1. External Influences on Consumers MKT 750 Dr. West

2. 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

3. Last week’s readings Last week’s readings This week’s readings This week’s readings

4. 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?

5. Snapshot of Demographic Trends

7. 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.

8. Snapshot of Demographic Trends

10. 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.

11. Snapshot of Demographic Trends

13. US Growth Projections The “mature” segment of the population will increase dramatically. 65+ segment will increase from 12.7% to 23.5% of the population 85+ segment will increase from 1% to 5.9% of the population Projected Growth (Millions)

14. 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

15. Snapshot of Demographic Trends National Trends & Projections

16. Buying Power (billions of dollars) Selig Center For Economic Growth, 2002

18. How to stay informed … AdAge now owns American Demographics –www.adage.comwww.adage.com US Census –www.census.govwww.census.gov Read broadly!

19. 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

20. 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

21. Stages of the Household Life Cycle

22. Identifying with Subcultures

23. 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?

24. 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

25. Generational Influence Marketplace Behavior Marketplace Behavior Preferences Values Life Stage Life Stage Current Conditions Current Conditions Cohort Experiences Cohort Experiences Marketing Communications Culture/ Upbringing

26. Understanding American Generations

27. 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

28. 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

31. 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 self- sacrifice and individual accomplishment Focused on the present and very career oriented Highly educated, “above the law”

32. 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, h 2 o – Bio Chemistry Dye graying hair (men and women) Use anti-age creams Resort to tummy tucks, eye lifts, and botox

34. 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

35. 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

36. 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

37. 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

38. 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

39. 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

40. Cultural Influence Values Market Behaviors Market Behaviors Marketing Communications Symbols/ Language Symbols/ Language Heroes/ Infuencers Heroes/ Infuencers Lifestyle/ Customs Lifestyle/ Customs Preferences

41. 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?

42. 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…?

43. 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?

44. 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?

45. Self-Oriented Values Active/Passive Lifestyle Sensual gratification/Abstinence Material/Nonmaterial Hard Work/Leisure Postponed/Immediate Gratification Religious/Secular

46. 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.

47. 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

48. Household Decision Making

49. 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

50. 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.

52. Multi-step Flow Model

53. Likelihood of Seeking WOM

54. 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

55. 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

56. 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

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

58. 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

59. 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

60. Social Networks Distributive Scale-Free

61. 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

63. 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

65. 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

66. 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

67. 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.