Marketers must understand the different demographic groupings that exist and the demographic changes that are constantly occurring.
Identify common demographic traits used by marketers and demographic changes in the current marketplace
- The traditional demographic groupings identified by marketers are the baby boomers and Generation X. Each of these has its own characteristics, which forces marketers to act differently depending on who is their target market.
- Demographic changes are occurring in different areas due to different external forces. Aging populations, more educated workers, and a changing market structure mean that people spend money in different ways and on different things. Marketers must be aware of this and react accordingly.
- Generations Y and Z pose a new challenge to marketers, as their tastes and spending habits differ from previous generations. As this group discovers itself, so marketers will be able to discover them as well.
- immigration: The act of immigrating; the passing or coming into a country for the purpose of permanent residence.
- baby boomer: A person born in the postwar years (generally considered in the USA and other Allied countries as between 1945 and the early 1960s), when there was an increase in the birth rate following the return of servicemen at the end of World War II.
- demographics: The observable characteristics of a population, such as physical traits, economic traits, occupational traits, and more.
Demographics describe the observable characteristics of individuals living in the culture. Demographics include our physical traits, such as gender, race, age, and height; our economic traits, such as income, savings, and net worth; our occupation-related traits, including education; our location-related traits; and our family-related traits, such as marital status and number and age of children.
It is important that marketers understand the demographic segment that they are focusing on. One differentiation is by generation–two of the biggest demographic groups are the baby boomers and generation X. These historically have been of great importance and focus to marketers. More recently, generations Y and Z have emerged, and marketers must ensure they understand how to target them most effectively. One challenge with the younger generations is that many of them are yet to understand their own tastes and desires.
Demographic trait compositions are constantly changing, and no American, Japanese, or Brazilian is “typical” anymore. There is no average family, no ordinary worker, no everyday wage and no traditional middle class. Still, marketing managers must understand consumers intimately. As we see next, some trends are old, others are new. For instance, the aging of the population has been going on for several decades, but births and birth rates in recent years have been much higher than expected. Immigration is also greater than predicted, and so is the backlash against it. In the US, interstate migration to the south and west are old trends. What is new is heavier movement in the US from the northeast rather than from the midwest and rapid growth in the mountain states.
Consider the following demographic changes and how they affect marketing:
- Households are growing more slowly and getting older. About half of all households are aged 45 and older and growing at an annual rate of one percent compared with nearly two percent in the 1980s. Marketing communicators must plan for a greater number of middle-aged households, consumers who are experienced and have a better understanding of price and value. These consumers have an interest in high-quality household goods and in-home health care.
- The traditional family barely exists now. Married couples are a slim majority of US households. Only one-third of households have children under 18, and nearly one-fourth of households are people who live alone. However, married couples dominate the affluent market, as the vast majority of very high-income households are married couples. The long-term trend of high growth in nontraditional types of households and lack of growth among married couples can only mean further segmentation of an already segmented marketplace.
- The continued increase in education. Most adults in the United States still have not completed college (approximately 67 percent), but that number continues to decline. An increasing number of people have attended some college or have an associate or technical degree. More skilled workers mean more knowledgeable and sophisticated consumers who expect more information about product attributes and benefits before making a purchase.
- Jobs that do not require physical strength keep growing in number. Also, the extremely high cost of employee benefits suggests that the use of temporary workers and independent contractors will continue to grow. Marketing managers must assess whether consumers who do not have corporate benefits will become more risk-averse because they lack the safety net of company-provided pension plans and medical insurance (related: see ).
- People in the US are moving south. More than half (54 percent) of US residents live in the ten largest states, and more than half of US population growth between 1990 and 1999 occurred in these ten states. New York had the largest population of all states in 1950, but in the 1990s, fast-growing Texas pushed the barely growing New York to number three. Why? More than half of the four million immigrants that located in the United States between 1990 and 1995 moved to California, Texas, or Florida.
- The share of aggregate household income earned by the middle 60 percent of households has shrunk from 52 percent in 1973 to 49 percent 25 years later. Meanwhile, the share of such income earned by the top 20 percent (average income USD 98,600) increased from 44 percent to 48 percent. In other words, the total purchasing power of the top 20 percent of US households now equals that of the middle 60 percent.