Demographics & Trends I

External Influences on Consumers MKT 750 Dr. West

Agenda • Snapshot of important demographic trends and how to keep on top of them • A brief look at generational and cultural influences and the need to understand them • Explore how social dynamics and word of mouth affect consumers

This week’s readings

Last week’s readings

Snapshot of Demographic Trends • Demographics tell us where demand is headed – Age, SES, Household composition, Regional Shifts

• So, what are the important trends to be aware of? – The US population more than tripled from 76 million in 1900 to 281 million in 2000. – Growth of 32.7 million in the 1990s represents the largest numerical increase in any decade in history

• Where did this growth occur?

Snapshot of Demographic Trends

Snapshot of Demographic Trends

Snapshot of Demographic Trends • The US population grew increasingly metropolitan, from 28 percent in 1910 to 80 percent in 2000. • The suburbs, rather than central cities accounted for most of the growth – By 2000 half of the population lived in suburban areas.

Snapshot of Demographic Trends

Snapshot of Demographic Trends

Snapshot of Demographic Trends • In 1900 half of the US population was less than 22.9 years old. • By 2000, half of the population was more than 35.3 years old. – The population age 65 and over increased tenfold, from 3.1 million in 1900 to 35 million in 2000.

Snapshot of Demographic Trends

Snapshot of Demographic Trends

US Growth Projections • The “mature” segment of the population will increase dramatically. Projected Growth (Millions) 65+ segment will increase from 80 12.7% to 23.5% of the population 70 60

85+ segment will increase from 1% to 5.9% of the population

50 40 30 20 10 0 1980 1990 2000 2010 2030 2050 2080

65+ 85+

Snapshot of Demographic Trends • In 1900, 7 out of 8 (87.5 percent) Americans was classified as white/not-Hispanic. • At the of the century, the ratio was 3 out of 4 (75 percent). – From 1980 to 2000, the Hispanic population more than doubled – By 2000, the percentage of minority populations ranged from… • 16 percent for people over age 65 • 39 percent for those under age 25

Snapshot of Demographic Trends • National Trends & Projections

Buying Power (billions of dollars) 1,000 900 800 700 600 500 400 300 200 100 0

Hispanic Black Asian

1990

2000

2002

2007

Selig Center For Economic Growth, 2002

How to stay informed … • AdAge now owns American Demographics – www.adage.com

• US Census – www.census.gov

• Read broadly!

The Concept of a “Household Life Cycle” • Going back to the early 1960s researchers came to understand that consumer needs change in a predictable way over time related to a “household life cycle”… – – – – – –

Single Newly married Full nest I Full nest II Empty Next Solitary Survivor

The Concept of a “Household Life Cycle” • While times and household settings have changed the concept of a life cycle remains relevant and effects… – Income level, as it relates to age and number of wage earners – Discretionary income, as it relates to raising a kids – Product category spending, but not brand selection – Household production, as it relates to time constraints

Stages of the Household Life Cycle

Identifying with Subcultures

Understanding American Generations • An age cohort is defined by common experiences and a shared history – These include political, economic, social conditions, and technological developments that shape one’s values, preferences, and consumption behavior – Remember PEST?

Understanding American Generations • Cohort analysis reveals that each generation behaves differently from other generations over time. – For example, it would be a mistake to presume that retiring Baby Boomers will behave like the Depression Era Cohort that preceded them

Generational Influence Life Stage

Cohort Experiences

Current Conditions

Culture/ Upbringing

Values Marketing Communications

Preferences Marketplace Behavior

Understanding American Generations 13%

9% 12%

24%

27% 15%

Pre-Depression Depression Baby Boomers Generation X Generation Y Millennials

The Pre-Depression Generation • These Mature or Senior consumers were born before 1930 are 25 million strong – Shared Experiences: • They grew up in traumatic times which strongly impacted their spending habits • Vanquished the Germans and Japanese • Built the suburbs and shopping malls • Developed miracle vaccines...

– Values: • Accomplished their goals through hard work and self-sacrifice • Allegiance to their country • Respect for authority who they turn to for direction and guidance

The Depression Generation • This cohort of 35 million consumers was born between 1930 and 1945 and don’t like being referred to as Seniors – Shared Experiences: • They matured during the more prosperous years of the 1950s and early 1960s • Music and television were important parts of their early lives

– Values: • • • •

They are strongly patriotic, like the generation before them Learned from their parents to be thrifty and save for a rainy day Enjoy life and love to travel Their children and grandchildren are especially valued and they spend heavily on them

Baby Boom Generation • This massive group of 80 million consumers born between 1945 and 1964 has shaped our society and economy throughout their lifetime – Shared Experiences: • Grew up during one of the most prosperous eras in recent history • Permissive parenting ala Dr. Spock • Assassination of leaders, Vietnam war, sexual revolution

– Values: • “Me” generation focused on self-improvement rather than selfsacrifice and individual accomplishment • Focused on the present and very career oriented • Highly educated, “above the law”

Baby Boom Generation • Understanding this market – They prize holding on to youth more than the previous generation • SUVs represent a symbol of youth and vitality • Fitness Revolution - want to enjoy their exercise • Vitamins, herbal remedies, fitness, h2o

– Bio Chemistry • Dye graying hair (men and women) • Use anti-age creams • Resort to tummy tucks, eye lifts, and botox

Generation X • This smaller generation is still 45 million strong and born between 1965 and 1976. – Shared Experiences: • Reached adulthood during difficult economic times • Was the first generation to be raised in dual-income households (Latch-key kids) • Likely to have been affected by divorce and AIDS

– Values: • View friends as family because they had to rely on them so much growing up • Less willing to make sacrifices for their career than BBs • Don’t have the “live for today” mentality of the BBs

Generation X • Understanding this market – This generation heralded the trend in X-treme sport and the WWF • Grunge look and irreverent attitudes

– They are currently moving into the family stage of the HLC • Housing and child related “needs” are important

– Better at saving their money

Generation Y • This group represent the next baby boom (echo boom) with 71 million consumers born between 1977 and 1994 – Shared Experiences: • The older half of this group grew up in prosperous times but the recent downturn in the economy is likely to leave a mark • Terrorist threats and security concerns will have a lasting impact but it is unclear how it will shape these individuals values and behavior as consumers • Technology and the internet will impact this generation in much the same way as television affected the Depression generation

Generation Y • We are still learning about this generation and they are only now beginning to emerge as independent consumers – Values: • Respect for ethnic and cultural diversity • Independence and autonomy

– Understanding this market • • • • •

Don’t respond to “marketing hype” Event sponsorship works well They like the ability to customize products to convey their personality Respond well to humor, irony, and the truth! Their preferences and tastes are still evolving, which makes them highly coveted

Understanding American Generations • It is important to realize that “generation” is one of many factors that influence consumer behavior, thus – The differences within generations can sometimes be greater than the differences between them…even so characterizations can be useful in understanding the nature of the group as a whole – Generations do not have sharp boundaries and therefore those who are near the age boundaries may exhibit the behavior of both groups

Our Multicultural Society • One of the major challenges markets face today is adapting to cultural diversity – African Americans – Hispanic / Latino Americans – Asian Americans

• Just as we are “diving deep” to understand teens in this class, it is necessary to immerse yourself in another culture in order to understand and respond to their needs as consumers

Cultural Influence Symbols/ Language

Heroes/ Infuencers

Lifestyle/ Customs

Values Marketing Communications

Preferences

Market Behaviors

Other-Oriented values • Individual/Collective: – Does the culture emphasize and reward individual initiative or cooperation and conformity to a group?

• Youth/Age: – Do family activities focus on the children or adults?

• Extended/Limited Family: – To what extent does one have lifelong obligations to family members?

Other-Oriented values • Masculine/Feminine: – Are rank, prestige, and important social roles assigned primarily to men?

• Competitive/Cooperative: – Does one obtain success by excelling over or cooperating with others?

• Diversity/Uniformity: – Does the culture embrace variation in religious belief, ethnic backgrounds, political views, etc…?

Environment-Oriented Values • Cleanliness – To what extent is cleanliness emphasized?

• Performance/Status – Is one rewarded based on performance or inherited position?

• Tradition/Change – Is things valued for the sake of tradition or is progress pursued?

Environment-Oriented Values • Risk Taking/Security – Are the societies heroes ones who have met and overcome obstacles?

• Problem Solving/Fatalistic – “We can do it” versus “What will be will be”

• Nature – Is nature admired or viewed as something to overcome?

Self-Oriented Values • • • • • •

Active/Passive Lifestyle Sensual gratification/Abstinence Material/Nonmaterial Hard Work/Leisure Postponed/Immediate Gratification Religious/Secular

Responding to Cultural Diversity • Firms, such as Hallmark, are responding to the needs of different minority segments by… – Developing different product offerings – Employing minorities – Working with specialty agencies who understand the culture and know how to appeal to them.

Other Sources of External Influence • Family and friends play a very important role in our lives and influence our decision making and consumption in a multitude of ways – – – –

Household or group decision making Word of mouth influence Social dynamics and reference groups Role models and aspirational influences

Household Decision Making

Group Decision Making • Understanding who plays which roles: – Initiator: The person who first recognizes a need or starts the decision process – Information gatherer: The individual who has expertise and interest and seeks information on different aspects of the decision – Influencer: The person who influences which alternatives are considered and which criteria are considered

Group Decision Making • Understanding who plays which roles: – Decision maker: The person who makes the final decision. – Purchaser: Who actually purchases the product – User: The individuals who use/consumer the product.

Multi-step Flow Model

Likelihood of Seeking WOM

Do You Know a BzzAgent? • BzzAgents actively share their opinions and experiences with others and earn points for doing so (see www.bzzagent.com) • BzzAgents are – Naturally strong communicators – Trained how to talk about products and services with others – Honest in sharing their opinions – In touch with new products and trends

What is WOM? • WOM is not… – Street teaming where people hand out freebies and flyers – “Shill” or “roach” marketing where firms hire actors to create staged conversations – Spamming where people send e-mails to people who don’t want them – Pseudo on-line opinions where firms post fake blogs and reviews

What is WOM? • WOM is … – Honest – Real – Powerful!!! – It is something we all do everyday…its how we communicate – It is a shared opinion about a product or service – It is perceived as much more credible than marketing communication because • It isn’t “self-serving” and you hear about the pros & cons

Benefits of WOM • Receiver:

• Sender:

– Prestige and power – Reduces risk – Increase confidence – Enhanced position within a group – Increase likelihood of – Reduce doubt about social acceptance one’s own choice – High credibility – Reciprocity – Saves time – Increase the cohesion – Enhanced relationship within a group

Creating “Buzz” • Viral Marketing leverages the word-of-mouth channel of information • Not a new approach…we have known a lot about the power of word-of-mouth – It’s twice as effective as radio advertising – Four times as effective as personal selling – Seven times as effective as newspapers and magazines

Creating “Buzz” • Identify the opinion leaders/influentials to get the ball rolling – Grassroots efforts can be very effective

• If you have something “newsworthy” get the message out to the media – PR is a great way to get the buzz going

Social Networks • Scale-Free

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Social Networks • Scale-free networks tend to have “hubs” and “spokes” – Identifying the individuals who are connected to multiple “hubs” will speed the spread of information

Reference Group Influence • Informational Influence: when an individual uses the opinions or actions of peers as information • Normative Influence: when an individual engages in a behavior to gain a reward or avoid sanction from peers • Identification influence: when an individual internalizes the group values and norms

Understanding Social Needs • Brands that have recognized the social needs of their customers are reaping benefits by facilitating the development of brand communities – These communities are based on social relationships among “fans” – They enhance the attachment members feel toward the brand and provide value through the sharing of experiences and information

Characteristics of “brand community” • • • • • •

Consciousness of kind A common enemy Shared rituals and traditions A social hierarchy Norms of behavior A sense of moral responsibility

Assignment • Reading – Finish your readings in Chapters 4 - 7, and 13

• Individual assignment – You might want to consider putting together some multiple choice questions for the exam – These can be posted on the class discussion board in the general area so others can read and study from them

• Team Assignment – You should have your recruits in place for your primary data collection soon – Next time we will discussion ethnographic research techniques and your team should have thought through what questions they intend to ask of teens and Clipper Associates.