This might have gotten lost in your rush to get back up to speed after the long weekend, but is a very important exercise in the continuous reevaluation of your core target and how well you are engaging them. The areas for potential growth in the general audience may surprise you, but we all need to keep these figures in mind while formulating strategic decisions and planning for what moves are likely from competitors.
I am not a believer in generic, one size fits all solutions to any problem and am not saying that now. In fact, if anything these numbers speak to how poorly a non-localized formatic solution would address regional demographic and psychographic differences.
How are you different from a station with a similar format in other regions of the country? What are the things about your market that make your area different and how do those things resonate on your air? Does your imaging underline this localism without pandering? How do you work with the air staff on insuring their communication is maximizing this connection? Why the hell is he asking all of these obvious questions?
I really think we need to jump all over these topics when they come up outside of the quarterly strategic meetings because we can approach them from a non-structured place rather than from a corporate exercise. We all tend to tell stock holders, executives, national, regional, and upper management what they want to hear when in the confines of a measured environment while being in the moment with an open mind and encouragement to explore usually brings about fresh thinking and nontraditional answers to the same old questions.
Roll up your sleeves and break out a legal pad for some brainstorming points with your staff and let’s get into it. Gar
The Changing Face of the U.S. Consumer
What We Can Learn from Census Data, and Why It Matters for Brands
By Peter Francese
Published: July 07, 2008
NEW YORK (AdAge.com) — The marketing community, already dealing with a slumping economy and an increasingly consumer-controlled media marketplace, must confront another new reality: The face of the American consumer is changing dramatically.
It’s not news that the nation is aging, but the fact that the average U.S. head of household is just six months shy of 50 is a startling statistic.
Also factor in that regional demographics are diverging more than ever before. The young, multicultural West bears little resemblance to the old, largely white Northeast, where many communities are nearly childless. And that’s to say nothing of the rapid and economically vital influx of immigrants.
To examine what these demographic shifts mean for brand marketing, let’s take a look at some of the most prominent trends.
Growing old: Impact of aging households
The average U.S. head of household is now nearly 50 years old (49.5, to be precise). But here’s the bigger story: More than 80% of the growth in the number of households in the next five years will be among those headed by people 55 and older. That’s pretty scary stuff for the youth-obsessed.
The balance of household growth is projected to be among newly forming households headed by people 25 to 34. We can expect little or no household growth, and perhaps even a slight decline, in the highest-income and highest-spending household demographic: households headed by someone 35 to 54.
The chart above shows the profile of U.S. households by age in 2007, according to the Census Bureau. That chart explains a lot about why consumer spending has held up so well.
Two age groups — 35 to 44 and 45 to 54 (together about 47 million households) — have the highest number of dual-earner married couples, and they account for almost half (49%) of total U.S. consumer spending.
As these two age groups shrink in the next five years (by as much as 1 million households), a larger share of future increases in consumer spending may have to come from those high-growth households headed by someone 55 or older — many of whom spend much more on services than they do on goods.
Picking up slack
Can these older consumers, whom many in marketing have ignored for so long, pick up the spending slack? Well, they’ve been doing pretty well lately. The Bureau of Labor Statistics reports in its annual consumer-spending surveys that households headed by people 55 to 64 increased their total spending at almost twice the rate of all households (60% vs. 32%) in the most recent five-year survey period.
No other age group comes even close to that growth rate. One reason for the jump in spending was the 23% growth in older households. But the other reason was rising household income. The average household headed by someone 55 to 64 had $10,600 more to spend in 2007 than the average household in that age group five years earlier.
Lest we forget, the oldest boomers are starting to get their direct deposits from the Social Security Administration and, some pundits have suggested, will thus shortly bankrupt the nation. That’s nonsense, of course, but it’s a great story.
In the next five years, aging boomers will add more than 1 million consumers per year to the 65-and-older segment — increasing its number at more than twice the rate of the past five years. This boomer-driven growth will be highly concentrated in the 65-to-74 age group, where more than 80% of that near-term growth in the 65-plus segment will occur.
Growing old: Rise of the risk-averse
Something happens when that Medicare card comes in the mail at 65. It’s your government certifying that, no matter how young you may feel, pal, you are old. And actuarially you are also at high risk for a long list of nasty health problems.
Fortunately for marketers, the chances are rising that not many baby boomers will be retired by that age. But that doesn’t change the presence of that card in the wallet and the psychological effect it’s likely to have.
For one thing, it fosters more risk-averse behavior. It says to consumers: “Better be more careful with your spending, because you will never be as healthy or have as much money as you’ve had in the past.”
Risk-averse behavior can happen at any age. But for consumers, there is no doubt it increases with age and proximity to, well, you know what. From a marketing point of view, this will present several challenges.
Magic words
The first is to more fully understand the mind of the risk-averse. A risk-averse consumer wants to hear at least two of these three words: guarantee, safety and experience.
Risk-averse consumers are also very much interested in price (read: senior discount), but a low price by itself probably will not close the sale if there is any perceived risk of nonperformance.
The increasing number of such consumers suggests we will see greater use in advertising of product or service warranties, prominent displays of long corporate histories, exhibits of financial strength and testimonials from happy customers.
Once consumers of a certain age accept and/or embrace their grandparent life stage, age-denial messages (“60 is the new 40″) are not likely to get much traction among the newly or soon-to-be Medicare-eligible.
Growing old: Open vs. closed minds
One of the other consequences of aging consumers is that it becomes harder to change minds that are often closed to new ideas. Once an opinion about a brand or concept has been firmly established, older consumers can become quite possessive of their long-held attitudes and are loath to give them up.
One example is the negative attitudes so many consumers have acquired about U.S. motor vehicles. Overcoming hard negative perceptions built up over the years is vastly more expensive than attracting consumers who have no strong feelings about vehicle brand or country of origin.
As Barack Obama has found out, confronting older people’s strongly held beliefs and calling them out is a minefield to be traversed with great care. The reason: Resolutely opinionated consumers don’t want to admit that their minds are closed, and they resent it when anyone suggests they’re not willing to consider a new idea.
A frontal assault on a closed mind has little chance of success. A sly or somewhat humorous message using a nonthreatening spokesperson can sometimes open a locked mind and perhaps get a previously inflexible consumer to at least consider trying a product or service again.
Consumer-opinion websites — Epinions, for example — have been a principal enabler of hardening consumer attitudes.
Before the emergence of these sites, a few unhappy customers couldn’t do much damage. Now their unfiltered rants can be read by millions of prospects. And they could have a bigger effect on consumers who may already be tilting risk-averse. Those consumers might say, “Why take a chance when those two people had a bad experience?”
Critical ad role
This new world means marketers can not only lose control of their messages but also experience greatly diminished selling effectiveness because of a few bad reviews. That suggests a vastly more critical role for advertising research and testing, especially for products or services that have, shall we say, checkered pasts.
But advertising research is becoming trickier in a world where rising numbers of consumers have only cellphones and are not receptive to research calls.
Older consumers, however, are far more likely to have landlines than younger consumers. The Centers for Disease Control and Prevention recently found that more than one-third of young (under 30) households had no landline, compared with less than 10% of older (45-plus) households.
The increasing use of caller ID for screening out unknown callers and the rising number of older couples with second homes suggest a re-evaluation of research plans. There is no doubt that finding out what’s really on consumers’ minds is becoming more difficult.
This suggests a greater role for point-of-sale research. Brief face-to-face conversations with consumers at randomly selected retail outlets can provide valuable insights into their attitudes and the reasons for their product acceptance or rejection. Bottom line: We can do a lot better at overcoming a customer’s objections if we know more about the real reasons behind those objections.
Consumer chasm: Distance widening between consumer types
The emergence of the title of chief marketing officer elevated the marketing function to a level of importance equal to that of finance and the chief financial officer. Within the C-suite, we may see the creation of a new position under the CMO: consumer-segments communicator.
That person will be the one who keeps everyone in the firm up to speed on the different and fast-changing channels through which each segment of consumers can be most efficiently reached, queried and persuaded.
The online youthful and mostly wireless consumer inhabits a world far apart from the older consumer who subscribes to a newspaper and uses a telephone directory.
The college-educated consumer with a white-collar job in a wired office has much less in common and much less interaction with the high-school-educated, blue-collar worker than in the past. Their product and brand preferences can diverge just as widely as their views on issues such as free trade, gay marriage and global warming.
Escalade gulf
It’s hard to overstate the attitudinal gulf between a Prius-owning, environmentally aware consumer and the driver of an Escalade who thinks global warming is just a bogus scheme to take away his or her 3-ton tank. This suggests a revised look at the concept of target marketing and marketing efficiency.
In the past, target marketing focused mostly on what TV shows people in a segment watched or what radio formats they preferred or what periodicals they read.
To some extent, that type of targeting can still work. But precision targeting in the future will rely more heavily on ethnographic research into the culture, beliefs and activities of target consumer groups, as well as their media preferences.
Regional disconnect: Sharply diverging and diverse regional markets
There is often geographic as well as psychographic separation among segments. It is more common than ever for older people to live in places where there are few or no children. And the places where young adults choose to live are more often apart from where older people reside.
There are many towns in New England, for example, where only one in five households has any children, compared with a nationwide average of more than one in three. The six New England states are all among the 10 oldest states by median age, so the region leads the nation in terms of an aging consumer base.
Sometimes this is by design, such as in age-restricted housing developments. But more often it’s an unplanned separation by age or socioeconomic status. Whatever the reason, the geographic segmentation of consumer markets has become sharper.
The Northeast has one-fifth of the nation’s elderly, and that segment is projected to increase by at least 25% in the next decade. By contrast, the region has only 17% of the nation’s children, and no growth is projected for that segment. It also has 20% of the nation’s white, non-Hispanic population and the same percentage of Asians, but just 14% of Hispanics.
Younger West
By contrast, the Western region, which also has about one-fifth of the nation’s elderly, is home to nearly one in four children (24%). This region has just under a fifth of the nation’s white, non-Hispanics (19%) but is home to almost half of U.S. Hispanics (42%) and Asians (46%).
Women, 2007. Source: Census Bureau
One number that illustrates the widening differences among regions and subregions (Census divisions) is the median age of women (see chart). The higher that number, the fewer women in the childbearing-age range and thus the fewer heavy-spending married couples with young children.
According to the latest data from the Census Bureau, half the women in the six New England states are 40 or older. That’s five years older than the median age in the Western South subregion (Texas, Oklahoma, Louisiana and Arkansas). From a marketing perspective, those five years translate into huge differences in product preference and media behavior.
The Western states also have low female median ages, led by California, at 35.8, which (along with Texas, at 34.3) has one of the lowest of any of the big states . By comparison, the 2007 median age of U.S. women was 37.9.
By now it must be pretty clear that lower median age correlates with higher diversity. Conversely, a high median age means less diversity. The best examples are the nation’s two oldest states in terms of women’s median age: Maine (42.6) and Vermont (41.9). They are also the two least-diverse states: 95% of their residents are white, non-Hispanic consumers.
Two key variables driving states and regions apart as consumer markets are interstate migration and immigration. The latest population estimates from the Census Bureau show a net flow between 2000 and 2007 of 3.6 million people from the Northeast and Midwest to the South and West. At least half of those inter-regional movers were under 35.
Those same estimates show the arrival of 8 million immigrants in that seven-year period — two-thirds of whom went to the South or West. Whether the source is interstate or international, most people who move are young, and they either bring their children with them or have children later. The long-term effect is to make some states or regions older and others younger consumer markets.
New faces: Growing diversity of young adults, children and teens
A big share of future spending growth may come from the 26 million households headed by people under 35. A majority of these young households spend well in excess of their relatively meager incomes on a wide array of consumer goods, according to Bureau of Labor Statistics surveys.
Source: Census Bureau
Households headed by people under 35 account for only a little more than a fifth of consumer spending by themselves, but they cause vast spending by others on their weddings and babies. There really should be a separate category in the national GDP figures for competitive grandparenting by baby boomers. They can be seen in any Hanna Andersson outlet buying armloads of pricey kids’ clothes.
Young singles and young families with children are more diverse, better educated, more environmentally aware, deeper in debt and more globally connected via new media than any previous generation.
Not too surprisingly, they are more open to new ideas, more tolerant than their predecessors, and more aware that they live and compete for jobs in a global economy.
These young adults are also the first ones many boomers and older people have predicted will not live as well as previous generations. Millions of young consumers have responded to that with a dismissive shrug. Perhaps it’s hard for them to take seriously predictions about themselves by a technically challenged crowd that doesn’t even send text messages.
But there is more that separates these young-adult consumers from their parents’ and grandparents’ generations than texting competence. One defining difference can be seen in the the chart to the left: Only one in five consumers over 65 is Hispanic, Black or Asian, compared with two in five consumers under 45.
Mobile teens
Hispanic women, in fact, have a median age 14 years younger than the white, non-Hispanic population (see chart).
1. Other includes other races and multiracial. Source: Census Bureau
There are about 25 million U.S. teenagers 12 to 17, and any casual observer would guess that 24.99 million of them have cellphones. These teens and their parents are among the most diverse consumer segments in the nation, depending on where they live. Three-fifths of families with teens live in the South (36%) or West (24%) while only 18% live in the Northeast and 22% in the Midwest.
The chart on the right illustrates the great variation in diversity by region. More than three-quarters of teens in the Midwest are non-Hispanic whites, compared with only about half in the West and South. Variations are even greater from state to state. In California and Texas, two of the largest states, more than half of household heads are Hispanic, Black, Asian or multiracial.
Locating teenagers and young adults is, of course, not enough. Speaking to them with words and images they can relate to is a major challenge for senior — and I mean senior — marketing executives. Young consumers can sniff out condescending pander from boomers like new moms detecting a dirty diaper two rooms away.
Speaking of new moms, their educational attainment is at a record high. Nearly half (45%) of women 25 to 39 have a college degree, compared with just one-third of women 30 years older (55 to 69). More education means more-independent, savvier consumers with greater ability to evaluate product or service claims and decide for themselves which represent the best value for them or their children.
Claritas/Nielsen projections of households headed by people under 35 suggest that growth in the next five years will be pretty minimal. Their income may increase, but their relatively small numbers suggest they are not going to replace baby-boomer household spending anytime soon.
The immigration imperative
For the past seven years, 40% of U.S. population growth has come from immigration. Five large states (New York, New Jersey, Michigan, Connecticut and Illinois) would have seen dramatically shrinking work forces and total population declines were it not for the millions of immigrants who moved to those states.
Yet anti-immigrant rhetoric on talk radio and factory roundups by Immigration and Customs Enforcement have created the impression that immigrants are a scourge on our nation.
According to the Pew Research Center, 42% of Americans think immigration is a “big problem.” A not-too-well-informed woman on a TV talk show with me said flatly: “They’re drinking all our water.”
In her book “Bet You Didn’t Know” (Prometheus Books, August 2008), Cheryl Russell writes that Americans have become increasingly agitated about immigrants. Most upset, it seems, are people who live where there are the fewest immigrants.
“People most affected by immigration are least concerned about it, evidence that fantasy — not reality — is driving the narrative and stoking the immigration debate,” Ms. Russell reports.
Fortunately, cooler and much-better-informed heads are analyzing the situation and coming to sensible conclusions. Dowell Myers, writing in Communities & Banking (a quarterly publication of the Federal Reserve Bank of Boston), concludes his article “Immigrants’ Contributions in an Aging America” with this paragraph:
Immigration opportunities
“The future of America will be formed at the intersection of two great demographic forces. With the inexorable aging into senior status of the giant baby-boom generation, immigration may be the best way to get needed workers, taxpayers and home buyers. … The best thing to be done for America’s future is to think ahead and optimize the intersection between aging America and immigration.”
He might have added shoppers to the list of things we need as boomers move out of their prime spending years, 35 to 54. We could certainly use more immigrant families to bulk up the smaller Generation X and repopulate our base of consumers.
The rapidly aging Northeast region could certainly use more immigrants as well to care for its large and growing multitude of retirees.
Perhaps the best thing forward-looking marketing folks can do is to become more fully engaged in the national debate about immigration. It’s bizarre that we permit and encourage global movement of consumer goods, services and money, but not workers. Given our aging population, we clearly need to permit higher levels of immigration to feed our future labor-market needs.
At the very minimum, we should stop treating immigrants so shabbily. After all, they are the only ones likely to bail us out of our heavily mortgaged future.
Change agent
What Peter Francese says you need to know — and do — to reach the changing consumer
1. GENERATION AARP
THE TREND: The average age for a U.S. head of household is 49.5— just six months shy of getting a sign-up pitch from AARP. The first boomers will turn 65 in less than three years.
MARKETING CHALLENGE: Older consumers tend to be more risk-averse and less open to new ideas.
WHAT TO DO: Don’t pander (“60 is the new 40″). Play up messages suggesting advantages such as guarantees, safety and experience.
2. CONSUMER CHASM
THE TREND: The gulf is widening among consumers when it comes to attitudes and behavior. The online- and wireless-centric consumer lives in a different world from the older newspaper reader.
WHAT TO DO: Rethink strategies for target marketing. Put more emphasis on ethnographic research into the culture, beliefs and activities of the target consumer
3. REGIONAL DISCONNECT
THE TREND: One nation, but hardly united or homogeneous. The Northeast is older, largely white with fewer children; the West is younger and more diverse. Two thirds of recent immigrants have settled in the South or West.
WHAT TO DO: For products aimed at older consumers, consider looking north and east. If you want younger consumers, pick your regions and then make sure the message resonates with a multicultural audience.
4. NEW FACES
THE TREND: The median age of U.S. Hispanic women is about 28—14 years younger than the median age for white, non-Hispanic women. Two in five consumers under 45 are Hispanic, Black or Asian (vs. one in five for 65- plus). More than half of household heads in California and Texas are Hispanic, Black, Asian or multiracial.
WHAT TO DO: If you want to be the choice of a new generation, embrace the cultures and voices of that generation.
5. IMMIGRATION IMPERATIVE
THE TREND: In the past seven years, 40% of U.S. population growth has come from immigration. Five big states (New York, New Jersey, Michigan, Illinois and Connecticut) would have seen their work forces and populations shrink were it not for new immigrants.
WHAT TO DO: Marketers need to engage in the national debate about immigration. Immigrants, after all, are a source of labor—and a prime source of new consumers.
click here to link to the adage article with graphics. click here for another snafu.
