Forget Middle Class, It's Now About Connected Spenders

There’s a new consumer group in town dubbed the Connected Spenders that is expected to represent the sweet spot for brand marketers.

According to The Demand Institute, a nonprofit think tank jointly operated by The Conference Board and Nielsen, reaching consumers through income-based approaches is an insufficient and outdated predictor of consumer spending. According to Demand’s latest study, referring to this new consumer group concept as Connected Spenders allows firms to more effectively reach consumers who are ready and able to spend on products and services.

Demand said income-based classifications no longer work because they ignore two key elements: the consumer mind-set and engagement, and access to goods and services. Further, the new consumer concept is inclusive, as it prioritizes the most engaged consumers from each income group.

The report noted that marketers and strategists tend to prioritize the middle-class consumer for growth opportunities. Consumer growth driven by an income-based middle class has resulted in a standard approach where products and services have been designed to meet the needs and tastes of the middle class. It’s an approach that The Demand Institute report calls misguided and outdated.

Using the new consumer group concept, the report said the number of global Connected Spenders rose by nearly twice as much as the number of middle-class consumers between 2001 and 2011. And these digitally savvy consumers “punch above their income class in discretionary spending, prefer premium products and are on the cutting edge of consuming trends,” the report concluded.

Louise Keely, president of The Demand Institute and executive vice president of the global retail vertical unit at Nielsen, said, “The Connected Spender is the ideal consumer for a variety of goods and services.” She added that this group should be used by consumer-facing businesses as a “lens in making decisions about which markets to invest in, how to communicate with and reach consumers and what actions they can take to support growth across different markets.”

That’s because the data indicates a growing group of global Connected Spenders — from 1.4 billion in 2015 to 3 billion in 2025, rising from 19 percent to 37 percent of global consumers — and having spending power that is expected to be more than $32 trillion in 2025 from $15 trillion in 2015.

The Demand Institute report projected that Connected Spenders will account for 46 percent of the world’s consumer spending over the next decade. These are consumers who have access to the Internet, a key factor since their ability to participate in the digital economy is dependent on that access. Further, an estimated additional 2.3 billion consumers are expected to gain access to the Internet over the next decade, with the majority of that growth coming from emerging markets. Moreover, this group is also important because they believe they have discretionary income. The report found that even the lowest-income Connected Spenders both participate more often and allocate more income to discretionary products than the highest income non-Connected Spenders group.

Other findings of The Demand Institute report show that by 2025, the average spend of a Connected Spender in a mature market — the three major economies in the top-10 largest markets are the U.S., Japan and Germany — is forecast at nearly $40,000 annually, representing 10 times the amount of average spend from Connected Spender in an emerging market.

Increased access to the Internet in markets such as Indonesia, Pakistan and Nigeria will have consumers from these countries contribute significantly to the Connected Spenders group. But marketers and firms also need to understand that this new consumer concept group is one that expects a full omnichannel experience. That’s because they use their Internet access — growth in access is expected to come from smartphone users — for more than just researching and shopping online, or sharing ideas and reviews on social media. Access allows them use the digital capability for a variety of consumer activities that also include viewing media and advertising online.

It’s no surprise that the study also found that nearly one third of global Connected Spenders are between ages 25 and 34, with many Gen Y or Millennials who grew up with the Internet. That compares with just 29 percent of Connected Spenders who are over age 40. Across countries, 35 percent of Connected Spenders are in the highest income group, and more than three-quarters live in urban areas.