Today, I just finished a new book by Gary Rivlin. It is called "Broke, USA, From Pawnshops to Poverty, Inc.: How the Working Poor Became Big Business" (Harper Business, 2010). The book is an interesting and at times rather disturbing read.
Rivlin gives a stark description of how the underclass is provided with financial service. Most of us in advertising, media sales, or marketing lead comfortable lives. Certainly we would like to earn more but we do not live a life of constant strain bordering on desperation that the players in Rivlin’s narrative do. Many of us study and work with demographics from a computer printout. This book humanizes that data and brings it to life. A lot of his examples take place in towns such as Toledo, Ohio and much of Michigan which were in Rust Belt decline for years and are now in a depression.
Using the umbrella term “Poverty, Inc.” as a catch all term, Rivlin takes us through an array of products such as sub-prime mortgages with huge hidden fees that are hidden in the fine print of the loan agreement. There are instant tax rebates that hit the cash strapped and very impatient for 30% of their actual tax return check, and payday loans that have interest rates as high as several hundred percent. There is not much new here except for two things:
1) Major financial companies are getting in to the act of serving the financial needs of the underclass and their rates are not lower that what we used to refer to as loan sharks.
2) The business is booming as millions struggle to hang on to being members of the middle class. Many are not succeeding.
Now, please do not misunderstand me. I am a capitalist and will very likely die one. People who are credit risks should pay a higher interest rate than those with a pristine track record. And, government should not protect people from themselves. Interest rates as high as 500% on a payday loan are excessive, however. Will the new financial reform bill featuring the Consumer Financial Protection Bureau put an end to such predatory practices? A noted journalist said that financial institutions are dealing with it “like mosquitoes adapting to a new bug spray.” And the longer unemployment remains stubbornly high and real estate values continue to buckle or bump along at the bottom, the more people will have to use these non-traditional banks.
What does this mean to us as marketers? Most of us live miles away from those dreary strip malls with pawn shops, consumer loan offices, or specialists in pay day loans. But we do have to sell to consumers in places like Rhode Island, Ohio, Michigan, Florida, Illinois, Nevada, Arizona, and California that will be suffering for some time to come. Advertising on a TV/Radio station or cable system will not work as well in these states as in the past as each month more and more people fall in to the underclass to whom conventional avenues of credit are no longer available.
So set realistic expectations and choose spot markets to support very carefully. There are structural difficulties in some Nielsen DMA’s that will remain in place for the forseeable future.
If you would like to contact Don Cole directly, you may reach him at firstname.lastname@example.org