External Influences on Consumers

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. This week’s readings Last 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

6. Snapshot of Demographic Trends

7. Snapshot of Demographic Trends • 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

9. Snapshot of Demographic Trends

10. Snapshot of Demographic Trends • 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

12. 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.com • US Census • www.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 Life Stage Cohort Experiences Current Conditions Culture/ Upbringing Values Marketing Communications Preferences Marketplace Behavior

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, h2o • 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 Symbols/ Language Heroes/ Infuencers Lifestyle/ Customs Values Marketing Communications Preferences Market Behaviors

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.