Marketing is an essential part of a business because it helps to drive sales by making customers more aware of your products and services. In this article, we will discuss the difference between discretionary and non-discretionary categories in marketing.
| Key Takeaways |
|---|
| Understanding discretionary and non-discretionary categories is crucial in marketing. |
| Discretionary categories involve optional spending, while non-discretionary categories are essential expenses. |
| Balancing marketing strategies for both categories can optimize budget allocation. |
| Tailoring campaigns to consumer behavior within each category can enhance effectiveness. |
| Analyzing market trends and economic conditions aids in strategic decision-making. |
What Is Marketing?
Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that will satisfy individual and organizational objectives.
Marketing involves identifying market needs through a research and analysis process; determining how best to satisfy those needs; creating a communication strategy; and implementing tactics for communicating with consumers using multiple channels.[1]
To maintain a competitive advantage in a global marketplace, marketers must understand both their customers (their buying behavior) but also their potential customers’ emerging needs.
The challenge is to provide goods or services that will result in more value than the resources required to produce them.
Discovering the rules that govern effective marketing research can significantly impact your decision-making process. If you’re interested in learning more about these essential rules, check out our comprehensive guide on Discovering the Top 10 Rules of Marketing Research.
How To Define Discretionary And Non-Discretionary Categories?
Discretionary categories are products that aren’t essential to survival, but people still buy them for pleasure. For example, if you’re going out for dinner at a nice restaurant with your family (a non-discretionary category), you may want to order dessert (a discretionary category).
Non-discretionary categories are products that are essential to survival and therefore must be purchased to survive.
An example of this would be food – it’s one of our most basic needs as humans and without it, we cannot survive; therefore all food products fall into the “non-discretionary” category because they’re required for our survival.
How Does A Recession Affect Discretionary And Non-Discretionary Product Categories?
A recession is a period in which the economy contracts. It’s characterized by a decline in production and employment, as well.
Recessions are generally caused by negative shocks to the economy. These can include oil price increases, technological changes that make certain industries obsolete, or war.
In some cases, recessions are self-imposed for example, when the Fed lowers interest rates to boost spending and the resulting inflation causes people to put off purchases until prices fall again.
During a recession, discretionary spending tends to drop because consumers are more concerned about their current financial situation than they were before the recession began.
On average, Americans spend less on entertainment (going out for meals or going out at all) and nonessentials (clothes or beauty products).
They also may cut back on luxuries like travel but still maintain their cable TV subscriptions because these things have become necessities in our lives!
Incorporating social media into your marketing research strategy can yield valuable insights into consumer behavior. To explore the techniques and benefits of using social media for research, take a look at our article on How to Use Social Media for Marketing Research.
Which Product Categories Are Considered Discretionary Or Non-Discretionary?
Non-discretionary categories, on the other hand, are those that you have to spend money on. This can include utilities (like water and electricity), groceries and food items, transportation (gasoline or bus fare), insurance payments, and bills.
These are often considered necessities because they’re required for survival or basic living. Therefore, non-discretionary spending is more of an obligation than discretionary spending which is often spent on things such as entertainment and travel
What Is The Difference Between Discretionary And Non-Discretionary Income?
Discretionary income is the number of money people has left over after paying for necessities. Necessities are expenses like housing and food, as opposed to discretionary items, which are things like cable TV or a new car.
Non-discretionary income is required to pay for essentials such as rent or mortgage payments, child support, and other bills that must be paid regardless of how much money you make in a given month.
The term “non-discretionary” means that consumers don’t have any choice about spending their money on these items; if they don’t pay them, they’ll face dire financial consequences.
Unveiling the secrets to effective marketing research can unlock a world of insights and opportunities. If you’re ready to delve deeper into the strategies that lead to success, explore our article on The Secrets to Marketing Research for valuable tips and guidance.
How Does A Recession Affect Discretionary And Non-Discretionary Spending?
When a recession hits, it affects discretionary spending more than non-discretionary spending.
For example, when the economy takes a downturn and people’s salaries start to shrink or disappear altogether, they’re not going to be able to spend as much on fancy dinners and expensive vacations.
But if someone loses their job or their income is cut in half, they still need food for themselves and their family. Even if you’re only making $25K instead of $50K per year now, there’s no way you can afford not to buy groceries!
In other words: If your income goes down during a recession (whether due to layoffs or pay cuts).
It’ll end up taking away from your discretionary spending first which means that even though you might want a new kitchen remodeling project or vacation trip abroad every once in a while…when push comes to shove and money is tight…
You’re probably going to have less fun than usual until things get back on track financially again!
Effective marketing research often relies on powerful tools to gather and analyze data. Curious about the tools that can elevate your research efforts? Dive into our guide on The Top 10 Most Powerful Marketing Research Tools You Haven’t Heard Of to find out more.
What Are Some Examples Of Discretionary Spending Vs? Nondiscretionary Spending In A Business?
Discretionary spending is spending that’s optional, while non-discretionary spending is required. As you can probably imagine, this can get a little bit confusing.
Let’s try an example: let’s say you work for a company that makes dog sweaters and you’re thinking about how to expand your business. You could choose to focus on selling more sweaters, but it would be difficult for your customers to buy sweaters if they don’t have dogs!
So instead of focusing on selling more products, let’s say the owner wants to add some new flavors of ice cream. If there are multiple flavors available in the store, it will make people want ice cream more often; they won’t just eat one flavor all summer long!
This means they’ll come back more often and buy other things as well like hot dogs or hamburgers which might mean even more money coming into their bank account at the end of each month or year (depending on how much effort has been put into marketing).
Prioritizing your marketing research efforts can lead to more focused and impactful outcomes. If you’re looking for a strategic approach to prioritization, our article on 11 Questions to Help You Prioritize Your Next Marketing Research Effort offers insightful questions to guide your decisions.
Conclusion
So, to summarize our discussion, we can conclude that discretionary and non-discretionary categories are different because of the way they are purchased by consumers.
Discretionary items are purchased when consumers have extra money and feel like spending on themselves while non-discretionary items must be purchased for people to live comfortably or meet basic needs.
They both fall under various types including food, clothing, transportation costs, etc., which can affect how much someone spends on them within each category.
Further Reading
Explore these additional resources for more insights into discretionary and non-discretionary categories in marketing:
SHRM – Discretionary vs. Non-Discretionary Bonus Short Description: This article from SHRM discusses the differences between discretionary and non-discretionary bonuses in human resources and compensation management. Read more.
Investopedia – Consumer Discretionary Short Description: Dive into Investopedia’s explanation of consumer discretionary, a key concept in economics and market analysis. Understand how these consumer choices impact the economy. Read more.
ONS – Economic Analysis Quarterly: December 2021 Short Description: The Office for National Statistics (ONS) presents economic analysis and price indices, providing insights into inflation and economic trends. Explore the December 2021 report. Read more.
FAQs
What is the difference between discretionary and non-discretionary bonuses?
Discretionary bonuses are typically awarded at the employer’s discretion and may vary in amount, while non-discretionary bonuses are usually predetermined based on specific criteria or performance.
How does consumer discretionary impact the economy?
Consumer discretionary spending refers to non-essential purchases consumers make. This spending can provide insights into consumer confidence and economic health.
What insights can I gain from economic analysis and price indices?
Economic analysis and price indices offer valuable information about inflation, price trends, and economic conditions, helping individuals and businesses make informed decisions.
How are discretionary and non-discretionary categories relevant to human resources?
Understanding discretionary and non-discretionary bonuses can aid HR professionals in designing compensation plans that align with company goals and employee performance.
What factors contribute to economic trends highlighted in the ONS reports?
The ONS economic analysis covers various factors, including consumer behavior, market trends, and external influences, providing a comprehensive view of economic shifts.
Costantine Edward is a digital marketing expert, freelance writer, and entrepreneur who helps people attain financial freedom. I’ve been working in marketing since I was 18 years old and have managed to build a successful career doing what I love.