Use Data to ID Consumer Segments Spending Discretionary Dollars

Discretionary dollars. Which consumers have them, and which do not? Which consumers have them but are not spending, and which consumers are spending them? These are the critical questions direct marketers across all verticals must answer, especially those in travel and entertainment, education, and nonprofit. These business sectors thrive on identifying consumers who not only have the means but the willingness to spend on discretionary goods and services.

Consumers will emerge from the current economic recession at different paces driven by their consumer confidence, occupation, the housing market and other econometric data points. Not surprisingly, consumers with the highest discretionary dollars are the ones who had the ability to cut back the most on discretionary spending during these tough economic times. But looking only at who has the capacity to spend doesn't give marketers the complete story on which consumers actually are spending.

The good news for marketers is the growing amount of data and analytics available today to help identify and effectively target consumers who are spending on nonessential purchases.

The travel and entertainment industry, for example, relies heavily on consumers spending extra income each month on nonessential products and services. Data exists today that can tell marketers which consumers like to go to the movies, travel and/or gamble, as well as which households have children present. This is great insight for travel and entertainment marketers looking to improve their segmentation and targeting efforts. For example, we know affluent urban professionals and prime middle America segments tend to have higher propensities for taking cruise vacations. However their reasons for choosing which cruise to go on and their discretionary spend capabilities on the cruise differ greatly. Affluent urban professional households tend to take cruises as a reward for their hard work. They want to be pampered and participate in all the healthy activities that cruises offer. Prime middle America consumers, who account for approximately 4 million U.S. households, proactively save their discretionary income for vacations the entire family can enjoy together. Prime middle America cruisers have 46 percent less in annual discretionary spend for their cruises than the affluent urban professional cruise vacationers.

Nonprofits also have found themselves vying for a piece of consumers' discretionary spend as the number of charitable contributions has reduced during the economic downturn. Nonprofits have plenty of data available to help them identify which consumers donate to charity, as well as the types of causes a given consumer is most likely to be interested in, such as environmental. We know the "greenest" consumers tend to be charitable givers and have higher average discretionary spend abilities than "non-green" consumers. This insight helps the marketer identify its potential universe, but it is important to further segment that universe to identify which consumers have the financial ability—and willingness—to give to its cause.

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