Why Black People Are Top Consumers But Lack Wealth
July 30, 2021
This article is part of a larger series that focuses on diversity and equity in marketing. As a company, we are committed to identifying actions we can take in the fight against racism and injustice, and elevating BBIPOC voices is paramount to inspiring change. Follow along and read other posts in this series here.
This post is authored by Anyssa Roberts, writer and journalist.
For the last two years, I’ve witnessed dozens of families and individuals celebrate the most gratifying accomplishment of their lives—paying off their debt.
I was a marketing copywriter for Ramsey Solutions, an influential personal finance company in Tennessee. I created content that made sales while improving our audience’s lives. I even followed the financial principles myself and celebrated my own debt-freedom in 2020, as a single, Black woman with an immigrant background.
Personal finance changed my life for the better and influenced the way I interact with marketing. That’s why it bothered me to read that Black people are most likely to consume products but are financially behind white and Latino counterparts, according to research. While most Americans report feeling as though they live paycheck to paycheck, minorities are most likely to face ongoing wealth gaps compared to their white peers.
In marketing, we, of course, want people to buy from us, but we also want our products and services to improve the lives of the people who use them. But where does this financial discrepancy lie in the Black community and how can we as marketers better support one of our largest consumer populations?
Black Buying Power
Black people are major consumers in the American economy and spend more than $1 trillion a year on goods and services.
“At 47.8 million strong and a buying power that’s on par with many countries’ gross domestic products, African Americans continue to outpace spending nationally,” said Cheryl Grace, Nielsen’s Senior Vice President of Community Alliances and Consumer Engagement and co-creator of the DIS Report in 2019.
We dominate as consumers in the beauty and personal care categories—a multi-billion dollar industry—and make up 90 percent of the consumers in the ethnic hair care category. We’re also 20 percent more likely than the total population to say they will “pay extra for a product that is consistent with the image I want to convey,” according to Nielsen’s report.
In short, our dollar matters.
It’s unfortunate, however, to see so many dollars exiting the Black community only to leave us beautiful and broke.
Why Black People Trail Their Peers Financially
The average white family has eight times the wealth of the average Black family and five times the wealth of the typical Latino family, according to the Federal Reserve.
Let’s take a look at a couple of the reasons why Black people are behind when it comes to financial development and building wealth:
Lack of Access to Resources and Financial Education
Black people are more likely to face systemic financial challenges that limit their wealth-building ability. Some examples include having fewer financial resources, less access to employer-sponsored benefits and greater income volatility a TIAA study found. These challenges already limit financial advancement and are made worse by low financial literacy.
Financial literacy isn’t high amongst American adults in general. But in a study, Black people answered 38 percent of financial literacy questions correctly, and only 28 percent answered more than half correctly.
Low financial literacy also influences buying and investing habits. Black people have a tendency to get rid of assets too early or not acquire them at all, according to a TIAA research study.
These barriers hinder sound financial decision making as well as good financial management.
Expensive Spending Habits
The data shows that Black people like to shop, and there’s nothing wrong with that. However, too much reliance on consuming products and services rather than producing them can hurt us more than help.
Nielsen reported that 52 percent of Black people find in-store shopping relaxing, compared to 26 percent of the total population. And about half of Black consumers say they enjoy wandering the stores looking for new, interesting products.
Currently, Black women trail behind Latino and white women in financial security, according to a research study by the Teachers Insurance and Annuity Association of America (TIAA). In their report, they found that 71 percent of Black women and 60 percent of Latino women had at least one expensive behavior in relation to the use of credit cards. Only 49 percent of white women had at least one expensive behavior.
The Role Of Marketing In Black Consumption Practices
A Nielsen report stated that Black consumer spending is highly influenced by advertising. Black people reported being 42 percent more likely than the rest of the American population to respond to mobile ads. They’re also more likely to respond to ads on television, radio and the Internet.
This is good news for us in marketing, because it means our ads are working; however, when we zoom out and look at the big picture of our impact on an already vulnerable community, we have to pause and analyze the full impact.
Expensive cars, clothes, hair, jewelry and vacations are perfectly fine products and services to market to the Black community, but if our marketing departments are targeting a community solely to buy their products without thinking of how they can serve that community, then we’re doing more harm to our customers than good.
Like many populations, Black people appreciate and almost demand to see themselves in marketing, but is our product or service helping or hurting? Are we selling a false image of success—something that makes us want to keep up with the Joneses rather than live meaningful and productive lives? As I shared earlier, we want people to buy our products and services, but we should also be concerned about the communities we are marketing to.
So how can we better support them as marketers?
How Marketers Can Help
As marketers, we don’t have to stand idly by while we watch one of the main consumer populations in America struggle. We can do something. In fact, it’s expected of us. Nielsen reported that 42 percent of Black adults expect brands they purchase from to support social causes. That’s 16 percent higher than the total population.
Here are just some of the ways we can support the financial advancement of Black people as marketers:
Support and Mentor Black Business Owners
By nurturing up-and-coming business owners, you support the growth and expansion of Black-owned products. This is important because it helps to balance the flow of money entering and leaving the Black community. It also creates more positive representation of Black entrepreneurs for the next generation to aspire to.
Support the Expansion of Financial Literacy Resources in Black Communities
Financial literacy is key to the advancement of the Black community. By sponsoring school financial literacy and entrepreneurship programs in Black populated areas, you’re helping to transform and uplift the Black community in a way that’ll impact generations.
Oppose Systemic Racism That Causes Financial Challenges
Racism is malleable and doesn’t always look as overt as it did during slavery or the Jim Crow era. Today, systemic racism affects Black people in many ways, including financially.
Underfunded schools and lack of support for first generation college students hurts exposure to education that qualifies people for better paying jobs. Unfair hiring practices and poor employee benefits also negatively impact Black communities financially.
By taking a stand, being aware of your marketing practices and supporting social causes that positively impact the Black community, you’re helping to support one of the largest consumer bases in America and developing a better relationship between you and your customers.
Anyssa Roberts is an award-winning journalist, copywriter and editor. She has written for the USA Today Network, The Spruce, Ramsey Solutions, a Dave Ramsey Company, among other marketing and news organizations. Currently, she uses content to help customer-centric brands hone their unique voice and connect with their audiences.
Originally from Trinidad and Tobago, Anyssa earned her B.A. in journalism from the University of Kentucky and resides in the Nashville, Tennessee area.
Anyssa is passionate about personal finance and helping people to take control of their money. When she’s not writing, she can be found researching tiny houses, experimenting with new cocktails or solo traveling. Connect with her on LinkedIn or reach out via email. She’d love to hear from you.
Visit this page to see more in the series, or check back in a week for our next guest post.
CM Group is a family of global marketing technology brands including Campaign Monitor, CM Commerce, Delivra, Emma, Liveclicker, Sailthru and Vuture. By joining together these leading brands, CM Group offers a variety of world-class solutions that can be used by marketers at any level. Headquartered in Nashville, TN, CM Group has United States offices in Indianapolis, Los Angeles, New York City, Pittsburgh and San Francisco, and global offices in Australia, London, New Zealand and Uruguay.
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