Chapter 5

1. Chapter 5 Demographic Dimensions of Global Consumer Markets www.mhhe.com/fourps

2. At the end of this presentation, you should be able to: • Know about population and income trends in global markets — and how they affect marketers. • Understand how U.S. population growth is shifting in different areas and for different age groups. • Know about the distribution of income in the United States. • Know how consumer spending is related to family life cycle and other demographic dimensions. • Know why ethnic markets are important —and why they are increasingly the focus of multicultural marketing strategies.

3. Marketing Strategy Planning and Demographic Dimensions of Final Consumers (Exhibit 5-1)

4. Marketing Strategy Planning and Demographic Dimensions of Final Consumers (Exhibit 5-1) Final Consumers Organizational Consumers CH 6: Buying Behavior of Final Consumers CH 7: Buying Behavior of Business & Organizational Customers CH 5: Demographic Dimensions of Final Consumer Markets

5. Marketing Strategy Planning and Demographic Dimensions of Final Consumers (Exhibit 5-1) Final Consumers • Global Consumer Markets • Population trends • Income growth & distribution • Urbanization, literacy, & other • differences CH 5: Demographic Dimensions of Final Consumer Markets • U.S. Consumer Market • Population trends • Income growth & distribution • Spending patterns • Ethnic dimensions

6. Understanding Potential Markets 3 Main Questions What are its relevant segmenting dimensions? (e.g., demographic; psychographic; behavioral, and others) Where is it? (i.e., Location) How big is it? (i.e., Is it large enough to be profitable, or expected to grow?)

7. Checking Your Knowledge • When deciding whether or not to target a potential group of • customers, which of the following is NOT one of the three • important questions you need to be able to answer? • How big is the market? • What are the market’s relevant segmenting dimensions? • What products or services do the customers currently use? • Where is the market?

8. Marketers Search for Growing Markets Other Countries--U. S. makes up less than 5 % of population in the world Current Population--statistics tell marketers the sizes of countries as they are right now Population Trends--project growth rates into the future

9. Increasing Density-population is becoming more concentrated Increasing Urbanization-movement of people from rural areas into more industrialized urban areas Other Population Trends

10. No Money, No Market! Gross National Income (GNI)--total value of goods and services produced by a country’s economy in a year by its residents Gross Domestic Product (GDP) + = Income earned foreigners by who own resources in the nation GNI / Country’s Population Size = Per Capita Income

11. Literacy and marketing problems– affect advertising; product labeling What do third world consumers really need?--may need low-cost products that satisfy basic human needs • Much segmenting may be required-World Bank; • Central Intelligence Agency; • U. S. Census Bureau. • - Issues Related to Development

12. Where Does Your State Stand? (Exhibit 5-3)

13. Exhibit 5-4: Changes in the U.S. Birthrate, 1935-2006 (p.130)

14. Age Distribution • Average age is increasing • Post World War II Baby Boomers • Still a big, influential group • 45-64 group to grow dramatically • 30.8% in this decade (2000-2010) • 65 and over group to grow dramatically • 15.0% in this decade (2000-2010) • 35.8% in next decade (2010-2020)

15. Growth Trends Young and Old (birthrate is the number of babies born per one thousand people in the population) Key Trends Population Growing, but…U.S. is less than 1% per year Birthrate – Boom (1946 to 1964) or Bust (1975 to 1976) Graying of America (Baby Boomers enter middle age and senior citizenry)

16. Appealing to the “Matures”

17. Not Just for the Younger Generation © 2009 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

18. Trends in US Households and Families Married Couple without children—married later High Divorce Rate—50%; 80% remarry “Traditional” Family Single Adult Households Unmarried Living Together

19. Rural toUrban Urban toSuburban US Population Mobility--Local political boundaries may have less meaning for marketers than they used to have PopulationMobility

20. The Mobile Ones © 2009 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

21. Checking Your Knowledge • Of the 13% of Americans that move every year, which • category captures the majority (almost 70%) of those • moves? • Out of the U.S. • From one region to another • Within the same state • Within the same county • Within the same neighborhood

22. Changing US Income Patterns--overall level of income is higher than it was fifty years ago, but real income growth has slowed

23. Income Dimensions of the US Market (Exhibit 5-7)

24. Income Distribution • Growth in real income has slowed down • Middle income groups in U.S. enjoy real choices • U.S. distribution like Canada, Western Europe, Japan, Australia, New Zealand • Higher income groups still have much of the spending power • Top 20% income group has over 48 percent of total income! • Bottom 20% income group has only 4 percent!

25. Taxes Necessities food and housing Different Types of Spending Total Income Discretionary Income Disposable Income

26. Types of Income • DISPOSABLE INCOME • Income that is left after taxes • DISCRETIONARY INCOME • What is left of disposable income after paying for necessities

27. A Luxury Item-- Purchases of upscale motorcycles like Victory come from discretionary income

28. The Family Life Cycle (Exhibit 5-8)

29. Family Life Cycle Implications Acceptance of New Ideas (more willing to try new products & services) Reallocation for teenagers (can exert a lot of influence over their parents) Key Issues Senior Citizens (live longer and have more active lifestyles than in the past) Empty Nesters (often have higher discretionary income)

30. Family Life Cycle © 2009 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

31. Interactive Exercise: Family Life Cycle

32. Checking Your Knowledge • Which group likely spends the most money on durable • goods? • Young single. • Young married without children. • Young married with children. • Middle-aged married with children • Older married without children

33. Insights from the Census © 2009 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

34. Ethnic Dimensions of the US Market Buy Differently Increasing Median Income Avoid Stereotypes High Growth Rate

35. Appealing to Ethnic Markets

36. Study Question 1 Jane is a sales rep for a computer producer. Her salary last year was $30,000, and she earned another $5,000 in sales commissions. She paid $6,000 in taxes, and spent $8,000 on food, housing, a car, and other "necessities." What is Hannah's disposable income?  A. $29,000B. $34,000C. $15,000D. $24,000E. $ 8,000

37. Study Question 2 Ken earned $20,000 last year as a carpenter. He paid $6,000 for food, rent, medical expenses and other "necessities." There was little construction work in February, so he took a trip to the Caribbean and spent $4,000. What was Byron's disposable income last year?  A. $ 4,000B. $20,000C. $10,000D. $12,000E. There is not enough information

38. Study Question 3 A young working couple earned $50,000 last year. Of that, they paid $16,000 in taxes and $15,000 in rent, food, insurance and other necessities. Their discretionary income for the year was:  A. $35,000.B. $50,000.C. $19,000.D. $34,000.E. $15,000.

39. Study Question 4 Mary was just promoted to marketing manager for her company. She also gets a big raise with the promotion. Because her discretionary income will increase, which of the following products is MOST likely to benefit? A. furnace repairs.B. automobile insurance.C. a CD stereo system.D. medical services.E. grocery staples.

40. Study Question 5 Mike is a marketing analyst and made $28,000 last year. He paid $5,000 in taxes, and spent another $10,000 for food, housing, a car, and other "necessities." Mike's discretionary income was:  A. $28,000B. $13,000C. $23,000D. $18,000E. There is not enough information to tell.