Understanding relevant demographic shifts is essential to an organization's strategic planning and marketing, according to Kenneth Gronbach, author of "The Age Curve."
The book takes on what could be a mind-numbing topic, but Gronbach does it with interesting style and intellectual edification.
The central core of the book is: "Smaller generations buy less stuff; larger generations buy more stuff." Knowing how this plays out in a particular industry requires understanding the trends.
No. 1. Typically, a 5 percent drop in market size in a particular niche can be catastrophic. Since everything in business is affected by supply and demand, whenever there is a reduction in the base (size) of a given market, then there will be more supply than there is future demand. For example, Gronbach points to the U.S. motorcycle market in 1986-1992. Honda sales nationwide dropped by a cataclysmic 80 percent during this period, with declines also adversely impacting Suzuki, Yamaha and Kawasaki. Why? Because with the Generation X males born between 1965 and 1984, there were 11 percent fewer customers coming into the prime market demographic for motorcycles.
No. 2. Generations are bound together by similar wants/needs, motives and events. Since generations also vary greatly in size, this makes consumption habits more predictable. Take, for example, boomers who for years customarily taxied their kids around to endless activities until those kids could drive on their own. This similar want/need progressed linearly across the generation, making sales for minivans and sports utility vehicles unsurprising. Fast-forward to Gen Xers, and with 11 percent fewer consumers in the base, General Motors and other auto manufacturers compete for 9 million fewer buyers of automobiles in general.
No. 3. If a business markets itself to smaller niches like Gen Xers, Silents (64 to 83 years old) or the GI generation (84 and older), its best bet is to reduce exposure to future underperforming markets and to introduce new products or services that may create new demand.
No. 4. One company that gets the changing demographics and concomitant buying preferences of its customers is Toyota. According to Gronbach, Toyota has invested heavily in learning what Millennials (aka Yers, born after 1980) want and expect. The Gen Y market will expand for automobiles (while others peak and/or decline) for the next 30 years, and Toyota repositioned itself several years ago to be on the leading edge of this trend. The launch of Scion is a good example; do a Google search to learn more.
No. 5. Expect brand loyalty to shift for two potential reasons: (a) Boomers increasingly consider themselves more open-minded to trying other brands, especially if the value proposition delivers simpler, easier-to-use, time-saving products or services they can trust; and (b) Generation Y may become the most brand-disloyal generation in U.S. history. However, savvy marketers can't avoid Yers. They have a 500 percent higher consumption appetite than their boomer parents.
No. 5. Rearview marketing is dangerous. This common trap occurs when companies base future marketing decisions too extensively on where the company has been versus where it should be going. Consider Levi Strauss, which in 1989 had $8 billion in sales of jeans but refused to change when its 18-to-34-year-old market declined. Boomers no longer fit the jeans, and remember, 11 percent fewer Xers came into the market. The result? Revenues declined 75 percent to $2 billion.
The Age Curve is as enlightening as it is sobering. Generational shifts will impact everything from goods and services to the level of state, local and federal taxes needed to run government.
Pay attention. Stay ahead of the curve.
Springfield-based consultant Mark Holmes speaks nationally on increasing employee and customer retention and improving employee performance. He is the author of "Wooing Customers Back" and "The People Keeper," and his ideas have been featured in the Wall Street Journal and on Fox Business Network. He can be reached at mholmes@thepeoplekeeper.com.
