How to Effectively Target Customers by Household Income

Every business after going through the beginning phase is confronted with the question of how to best optimize their sales and price their products.

Because money is crucial in business, pricing is one of the most important things that you should pay attention to. Prices communicate the value and quantity of your product to your customers.

Like the economist Milton Friedman says, price is the language that breaks all language barriers and gives opportunity for people all over the world to trade with one another.

In his famous video about a pencil, he explains no one nation can build a pencil, instead the wooden part of the pencil is from a wood cut in Washington state, the graphite comes from mines in South America, the rubber on the top that is part of the eraser comes from Malaysia. And the whole pencil is made in China.

So thousands of different people work together to make one pencil, and the only thing that they communicate through is price. They can practice different faiths, speak different languages, write in different letters, but they all negotiate between themselves because of the price of their products.

So how should we approach the pricing of our products and services? And how should we target our customers by their household income? Read our article below to find out more.

Why Household Income Matters

The first thing about pricing our product is knowing our audience and what is their income. To make this simple, we use household income. That is the combine income of the of all members of a household. Of course there are different types of households but we calculate the average and look at statistics.

For example, in the US we have these income statistics:

• Low-Income Households: Earn less than $50,000/year; make up 28% of U.S. households.
• Middle-Income Households: Earn $50,000–$150,000/year; represent 53% of households.
• High-Income Households: Earn over $150,000/year; account for 19% of households.

You can check more on this source.

For more detailed income by household in the US, take a look at this chart from Statista:

The breakdown is similar in Canada: 

• Low-Income Households: Earn less than $50,000/year; represent 28% of Canadian households.
• Middle-Income Households: Earn $50,000–$100,000/year; make up 50% of households.
• High-Income Households: Earn over $100,000/year; account for 22% of households.

Note that the Canadian income is presented in Canadian Dollars (CAD)

Having all of this in mind, we need to adjust our pricing and decide what is our target group. Household income plays a big role in how people spend their money and what they buy. It affects what people can afford and what they value most when shopping. Businesses that understand this can create products, services, and marketing campaigns that better meet their customers’ needs.

Here’s how different income groups shop:

• Higher-income households: Spend on luxury or high-quality items; care about brand reputation and exclusivity.
• Lower-income households: Focus on affordable, practical products that offer good value.
• Middle-income households: Look for a mix of quality and reasonable pricing.

By understanding these differences, businesses can offer options that fit each group. A store might sell budget-friendly items for lower-income shoppers while also providing premium products for higher-income buyers.

This is usually the case when you go into a tech store, you see that you can buy few models of keyboards for a reasonable price, and then you have a big gap followed by the high-end models that are worth like 5 regular keyboards. That kind of tech store targets every income group, but is especially trying to push the middle income people to buy the more expensive premium keyboards. And if they have the good quality, they will probably succeed in getting more conversions.

Strategies for Targeting by Income

To successfully target your customers by income, you need to adjust their marketing, products, and services to fit each income group’s needs. Here are some simple strategies to consider:

1. Marketing Messaging
   Your marketing message should speak to what each group values. For lower-income consumers, focus on affordability, deals, and practicality. Highlight how your products offer good value. For middle-income customers, emphasize a balance of quality and price. For high-income households, focus on luxury, exclusivity, and high quality, using elegant language and visuals that appeal to their desire for status. You can also use the SEO of your content to rank for keywords that are more desirable for a given group. 
2. Product Offering
   Offer products that fit the income level. For low-income consumers, sell affordable, essential products that provide value. For middle-income households, offer a mix of quality and value, with options that balance good price and performance. For high-income groups, offer premium or exclusive products, such as limited editions or personalized options, to justify a higher price.
3. Distribution Channels
   Where and how you sell matters. For lower-income groups, use retail stores or discount outlets that focus on low prices. For middle-income households, offer both in-store and online shopping options. For high-income consumers, sell through exclusive retail locations or high-end online platforms to offer a more premium shopping experience.

By adapting your approach, you can better connect with each income group and boost sales.

Case Studies in Targeting by Income

There are many businesses that are successfully targeting customers by income, adjusting their products and marketing strategies to appeal to different income groups.

1. Walmart
   Walmart is a great example of targeting low- and middle-income consumers. The retail giant focuses on offering affordable products and everyday essentials. By emphasizing low prices and value, Walmart has built a loyal customer base among price-sensitive shoppers. They also use strategic location choices to serve areas with a higher percentage of lower-income households, ensuring accessibility and convenience.
2. Apple
   Apple targets higher-income consumers through its premium products, such as the iPhone, MacBook, and Apple Watch. The company focuses on luxury, innovation, and design, appealing to customers who are willing to pay a premium for quality and brand prestige. Their marketing emphasizes exclusivity and cutting-edge technology, creating a sense of status among consumers who identify with the brand’s high-end image.
3. Target
   Target positions itself between budget and premium retail options, attracting middle-income consumers. Offering a range of affordable yet stylish products, Target’s strategy combines quality and price. It also tailors its store layouts and online presence to provide an enjoyable shopping experience for those who want good value without sacrificing style or quality.

These case studies show how different businesses successfully adjust their approach based on income levels, helping them connect with their target markets and drive sales.

Using Data and Technology for Precision

Using data and technology helps businesses target customers based on income more accurately. With the right tools, companies can better understand their customers and make smarter decisions.

One important tool is data analytics. This helps businesses track customer behavior, like what they buy and how much they spend. Platforms like Google Analytics or CRM systems like HubSpot give businesses insights into customer demographics, including income levels. By analyzing this data, companies can create more targeted marketing campaigns that speak directly to the right people.

Businesses can also use geolocation data to see which areas have higher-income households. This helps them focus marketing efforts or even open stores in the right places. For example, targeted ads can be shown to people in certain income groups in specific regions, making the ads more effective. 

This works great by targeting specific ZIP codes for their average income. People living in high earning ZIP codes are more likely to buy premium or expensive goods. So using government statistics for targeting can be a very effective tool.

Targeting by Household Income with Google Ads

Google Ads provides a powerful way to target customers based on household income, helping businesses reach the right audience with the right message. With Google’s income targeting options, you can segment your audience into specific income brackets, allowing you to tailor your ads more precisely.

Google Ads uses data from users’ search behaviors and demographics, such as location and online activity, to estimate income groups. It divides users into income ranges like low, medium, and high, which helps businesses customize their campaigns for different budgets. For example, if your product is a luxury item, you can target high-income households, ensuring your ads reach people who are more likely to make premium purchases. Conversely, if you’re selling budget-friendly goods, you can focus on lower-income groups to make sure your message is reaching the right consumers.

To target your ads based on household income in Google Ads, follow these steps:

• Navigate to “Settings”
  In the campaign menu, go to the Settings tab.
• Go to “Demographic Targeting”
  Scroll down to the “Demographics” section, and click on “Edit” to modify demographic targeting options.

• Enable Income Targeting
  Under the “Demographics” section, you’ll see options for Age, Gender, Parental Status, and Household Income. Click on the Household Income tab.
• Choose Income Segments
  You will see income segments such as:
  • Top 10% (High income)
  • 11-20% (Higher-middle income)
  • 21-30% (Middle income)
  • 31-40% (Lower-middle income)
  • Bottom 50% (Low income)
• Select the income groups you want to target. You can choose one or more income segments depending on your campaign goals.

Conclusion

Targeting by household income is one of the best ways to reach your customers. By understanding the different needs and spending habits of different income groups, you can adjust their products, pricing, and marketing to better fit each group.

Using tools like Google Ads makes this process even easier. With Google Ads, businesses can target specific income groups, ensuring their ads are shown to the right people. This improves makes the campaigns more effective and cost-efficient. 

You can also target people using data that you have gathered with Google Analytics of the CRM you use, or target people by ZIP codes using government statistics. Whatever method you use you will surely improve your conversion rates and get more sales.

If you have a problem with targeting your customers by household income, feel free to contact us right away. We can help you to find your target audience and reach them, so you can get your product out. We have been doing this for over a decade, so we are sure we can help you!