1. Chapter 5:
Demographic
Dimensions of
Global Consumer
Markets

2. Chapter 5 Objectives When you finish this chapter, you should
1. Know about population and income trends in global markets—and how they affect marketers. 2. Understand how population growth is shifting in different areas and for different age groups. 3. Know about the distribution of income in the United States.
4. Know how consumer spending is related to family life cycle and other demographic dimensions. 5. Know why ethnic markets are important—and why increasingly they are the focus of multicultural marketing strategies. 6. Understand the important new terms.
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3. Identifying Potential Markets
This slide relates to the material on pp See Transparency 38 and Overheads
Money
Growth
Concentration
Literacy
Relative Buying Power
Rate of Growth
Population Density
Communication Concerns
Focus:
Focus :
Summary Overview
Identifying important market dimensions involves verifying the existence of key market success factors. Demographic information -- facts about income, population levels, growth and concentration, and changing patterns of family structure -- help marketers make better decisions in locating and serving target markets.
Important Market Dimensions
Money. Markets consist of people with money to spend. This is more than a measure of income because the cost of living varies from location to location. Marketers must know how much money a market makes and how much of that income is available for the kinds of products the company offers.
Growth. The current size of a potential market is important of course but whether a given market is growing and how fast is perhaps more important for long term planning. This is a key reason that more and more companies are considering global markets. In the US and most of the industrialized Western European countries, market growth is very slow. But in Eastern Europe, Asia, and Africa, most countries are experiencing rapid population growth. Some of these countries make excellent target markets.
Concentration. How densely populated a potential market is has important implications for marketers. Highly concentrated markets are easier to serve logistically for a number of reasons. First, they simply have more people in a single location. Secondly, highly concentrated urban centers tend to have more of the modern infrastructure of roads, railways, and shipping that facilitates physical distribution.
Literacy. The level of reading and writing present in a country, expressed as a percentage of the total population is important. For marketers, low literacy levels have profound effects on promotion and packaging, especially labels, activities that typically rely on printed words. Assuming such markets are otherwise viable, marketers must adapt symbols and pictures to communicate necessary product information successfully.
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4. ????? US Population Trends Regional Differences Birthrate
This slide relates to the material on pp See Transparencies and Overhead 50.
Shifts to Suburban
Areas
Changing Household
Composition
Aging Population
Birthrate
Regional Differences
?????
Summary Overview
Population trends in the US are important because of the sheer size of the country’s economy (GNP > 7.1 trillion dollars!). But even here, growth, not just size is of key importance. Since growth rates vary from state to state, and among subgroups that can be segmented by age, family life cycle, ethnic group, and other factors, marketers need to have accurate, up-to-date information on population trends in the US market.
US Population Trends
Regional Group Differences. Not all areas of the country are changing the same way or at the same speed. California, the most populous state is also growing quickly. But the “old East Coast” still has the largest concentration of population by region. Even so, its growth rate is declining while the relatively “empty” West (mountain states) is growing very rapidly. The Northwest shares with the West the greatest growth. The Sunbelt continues to grow but not as rapidly as in the last two decades.
Discussion Note: Point out that even within these trends, important exceptions occur. Atlanta, GA, for example, continues to grow at a high rate (+1000 people every other day!) while the rest of Georgia might be a little behind the average for the Sun Belt.
Birthrate. The birthrate is measured as the number of babies born per 1,000 people. The US “baby boom” is in turn having fewer children. This declining birthrate means slower market growth but higher disposable income per person in those markets. See following slide
The Aging Population. Lower birthrates mean the average age of Americans is higher.
Household Composition. Couples with no children under 18 at home account for more than half of all households. Single-adult households account for another one-quarter. More unmarried couples are present than ever before. Marketers must adjust packaging and product forms to meet these new household configurations.
Shifts to Suburban Areas. As people left cities for suburbs, retailers followed. Now marketers concentrate less on cities per se and more on Metropolitan Statistical Areas (MSAs) - an integrated economic and social unit with a large population nucleus.
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5. Changes in U.S. Birthrate, 1935-2005
This slide relates to the material on pp
Instructor’s Note: This slide corresponds to Exhibit 5-5 on p. 136 and Transparency 41. See also Transparency 42.
1935
1970
2005 13 19 26
Birthrate
25.0
18.7
19.4
14.6
14.0
16.6
After a peak between 1950 and 1955, U.S. Birthrates declined steadily until Following a brief rise in rates finishing about 1990, rates have again begun to fall.
Summary Overview
The birthrate is measured as the number of babies born per 1,000 people. The U.S. “baby boom” is in turn having fewer children. This declining birthrate means slower market growth but higher disposable income per person in those markets.
The U.S. birthrate hit a low in 1976 and then rose again--but only slightly. From 1980 to 1990 the birthrate was between 15 and 17. It is starting to drop again now, and this trend should continue--with an estimated birthrate of about 14.2 around the year 2000.
Exhibit 5-5
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6. Median Family Income, 1960-1996 Median income
This slide relates to the material on pp
Instructor’s Note: This slide corresponds to Exhibit 5-7 on p. 142 and Overhead 51.
1960
1980
1996
$26K
$34K
$44K
Median income
Long term income trends are important to marketing managers because strategy planning must take into account realistic growth potential. A narrow focus on a high growth period that extends a temporary rate too far into the future can ruin chances for long term success
Median Family Income
(Real) median income stopped its continuous rise during the 1970s. Since then, it has gone through periods of both upswings and decreases. But the changes in recent years have not been as great as a few decades ago.
Exhibit 5-7
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7. Income Distribution Percent of Total Income
This slide relates to the material on pp
Instructor’s Note: This slide corresponds to Exhibit 5-8 on p See also Overheads
Percent of Total Income
Middle 20%
Income Group
Lowest 20%
Top 20%
46.8% 10 20 30 40 50
4.2%
10.0%
15.8%
23.1%
Percent of Total Income Going to Different Income Groups in 1996
$0 19,680 34,315 51,086 75,316
Summary Overview
How income is distributed within a given population is extremely important. Very high income groups can afford virtually anything but constitute a relatively small market. Middle income groups offer the largest market base but only if their income growth is sustained over a long period of time.
Income Dimensions of the US Market
Growth in Middle and High Incomes. Over the last fifty years, real income growth in the US has increased to the point where even those in the lowest income groups can afford a comfortable standard of living. The proportion of people with middle incomes is much larger in the US than in most countries.
Median Income Declines. (Real) median income stopped its continuous rise during the 1970s. Since then, it has gone through periods of both upswings and decreases. But the changes in recent years have not been as great as a few decades ago. A key concern is the loss of high-paying manufacturing jobs and their replacement with lower-paying service jobs.
Discussion Note: Some researchers distinguish this trend more finely. While manufacturing jobs are declining, service jobs can be further divided into high-technology, information-based jobs requiring a highly educated, highly skilled workforce and low paying, unskilled labor service jobs. The first type pays very well, better than the lost manufacturing jobs, but there are fewer of them. The second pays considerable less than the lost jobs -- sometimes only half as much. This creates what is called a “bi-modal workforce” in the service jobs sector.
Higher-Income Share. In 1996, US median income was $42,300. The top 20 percent of families -- those with median incomes over $75, received 47 percent of all income. The top 5 percent of families -- those with incomes over $128, received more than 20 percent of all income. The lowest 20 percent -- the almost 14 million families with median incomes less than $19, received only 4.2 of all income.
Exhibit 5-8
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8. Consumer Spending Patterns
This slide relates to the material on pp and Overhead 54. See also Overhead 55.
Disposable
Income
Summary Overview
Understanding consumers often means looking at families. Family income is important because so many people live in families and most of their purchase decisions are affected by the family structure and how it changes over time.
Discretionary
Income
Key
Terms and
Issues
Consumer Spending Patterns: Key Terms and Issues
Disposable Income. Disposable income is what is left to the family after taxes. Family expenditures are figured from disposable income. Further, not all families spend all of this disposable income; they may save or invest some.
Discussion Note: The US savings rate is among the lowest in the industrialized world.
Discretionary Income. Discretionary income is what is left of disposable income after paying for necessities. Like disposable income, this too can be hard for marketers to identify because families differ on what they consider necessities. Even “basic” necessities such as food, clothing, and shelter, take on different product forms that in turn may vary in cost. Marketers are very much interested in identifying and targeting high discretionary income groups, such as single or newly married professionals with no children and no house mortgage.
Expenditure Data. The Bureau of Labor Statistics (BLS) and the US Census Bureau publish comprehensive and easily available data on family spending.
Family Life Cycle. Families progress through identifiable stages that have implications for the number and types of products that they need. Note: See following slide on the stages in the family life cycle.
Expenditure
Data
Family
Life Cycle
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9. Family Life Cycle Middle-aged divorced w/out children Young divorced
This slide relates to the material on pp
Instructor’s Note: This slide corresponds to Exhibit 5-9 on p. 145 and Transparency 44. See also Transparency 43 and Overhead 56.
Middle-aged
divorced w/out
children
Young
divorced
w/out
children
Middle-aged
married w/out
children
Summary Overview
Understanding consumers often means looking at families. Family income is important because so many people live in families and most of their purchase decisions are affected by the family structure and how it changes over time.
Family Life Cycle
Families progress through identifiable stages that have implications for the number and types of products that they need. The high divorce rate in the US (over 50%) complicates this picture somewhat but it still provides marketers with a valuable view of family needs. Within the family life cycle, different groups behave differently. For example:
Young. Young singles and young marrieds are more likely to try new products.
Teens. Teenagers, especially in more affluent families, have large discretionary incomes.
Empty Nesters. Aged between 50-64, these couples have grown children and can now spend more on themselves.
Senior Citizens. Aged over 65, this group is more affluent than ever and is growing rapidly.
Young
single*
Young
married
x-child.*
Young
married with
children*
Middle-aged
married with
children*
Middle-aged
married w/out
dep. children*
Older
married*
Older
un-
married*
Young
divorced with
children
Middle-aged
divorced with
children
Middle-aged
divorced w/out
dep. children
Usual flow Recycled flow *Traditional family flow
Exhibit 5-9
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10. Ethnic Dimensions of the US Market
This slide relates to the material on pp
Buying
Behavior
Median
Income
Growth
Accurate
Target
Rate
Summary Overview
Ethnic subgroups are an important source of new markets in the US. This is especially true because most ethnic groups (non-white or non-European descent) are growing faster than the traditional white population.
Ethnic Dimensions in the US Market
Buying Behavior. Ethnic groups often buy and consume products in behaviorally different and important ways. Marketers seek to identify these differences and adjust their marketing mixes to better meet the needs of ethnic target markets.
Increasing Median Incomes. While ethnic groups as a whole still trail white Americans in median income, that picture is changing. Moreover, that change offers important new marketing opportunities. For example, over 21percent of Black families have median incomes over $50,000 and a third of those are making more than $75,000. This is an important income segment that can be further targeted by ethnic identity.
Growth Rate. Ethnic populations are growing more rapidly than the US population as a whole. Asian-Americans almost tripled their numbers between 1980 and 2000 and now number about 10 million. Hispanic-Americans now number 29 million and should reach 41 million by making them larger than African-Americans at that time.
Targeting Ethnic Groups Accurately. From a census point of view, “Asian-American” may be sufficiently clear, but marketers must distinguish target markets more carefully. Chinese-Americans don’t respond to the same ethnically-designed marketing mix as Japanese-Americans. Marketers must avoid broad stereotypes that mislead, even offend.
Discussion Note: By one estimate, Asian-Americans comprise over forty different combinations of nationality, culture, language, and religion!
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11. Key Terms Gross National Product (GNP) Birthrate
Metropolitan Statistical Area (MSA)
Disposable Income
Discretionary Income
Empty Nesters
Senior Citizens
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