Do you know Danica from the Philippines, Peter from London, Nargis from India, M

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Do you know Danica from the Philippines, Peter from London, Nargis from India, Marina from Russia, Chieko from Japan, or Miran from the United States? These are some of the babies whose parents claimed they were the 7th billion human born into the world. The world population continues to grow, even though women are having fewer children than before. Markets are made up of people, and to stay competitive, marketers must know where populations are located and where they are going. The fertility rate in the United States is declining and the population is aging, creating opportunities as well as threats for marketers. That is why tracking and predicting demographic trends are so important in marketing. Marketers must plan to capitalize on opportunities and deal with the threats before it is too late. Develop a presentation on a specific demographic trend in the United States.  Explain the reasons behind this trend and discuss the implications for marketers (1 page maximum).

Explanation / Answer

Presentation on a specific demographic trend in the United States

In the last decade, firms have been witnessing market fragmentation and constantly evolving

products and services. These changes have put pressure on the marketing function to shift their strategies

from stable markets to turbulent markets. In fact, due largely to the evolving market place, firms have

started questioning the performance and productivity of the marketing function (Sheth and Sisodia 1993).

As firms approach the 21st century, they need to be cognizant of and anticipate changes in customer

behavior. The marketing function needs to convert anticipated customer behavior changes into

opportunities for sustained competitive advantage (c.f., Ashley & Morrison 1997).

In this paper, we examine the impact of demographic trends on consumption behavior.

Demographic factors have always been of interest to marketers. In an exhaustive examination of six major

marketing journals, Pol (1991) found that 16.7% of the articles contained demographic components. For

example, Murphy and Staples (1979) examined the family life cycle and its impact of consumption patterns.

Similarly, Burnett (1981) used demographic information to discriminate between blood donors and non-

donors; McCann and Reibstein (1985) used demographic trends to forecast change in product demand;

and Kalyanam and Putler (1997) examined the effect of demographic variables on brand choice. In spite of

the presence of demographic data in marketing research, researchers have called for a better technique and

more expanded application (Pol 1991).

In the last decade there have been a rapid evolution of technologies in product and service design

and manufacturing, distribution, and personal use that have facilitated changes in consumer behavior. For

example, communication technologies such as the internet, personal computers, and wireless

communications have changed shopping and consumption behavior. In the US automobile industry,

consumers (estimated at a quarter of buyers) peruse the Internet before they visit a dealer. This trend

toward adopting new technologies is expected to grow. About half of the US population look forward to

technology innovations (Fry 1994).

The purpose of our paper is to evaluate changes in demography and facilitating technologies and

the impact of these changes on consumer behavior. The paper recommends methods to develop high

performance marketing organizations for the next millennium. In the next section, we explicate the

demographic shifts occurring in the US and the impact of these changes in customer and market behaviors.

The subsequent section examines the technology evolution that has and will facilitate further customer

changes. We then discuss the changes in the marketing process based on changes in consumer behavior

grounded on the above mentioned trends.

Demographic Information

Demographic information has traditionally and extensively been utilized by marketing researchers.

Factors such as age, income, gender, and social class are regarded as reasonably good predictors of buyer

behavior and market related activities in macro and micro contexts (Pol 1991; Hansman and Schutjens

1993). Practitioners use demographic information very extensively and a large number of geodemographic

data bases are available. In academic research, the focus of inquiry has been on a specific behavior or a

specific demographic group. For example, Gupta and Chintagunta (1994) examined the impact of

demographic variables on segment membership whereas Kalyanam and Putler (1997) examined the effect

of demographic variables on brand choice. Retail location models (c.f., Ghosh and McLafferty 1987) and

transportation mode choice models (Tybout and Hauser 1981) have also utilized demographic information.

Regarding demographic groups, Murphy and Staples (1979) examined the family life cycle and its impact

of consumption patterns.

In spite of the extensive use of demographic data in marketing research, there has been a very

limited set of research that has examined the impact of demographic shifts on customer behavior at a

broader level. Marketers that understand the impact of demographic changes on their markets will have a

sustainable competitive advantage (Mendes 1989; Pampel, Fost and O'Malley 1994). Demographic

examination becomes more important as we approach the 21st century as change is taking place as faster

rate than is perceived by marketers (Pol and Thoma 1995). The primary reason is that there are four

demographic shifts taking place at the same time -- an occurrence that is unprecedented. These four trends

are: an aging but affluent population, the rise in working women households, increasing ethnic diversity,

and decline of the middle class. The reasons for focussing on these trends are fourfold:

• The trends are occurring simultaneously and the impact will be synergistic.

• The impact of these trends will be long-term and may last two to three generations.

• The impact of these trends will be large for society in general and marketing in specific.

• The trends will create a discontinuity in the practice of marketing. This discontinuity will be similar to

technologies that disrupt market places and place incumbents at a disadvantage (Bower and

Christensen 1994; Christensen 1997).

Aging but Affluent Population

The United States, and developed countries in general, are experiencing a well-documented aging

of the population. In 1900, there were 3.1 million people over the age of 65 in the United States. That

number increased to 12.4 million in 1950 and 25.5 million 1980. It will be approximately 25 million in the

year 2000. More interesting than the absolute numbers of elderly is the distribution. In a country such as

India, the proportion of people over 65 has remained quite steady, between two and three percent of the

population (Watkins 1994), while the corresponding figure in the United States is currently 13 percent, and

will rise to 20 percent by the year 2030 (Cory 1995). Countries in Western Europe have experienced an

even greater shift. As of 1992, 15 percent of Germans, 16 percent of Norwegians and 18 percent of

Swedes were over the age of 65 (Gattuso 1998). Italy, Japan, Germany, United Kingdom, France and

Canada are expected to have higher proportion of over 65 citizens when compared to the US (Pan and

Roberts, 1999)

According to the U.S. Census Bureau, by the year 2020 more than 50 percent of all Americans will

be older than 40, and one-third will be over 50 years old. In the last 25 years, the 50 plus population has

increased by nearly 50 percent, while the population of Americans under 18 has declined (Adler 1996).

The variation among developed countries is quite significant. Japan will go from being the

youngest of the G-7 in 1950 to the oldest in 2020, while United States will become the youngest. As the

developed world ages rapidly, the developing world continues to increase in population. The world

population, currently about six billion, is increasing at a rate of more than 90 million a year. It is projected

to reach 8 billion by the year 2020. At this rate, the relative population weight on developed countries will

decline from about 24 percent of the world’s population to about 17 percent, with a similar decline in

relative economic weight also anticipated (McRae 1996).

Even more important that the aging of the population may be the fact that the number and

proportion of younger people is falling rapidly. In Japan for example, about it is only 1.5 births per woman

of reproductive age; this would reduce the population to 50 million by the year 2100. Likewise Italy’s

population would go from 60 million to 20 million (Schendler 1998).

The fundamental characteristics of developed and developing countries will start to diverge in

important ways. Older societies will have clearly different needs and values and younger ones. Thus, while

globalization and communication technologies are pushing the world towards convergence, demographic

factors are operating in the opposite direction, and are likely to lead to a fundamental divide between older

and younger nations and richer and poorer customers.

There are some fundamental myths about the aging population. Chief among these is that older

consumers are economically poorly off. The facts are quite different (c.f., Colvin 1997). The individuals

with the highest incomes, largest savings and most valuable stock portfolios are aged between 50 an 85. In

fact, approximately 80 percent of U.S. savings are in the hands of people over 50, 77 percent of U.S. assets

and 50 percent of discretionary spending in the economy (Corlett 1998).

Implications for Marketers: Companies that target youth markets will find themselves increasingly

dependent upon the developing world. Since North America is aging at a slower rate than Western Europe

and Japan, it will continue to be an attractive market for such companies. Most companies will have to

specifically alter their products and marketing approaches to suit the needs and desires of an older market.

Some of the changes will be straightforward, such as a shift toward saving rather than lending products for

the financial services industry. Healthcare and passive recreation will be significant growth industries.

Goods and services will have to be increasingly user-friendly. Older consumers are also much more

receptive to relationship marketing approaches than younger ones. They want products that are durable

and reliable, and are less subject to current fashions (McRae 1996).

Older consumers can and do spend heavily on products and services that are of interest to them.

The 50 plus population includes many frequent travelers, and marketers such as Club Med have developed

special offerings for them. They also represent an important market for children’s products; while the

typical parent today has two children, 50 percent of grandparents have five or more grandchildren, and 28

percent have eight or more (Adler 1996). The spending on grandchildren has lead to the development of

expensive children's clothing stores that caters to grandparents rather than parents.

“Active aging” has become an important phenomenon in developed countries. While there has

been a trend toward longer retirements, there has been a greater trend toward a lengthening of working

years (Blommestein, Hicks and Vanston 1998). Many healthy, active seniors keep on working into their

70s, 80s and even 90s. Peter Drucker has argued that the retirement age should be increased to about 79

to account for the changes in longevity and expected length of retirement since the early part of the century

(Schendler 1998).

Most marketers do not explicitly address the senior market, relegating it to a niche rather than

treating it as the emerging mainstream. As a result, consumers over 50 are spending less time and less

money on traditional shopping. Instead, they are spending their money in industries that are specifically

designing offerings for them, such as travel, recreation fitness and gardening. Many have little

understanding of developmental psychology -- how consumers change over their life spans in terms of the

values, attitudes etc. (Abdel-Ghany and Sharpe 1997). The reverse is also true as some marketers have not

been able to break out of the elderly market. The average age of buyers of Detroit made cars is the late

‘50s to early ‘60s and Detroit is in danger of being virtually shut out of the Baby Boomer market (Russell

1998).

The three biggest concerns of aging consumers are health preservation, wealth preservation and

safety/security. The healthcare sector, already close to 15 percent of GDP, will continue to grow in

absolute as well as relative terms. The desire for health preservation extends to health consciousness in all

things. Food and beverage producers will have to develop healthier products. The sales of neutraceuticals,

or health enhancing foods, are expected to exceed in 100 billion dollars by 2000. This is consistent with

the trend toward a holistic approach to health that has been gaining ground in recent years. Women are

taking the lead in this movement; they have a higher rate of chronic disease, live longer and make most

family healthcare decisions (Lofton 1999).

Older consumers want a variety of conveniences such as installation in-home services and home

delivery (Cory 1995). For example, Anderson Consulting estimates that home delivery will become a $130

billion per year market.

The Rise in Working Women Households

As of 1995, 77 percent of women aged 30-49 were in the workforce. The proportion of women in

the workforce is nearing 50 percent, and women own almost 35 percent of all small businesses (Golterman

and Hopkins 1997). Full-time working women now represent 56% of all women, and will rise to 65% by

2000.

Implications for Marketers:-

The consumer behavior of men and women is starting to converge.

While men have traditionally been regarded as more hedonistic than women, they are now seen as

exhibiting the trait of introspection, previously thought to be more characteristic of women. Many are

struggling to become what Watts Wacker calls “SNAGs” or “sensitive New Age guys” (Francese 1995).

At the same time, women are seen as becoming more hedonistic. As a result of these types of changes,

traditional gender-oriented advertising approaches are no longer effective. More men are now doing

grocery shopping. Traditionally, men have been known for fast shopping, high levels of brand loyalty, less

attention to bargains and more impulse purchases. Now that is changing; men are becoming more

sophisticated shoppers, and are increasingly concerned with the health benefits of the foods they purchase.

At the same time women are becoming more harried shoppers focusing on convenience and meal solutions

(Golterman and Hopkins 1997).

Greater time pressures brought on by the rise in working women are causing American families to

seek new ways of reducing stress. The trends are toward healthy de-stressing: new ways of relaxing,

becoming calmer without using alcohol or other vices. Massages, spa vacations, yoga, outdoor activities

and even tea are replacing the happy hours of the 1980s (Francese 1995).

Working women have put tremendous pressure on the “traditional” family. The old model was

that women would stop working when they decided to have kids. The new model is that most women

must work if they want to have children. As a result of the loss of a full-time homemaker, the family as a

unit of social and consumption analysis is changing. As single-person or dual-career households proliferate,

the need to define a separate existence or space will result in highly individualistic lifestyles and behaviors

even within family units (c.f., Santi 1988). We will increasingly have to look at individual behavior as

family members will exhibit more of a roommate lifestyle. This will increase the need for personalized

attention to each household.

Also as a result of this trend, the majority of households are now relatively time-poor and money-

rich. Marketers that impose a time or place constraint will be less successful. Time in particular will

become the most precious commodity. As activities compete for time, consumers will redesign tasks that

consume too much time, and embrace time-saving and time-shifting technologies. They will demand

hassle-free (“get it right the first time”) service on demand. Also as consumers become more exposed to

risk in their work lives, they become more risk averse in their consumption behavior, looking for money

back guarantees and other forms of assurance (Francese 1995).

The increased numbers and visibility of women in the workplace has led to a gradual blurring of

gender distinctions as jewelry, cosmetics, personal care items and plastic surgery are all growth markets for

men. One of the impacts of demographics is on food away from home (Pol and Pak 1995). For example,

cooking is fast becoming a dying art as a third of our meals are eaten out now that will rise to two thirds.

Of the remaining, 50% are not cooked by us at all. The kitchen is increasingly the communication center of

the house rather than the food center.

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