Understand the demographic forces that affect your marketing environment

  

Date Posted: 11/8/2012 3:11:41 AM

Posted By: sashoo  Membership Level: Silver  Total Points: 382

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Demographic forces concern changes in population in terms of the size and the characteristics. Demography is important to marketers because it helps to predict the size and growth rates of markets, and the need for products such as schools, one-person housing and homes for the elderly. Two major demographic forces are world population growth and the changing age distribution in western countries

World Population Growth

Overall, the global population is expanding at an increasing rate. However, the rate of growth is uneven across the world. In particular, the population in developed economies is expected to be stable or shrinking, whereas countries of Africa, India, ‘other Asia’ and Latin America are expected to account for over 90 per cent of the projected population increase. As these countries grow more youthful, the developed countries will play host to an aging population. In 2025, half the population of Europe will be over 45 years old. For the next decade, the world population is expected to grow by an average of 97 million per year.

The changing world population distribution suggests that new markets outside the developed economies may provide attractive opportunities, although the extent to which this force progresses will depend on a concomitant rise in income levels in the less developed world. The problem is that the major growth is predicted to be in countries that are already poor. Concern for their well-being is growing among people in the developed world. One response is the social marketing of family planning and birth control. Companies such as Hewlett-Packard and Citibank are increasingly focusing their attention on these so called ‘pre-markets’ (i.e. those not yet sufficiently developed to be considered consumer markets). For example, Hewlett-Packards aims to sell, lease or donate a billion dollars worth of computer equipment and services for these under-served markets.

Age Distribution

A major demographic

change that will continue to affect the demand for products is the rising proportion of people over the age of 45 in the EU, and the decline in the younger age group. The fall in the 15-44 age group suggests a slowdown in sales of such products as CDs, denim jeans and housing. However, the rise in over-45s creates substantial marketing opportunities because of their high level of per capita income. They have higher disposable income and higher savings than younger people, tend to benefit from inheritance wealth, and are healthier than ever before. In France, for example, the average per capita disposable income for households headed by a retired person is now higher than the average for all households, and people over 60 (who constitute 18 per cent of the population) consume more than 22 per cent of the French gross domestic product (GDP).

Another demographic change is the growth in the number of retired people in Europe. This is partly because people are living longer but also because of early retirement. For example, although the official UK retirement age is 65, and likely to rise, early retirement schemes and redundancies have meant that a high proportion of people below this age group are, in effect, retired—for example, over 30 per cent of men aged 55-64 have already left the labor market. High disposable income, coupled with increasing leisure time, means that the demand for holidays and recreational activities such as golf, fishing and walking should continue to increase. Also there should be increasing demand for medical products and services, housing designed for elderly couples and singles, and single-portion foods. Understanding the needs of the over-45s presents a huge marketing opportunity, so that products can be created that possess the differential advantages valued by these people. In reality it is likely that there are a number of subgroups according to age band, which will allow market segmentation to be used. The overall implication of these trends is that many consumer companies may need to reposition their product offerings to take account of the rise in ‘grey’ purchasing power.

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