Inflation is the universal tax – but it is not universally experienced.

Over the last twelve-plus months, wallet capacity has contracted for consumers. Regardless of where you live, work, or shop, inflation is omnipresent in the US economy and yet, the level of the impact on each individual varies from nominal to calamitous.

Marketers across all industries are responding to the current effects of inflation on consumer spending habits and forecasting how to best mitigate risk against inflationary pressures that will likely loom into the back half of 2022 and beyond.

As marketers, we must approach the intricate impacts of inflation at a local level. Consumers are experiencing rising prices uniquely within their communities. Cost of living and household income (HHI) directly determine whether the increased cost of gas will force a potential customer to forego buying a new t-shirt or postpone a weekend getaway. The key to optimizing your forward-looking marketing plans is utilizing data to inform actions today.

Look at Inflation Through the Eyes of the Consumer

Risk mitigation against the negative influences of inflation begins with a consumer mindset and deepening your knowledge of the customer beyond transactional data. Is your customer being merely influenced by inflation or is inflation having a detrimental impact on buying decisions? Leveraging the Inflation Resilience Dashboard, marketers can diagnose where and who in the country is most (and least) able to withstand ever-expanding prices.

Utilizing a mix of demographic and macroeconomic data, the Inflationary Resilience Dashboard uncovers who is most and least resilient to the rising rate of inflation – informing optimized communication and targeting strategy with personalized offers and products – through the Inflation Resilience Measure.

The Inflation Resiliency Measure (IRM) is community focused and utilizes the average household income – weighted by cost of living – divided by the consumer price index (CPI – the standard measure of inflation). The current IRM for a community or generation is compared to the baseline IRM of January 2020, since that time period was pre-pandemic and had a historically consistent rate of inflation. This variance gives a perspective of whether a community can spend on pace with the rate of inflation or if the spend capacity has contracted due to inflation. The IRM is pivotal to diagnosing which consumers and communities can withstand inflationary pressures with minimal changes to shopping behaviors and which will have to make difficult choices about how to leverage shrinking wallet capacity.

The IRM in Action: Inflation Differences between Millennials and Baby Boomers

This graph shows the differences between Baby Boomers and Millennials over time. The negative numbers indicate a lower ability to spend at levels similar to January 2020 due to inflation.

The two largest generations by population are Millennials (born between 1981-1996) and Baby Boomers (1946-1964) – but the impact of inflation varies wildly across them.

Millennials, on average, have experienced a 6.7% increase in HHI, while Boomers have experienced a 5.1% increase, making the high single-digit growth in inflation less impactful on the younger generation. Additionally, Millennials have a 4.7% higher average HHI compared to Boomers – adding additional elasticity to the generational wallet.

Purple areas indicate lower inflation resilience, or a lower likelihood of being able to keep up with January 2020 consumption patterns due to current inflation levels. Teal areas indicate higher inflation resilience.

Millennials are in a career growth stage of life – advancing in both salary and level – with anticipated compounded growth in total income in the coming decade-plus. This positive momentum and growth allow the average Millennial the space to treat inflation as a wallet influencer, not an impactor.

Inflation may influence a large purchase (e.g. home, car, furniture, etc.), in that shoppers may perform more extensive research or seek potential deals, but it likely will not meaningfully transform the average Millennial’s current shopping behavior. Understanding the Millennial at a local level informs what products might be better suited for a specific region or community, what increased pricing might be palatable, and how to best balance messaging.

Conversely, Baby Boomers are retired or likely nearing retirement, limiting their earning potential in the coming years. The confluence of lower income potential and rising prices makes inflation a wallet impactor to the average Baby Boomer.

Inflation adds uncertainty to a Baby Boomer’s day-to-day shopping and budgeting decisions and may impact whether they keep some level of employment in retirement or dig deeper into their nest eggs. Leaning into personalized offers and alternative products will be advantageous with Baby Boomer customers.

Although the variation by generation is distinct, optimizing marketing efforts is not as simple as focusing solely on the single dimension of age. True optimization through the heated inflationary period will need a multi-dimensional approach, developing personalized offers based on customers’ IRM at a generational, geographical, and HHI level coupled with brand transactional history. This level of personalization will enable your brand to meet your customer based on their inflation experience.

Regardless of who your customer is or where they live, inflation is impacting them. Diagnosing whether inflation is merely an influencer or an impactor is all in the data. Check out the Inflation Resilience Dashboard to see how other generations are impacted by inflation and the variance across different areas of the country.