Average income data

Average income data is information about the typical income of people in a group or area. It is often given as a single average figure, such as the average household income in a town, or split into income bands, which are groups of earners such as under £20,000, £20,000 to £40,000 and over £40,000.

Identifying target customers

How much people can afford to spend depends largely on what they earn, so average income data helps a business work out who its target customers are likely to be. A shop selling low-price everyday items looks for areas with plenty of people in the lower bands, while a seller of premium goods looks for the higher bands.

A business selling budget homeware would focus on Northfield and Millbrook, where customers are more price-sensitive. A seller of designer furniture would head for Ashcombe instead.

Market entry and product development

Average income data also supports two other decisions. Before market entry (opening in a new area or selling to a new market), a business checks whether enough local people can afford its product: a gym charging £45 a month needs plenty of customers nearby who still have money left after paying for rent, bills and food. For product development, rising average incomes in an area might justify a premium version with extra features, while falling incomes might justify a cheaper, basic version that still sells in volume.

An average is only one figure for a whole group, so it hides the mix of high and low earners inside it. Two areas with the same average income can contain very different numbers of possible customers, so it pays to read the income bands alongside the average.