for her situation• Lives within her means• Doesn’t identify with an existing class• Strong, proud and determined• Leading the way

But also-what you might not

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Lessons From The Hard-Working-Class: Doing More With L.E.S.S.

Doing More With L.E.S.S. 22

ThIS rESILIEnT, rESourCEFuL ConSuMEr is highly adept in the art of making ends meet, earning a master’s degree in “making it work.” In the next few pages, C-K distills some of her key survival strategies into lessons in how to do more with L.E.S.S. (Live, Eat, Spend and Shop). Marketers, take note.

Doing More With L.E.S.S. 23

Community KarmaHer community is a survival network. She relies on it for swapping deals, sharing items, childcare support and feeding her family—and they rely on her. So it’s little surprise that 72% share coupons and deals with family and friends. It’s just one way women of the Hard-Working-Class help each other out.

C-K Food for Thought: How can brands help facilitate and grow her support system and provide “currency” of value to the network? What’s the next evolution of progressive coupons?

Act of Friendship: Deal Seeking Mom, started by a mom of five “teaching others how to save big so they can live large,” is one of many community-created online resources relied upon by the Hard-Working-Class. At 100,000+ members strong, the blog is not only a one-stop shop for deals and freebies, but also a resource for making ends meet.

liVeeATspendshop

2 MRI Doublebase, 2012

Splurging on Markers of normalcy In contrast to many higher-income consumers who may swap out brands they prefer in the name of responsible spending, a different dynamic is at play among the Hard-Working-Class. We found a greater resistance to sacrifice their favorite “affordable” tried-and-true brands: 53% said they continue to buy certain brand names to maintain some sense of normalcy. Said one: “The car may be in the shop, my bills might be late, but I can still have my Heinz® Ketchup.” Continuing to buy these brands reminds them of comfortable times (past or to come).

C-K Food for Thought: If you’ve been marketing your brand as a “justified indulgence,” are you sure it’s not a “marker of normalcy?” If you’ve been losing share to private-label brands, take a look at where the share loss is coming from. If the truly struggling are holding on to you more tightly than the higher-income consumers, you may be a marker of normalcy.

Act of Friendship: Heinz® Ketchup (a C-K client) has recently launched an economical stand-up pouch for 99 cents as a way to help loyalists keep using the ketchup they love in these uncertain times.

Doing More With L.E.S.S. 24

Ingredient v. recipe DrivenUnlike higher-income moms who often tell us boredom fuels their mealtime planning, the Hard-Working-Class moms are driven by what they can afford. Their meal decisions are based on the ingredients in the pantry or what’s on sale: 87% make an effort to plan meals around ingredients they already have in the house.Said one: “I purchase the same food all the time, unless I have a new recipe, but it’s basically the same items with different seasoning.”

C-K Food for Thought: What can marketers do to help her fulfill higher-level emotional needs with the basic ingredients she has on hand? How can you help her give her family variety leveraging the ingredients of her basic pantry stock?

Acts of Friendship: Recipe Matcher, Supercook, and RecipePuppy are just three of the many websites that allow people to enter the ingredients they already have on hand to create a meal. Kraft has gotten in the game, too, with their iPhone application that allows people to search 70,000 recipes by ingredient.

Food StretchingThe Hard-Working-Class knows how to make ends meet through food: 88% said they buy food that “stretches” across meals. Pasta, rice, noodles and ground beef are staples, as they are both filling and versatile. Said one mom: “If I bought a pack of frozen snacks that small, my son would eat them in 10 minutes. I can’t have that. I buy food that will feed a lot of mouths and stretch as far as possible.”

C-K Food for Thought: If you’re a food brand, is there a new innovation in your product usage that would allow you to stretch? If not, can you partner with “stretchable” foods so that you can go farther?

Act of Friendship: Campbell’s® Soup isn’t just for the bowl anymore—they are encouraging consumers to pour a can of soup over rice or mashed potatoes to create a hearty meal that stretches.

liVeeATspendshop

Doing More With L.E.S.S. 25

hibernating Mid-CycleJust like bears, the Hard-Working-Class consumer instinctively knows when to wait out tough weather. When necessary, 91% say they stay home and make do with what they have until payday.

Said one mom, “When I am able to cook, I try to do a lot of freezing. That way when my hours are cut and I don’t have money for groceries, we still have good food to eat.”

C-K Food for Thought: How can marketers plan around the payday “holiday”? How can brands help the Hard-Working-Class make do in between?

Acts of Friendship: Panera Bread (a C-K client) has changed their entire business model to be a friend during slim weeks to struggling consumers like the Hard-Working-Class moms. Among other initiatives designed to fight food insecurity, they’ve created five (and counting) Panera Cares® cafes around the country, with the mission to “feed each and every person who walks through our door with dignity regardless of their means.” The cafes have a pay-what-you-can policy that allows people to choose how much they’re able to pay for the food and experience that’s available in any Panera Bread location.

liVeeATspendshop

recycling Their MoneyThese families are leveraging every coupon, sale and special offer they can to make ends meet. In fact, 89% said they use coupons whenever they can. But beyond stretching their dollar, there’s an emotional component to the “art of the deal” as well – the rewarding feeling that you’re getting something back for what you put in.

Said one mom: “I’d never go shopping without a coupon. You need a coupon to feel like you’re getting a deal.”

C-K Food for Thought: How can brands elevate couponing to a more emotional experience? Can you help these consumers play the recycling game? What tools can be created to help them benchmark their savings?

Act of Friendship: Target has moved to an instant gratification system with their Target Redcard®. Purchasers get an instant 5% discount on all purchases—and tangible evidence of “feeling the deal.”

Doing More With L.E.S.S. 26

Cart SegmentingAs a brand, it’s not just enough to make it into the cart—it’s where in the cart you’re placed. 42% place less important items in the back of their cart to put them back if they go over budget.

“I put the items we can’t do without in the front of the cart, and the less important items in the back. So when we hit my dollar limit at the checkout, I just hand back what’s left in the cart.”

C-K Food for Thought: Are you front-cart worthy or a back-cart indulgence? What strategies can you employ to become more of a priority?

Act of Friendship: “Select supermarkets within China and Korea are testing SKTelecom’s Smart Cart service, which syncs tablet-equipped shopping carts with consumers’ smartphones to offer real-time, relevant geo-target information. A companion mobile app automatically synchronizes with the cart’s tablet, upon which it displays shopping tips, targeted coupons, and product information based on where shoppers are in the store and what’s on their list. At the checkout counter, the tablet compiles a list of purchased items, membership points accumulated, and available coupons.” (Source: Cassandra Daily, June 20, 2012).

over-Purchase PreventionPerimeter shopping and selective aisle shopping help these women avoid over-purchasing: 60% skip certain aisles to avoid impulse buys.Said one mom: “If it’s not on my list, I won’t go in that aisle. I don’t want to get tempted to pick up something I don’t need.”

C-K Food for Thought: What can you do as a brand to build your presence on the perimeter through cross- promotion, display or even alternative sources of distribution?

Act of Friendship: Customer-centric grocers are starting to stage more sophisticated meal displays that feature select recipes and corresponding ingredients—in many cases, bringing products out from their aisles and into the consumer’s perimeter pattern. A “16-week analysis at six participating stores (including Harris Teeter® and Save Mart) found that the grocers saw an average incremental increase of 19.2% for display items.” (SupermarketNews.com, May 21, 2012).

liVeeATspendshop

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Be A Friend: Brands Can Offer A Meaningful Hand-Up

Be a Friend 28

A hAnD uP, noT A hAnDouT.Hard-Working-Class moms are doing everything they can to keep their families afloat. As we learned, part of this is finding ways to continue to buy brands that give them a sense of familiarity and comfort in tough times. In many ways, they’re still supporting us, but as marketers, what are we doing to support them? There’s a great opportunity to do more to fully appreciate her situation and identify ways to help—building lifelong loyalty in the process.

The Hard-Working-Class isn’t looking for a handout. But 73% of them told us they feel brands could be doing more to offer a hand-up during these tough times.

While price matters, these women are so much more than value-driven consumers. There are many opportunities to offer a hand-up by connecting beyond the wallet. Whether that’s through rewarding them, acknowledging and/or elevating them, helping them build a community of support or further her master’s degree in “making it work,” there are many potential pathways to befriend this important, influential and inspiring consumer.

Feel brands could be doing more to offer a hand-up.73%

Methodology 29

Methodology

At C-K, our philosophy is “Make friends, not ads.®” We look at consumers as friends—current or potential. In looking across our clients’ businesses, we realized there was an opportunity to better understand how to build friendships with an often-overlooked consumer—moms within the struggling “lower middle” class.

So we spent a lot of time getting to know them through home visits, shop-alongs, qualitative group discussions, ethnographic research and a quantitative study to better understand this influential group, their needs and how brands might be able to better serve them. In particular, we spoke to 18- to 54-year-old women with children under 18 in the household, with household incomes of between $30,000 and $50,000 (an income level that generally doesn’t qualify for government assistance).

Research was conducted throughout 2012 and supplemented by secondary sources on socioeconomic trends. Special thanks to Iconoculture for select examples of brands helping the Hard-Working-Class.

Becky JohnsCramer-Krasselt(312) 616-3871bjohns@c-k.com

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