The Decline of the Middle Class and End of the Hot Price Point

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The United States toy industry came of age after World War II. The combination of an economic boom in the U.S.  (Europe and Asia were in collapse) and an aspirational generation of former G.I.'s created a robust toy economy on the shoulders of a rising middle class.

This sizeable middle class allowed toy companies and retailers to think in terms of an "average retail price point" or an average "hot price point." That was because there was an actual, average American, at least in the economic sense.

That was then, and this is now. The American middle class has, according to the Pew Research Center, been steadily shrinking for the last three decades. And how is the Middle Class defined? According to an Investopedia article, "America's Slowly Disappearing Middle Class", being Middle Class means that you have an income of between "…roughly $35,000 to $106,000 a year for a household of three."

In doing my research, however, I found that the Middle Class is not disappearing because people are getting poorer. Instead, it is because, yes, some people are getting poorer, but other people are also getting wealthier.

What this means for the toy industry is that the notion of an average American may be out-of-date. And, if that is the case, so is the concept of trying to hit " the hot price point."

Think about it, even if there was still a large Middle Class, does it make sense to establish a hot price point for a group whose incomes stretch between $35,000 and $106,000? That's a pretty big stretch. Someone making over $100,000 a year has more expendable income than someone making $35,000 a year.

Now add in a growing upper economic class, and a poverty level that starts at $25,100 (according to the Department of Health and Human Services) and you can see that hitting one hot price point is absurd.

Yes, $29.99 may be the right price point for people who make $50,000 a year, but what about those who make $100,00, $250,000 or more. Shouldn't we have multiple hot price points? What about $49.99 or $99.99 or even $249.99? Aren't we leaving money on the table by underselling a large and prosperous segment of the country?

For better and for worse, this is no longer our grandparents America. Habits acquired by a mid-20th-century toy industry may no longer apply. Its time to move on. What do you think?

 

4 thoughts

  1. I think there is still plenty of room for the $20-$30 blockbuster toy that becomes a favorite of a generation – if not a classic.

  2. I realize this isn’t really what your article is about, but there is no way that 35K is middle class. You wouldn’t be able to pay for most apartment rents on that income. Maybe the middle class wouldn’t be disappearing if they adjusted the range.
    Dollar General sells inexpensive toys (arts & crafts), many of which are knock-offs of the same overpriced toy sold at other stores. I guess it’s easier to have different priced products at different stores, but if everything is purchased through Amazon it’s harder to segment.

  3. Do you propose selling the same product at different price points? If so, how do you propose doing that. Or are you saying we should have different products at different price points.

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