Student Loans Highlight the Need for Marketing Segmentation Based on Discretionary Income

By Braden Salas

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Marketing Coordinator

Are your marketing campaign segments prepared for September? As student loans return to the financial landscape, companies face a renewed urgency to adapt their marketing strategies to suppress or target consumers burdened by debt. Households must begin to forecast their monthly budget with the added student loan payment, estimated to be $503 per month per person on average.

With such an expense added back into the fold, student loans returning have significant implications for discretionary income, making it imperative for businesses to segment their marketing audiences based on the financial capacity of households. By tailoring their approaches to specific consumer segments, companies can effectively engage and cater to the unique needs and preferences of individuals with limited discretionary income, fostering loyalty and maximizing their market reach. Conversely, companies can hone in on those individuals with significant discretionary income to build relationships with customers who have the means to spend right away.

Understanding Discretionary Income

Discretionary income represents the funds available to individuals after deducting essential expenses, such as rent, utilities, and loan repayments. This differs from Disposable Income, which only accounts for the amount left in a person’s or household’s income after taxes. Individuals burdened with student loan debt often face reduced discretionary income due to substantial monthly loan repayments on top of other monthly bills. This limited discretionary income alters their spending behavior, making them more discerning in their purchasing decisions.

The Scale and Timing of Student Loan Repayment

Student loan debt has reached staggering proportions, impacting millions of individuals. In the United States alone, outstanding student loan debt exceeds $1.7 trillion, with an average debt of around $35,000 per borrower. With such financial obligations, individuals have limited discretionary income, impacting their purchasing power and consumption habits. Over 43 million Americans hold federal student loans, which have been at 0% interest since March 13th, 2020. Now, after 3.5 years, as inflation and interest rates have soared, federal student loans are returning, and companies must swiftly re-strategize their campaigns to adapt to this shift.

The repercussions will undoubtedly be felt during the holiday shopping season, making it crucial for businesses to act promptly and capitalize on this unique situation where possible.

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Segmenting by Discretionary Income

By segmenting audiences based on discretionary income, companies can reach those with specific financial capabilities. For example, reaching those with a high discretionary income is vital if you’re a high-end or luxury products retailer. If you offer budget-friendly products or services, your target audience is likely those with limited discretionary income.

If you’re selling products with prices in the middle of the road, consider segmenting your customers into three discretionary income buckets: low, medium, and high. Customize the messaging and product recommendations accordingly to appeal to each segment.

Personalization and Customer Loyalty

Segmenting marketing audiences based on discretionary income lets companies personalize their communication and offerings, fostering a stronger connection with their target consumers. By recognizing individuals’ financial constraints, companies can empathize with their challenges and provide relevant solutions. This personalized approach builds trust, loyalty, and understanding, which can translate into long-term customer relationships.

Don’t Let Data Hold You Back!

At LiftEngine, we understand that companies might not have access to detailed customer information such as discretionary income, just as they wouldn’t have access to personal details like birth month, hobbies, or income. That’s why we’ve developed LaunchPad, an intuitive Software as a Service platform designed to enhance your customer data with over 500+ data elements seamlessly.

With LaunchPad, you can effortlessly segment your customer data into targeted marketing audiences. We recommend starting the segmentation process with discretionary income in the current climate. Targeting customers with the financial capacity to afford your products or services can maximize your marketing efforts and ensure your message reaches those most likely to convert. LaunchPad’s advanced segmentation capabilities allow you to further refine your audience based on specific niche characteristics, enabling you to tailor your marketing campaigns precisely.

One of the significant advantages of LaunchPad is its ability to simplify the segmentation process, saving you valuable time and resources. Our platform streamlines the data enhancement process, providing actionable insights and empowering you to make informed marketing decisions. By leveraging our powerful tool, you can optimize your marketing budget, avoid wasted advertising spend, and protect your brand awareness during sensitive financial times.

With LaunchPad, gaining access to valuable customer data and enhancing your segmentation strategies has never been easier. Join countless businesses benefiting from our platform and maximize your marketing efforts today. Discover the competitive edge that LaunchPad provides, saving you money while delivering targeted messaging to the right audience.

About LiftEngine

Since 2005, LiftEngine's primary mission has been to help clients better understand and connect with their most responsive prospects and customers, online or offline. Our expertise is behind the marketing campaigns of 400+ clients.

Behind LiftEngine is LiftBase, our proprietary addressable consumer database. Comprised of 250 million US consumers, 140 million US households, and 1,000+ enhanced data elements, LiftBase powers our audience development services and industry-leading products, PortalLink and LaunchPad.

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Published on Jul. 05, 2023, Last Updated on Mar. 28, 2024