SOCIAL FORCES OF THE ENVIRONMENT

The  social forces  of the environment include the demographic characteristics of the population and its culture. Changes in these forces can have a dramatic impact on marketing strategy.

LO 3-2Describe how social forces such as demographics and culture can have an impact on marketing strategy.

Demographics

Describing a population according to selected characteristics such as age, gender, ethnicity, income, and occupation is referred to as  demographics . Several organizations such as the Population Reference Bureau and the United Nations monitor the world population profile, while many other organizations such as the U.S. Census Bureau provide information about the American population.

The World Population at a Glance    The most recent estimates indicate there are 7.1 billion people in the world today, and the population is likely to grow to 9.6 billion by 2050. While this growth has led to the term population explosion, the increases have not occurred worldwide; they are primarily in the developing countries of Africa, Asia, and Latin America. In fact, India is predicted to have the world’s largest population in 2050 with 1.69 billion people, and China will be a close second with 1.31 billion people. World population projections show that the proportion of the world’s population in more developed countries such as the United States, Japan, Australia, and those in Europe is declining.5

What are the implications of the shifting age structure of the world population?

Another important global trend is the shifting age structure of the world population. Worldwide, the number of people 60 years and older is expected to more than triple in the coming decades and reach 2 billion by 2050. Again, the magnitude of this trend varies by region, and developed countries such as the United States are expected to face the highest growth rates of the elderly age group. Global income levels and living standards have also been increasing, although the averages across countries are very different. Per capita income, for example, ranges from $88,890 in Norway, to $45,560 in Canada, to $370 in Ethiopia.

For marketers, global trends such as these have many implications. Obviously, the relative size of countries such as India and China will mean they represent huge markets for many product categories. Elderly populations in developed countries are likely to save less and begin spending their funds on health care, travel, and other retirement-related products and services. Economic progress in developing countries will lead to growth in entrepreneurship, new markets for infrastructure related to manufacturing, communication, and distribution, and the growth of exports.6

The U.S. Population    Studies of the demographic characteristics of the U.S. population suggest several important trends. Generally, the population is becoming larger, older, and more diverse. The U.S. Census Bureau estimates that the current population of the United States is 316 million people. If current trends in life expectancy, birthrates, and immigration continue, by 2030 the U.S. population will exceed 358 million people. This growth suggests that niche markets based on age, life stage, family structure, geographic location, and ethnicity will become increasingly important.

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The global trend toward an older population is particularly true in the United States. Today, there are more than 41 million people age 65 and older. By 2030, this age group will include more than 72 million people or 20 percent of the population. You may have noticed companies trying to attract older consumers by making typefaces larger, lowering store shelves, and avoiding colors that are difficult to read (yellow and blue). Finally, the term minority as it is currently used is likely to become obsolete as the size of most ethnic groups will double during the next two decades.7

Generational Cohorts    A major reason for the graying of America is that the 76 million  baby boomers —the generation of children born between 1946 and 1964—are growing older. Baby boomers are retiring at a rate of 10,000 every 24 hours, and they will all be 65 or older by 2030. Their participation in the workforce has made them the wealthiest generation in U.S. history, accounting for an estimated 50 percent of all consumer spending.

Companies that target boomers will need to respond to their interests in health, fitness, retirement housing, financial planning, and appearance. Frito-Lay, for example, attracts baby boomers with its Lay’s Kettle Cooked potato chips, which have 40 percent less fat than regular potato chips. Similarly, Prudential offers a retirement plan and Olay offers anti-aging and restoration products for this age group.8

The baby boom cohort is followed by  Generation X , which includes the 50 million people born between 1965 and 1976. This period is also known as the baby bust, because during this time the number of children born each year was declining. This is a generation of consumers who are self-reliant, supportive of racial and ethnic diversity, and better educated than any previous generation. They are not prone to extravagance and are likely to pursue lifestyles that are a blend of caution, pragmatism, and traditionalism.

In terms of net worth, Generation X is the first generation to have less than the previous generation. As baby boomers move toward retirement, however, Generation X is becoming a dominant force in many markets. Generation X, for example, spends more on food, housing, apparel, and entertainment than other generations. In addition, this generation is on the Internet more than any other generation and also leads in terms of online spending. Surveys of Generation X consumers indicate they want online customer support; websites that are comprehensive, professional, and interactive; and advertising that is authentic, family-oriented, and unique. Generation X is also replacing baby boomers as the largest segment of business travelers. In response, American Airlines is offering travelers in-flight Wi-Fi, entertainment on demand, and personal powerports.