External Influences on
Consumers
MKT 750
Dr. West
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
This week’s
readings
Last week’s
readings
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?
Snapshot of Demographic Trends
Snapshot of Demographic Trends
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.
Snapshot of Demographic Trends
Snapshot of Demographic Trends
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.
Snapshot of Demographic Trends
Snapshot of Demographic Trends
US Growth Projections
• The “mature” segment of the population
will increase dramatically.
Projected Growth (Millions)
65+ segment will increase from 80
12.7% to 23.5% of the population 70
60
85+ segment will increase from
1% to 5.9% of the population
50
40
30
20
10
0
1980 1990 2000 2010 2030 2050 2080
65+
85+
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
Snapshot of Demographic
Trends
• National Trends & Projections
Buying Power (billions of dollars)
1,000
900
800
700
600
500
400
300
200
100
0
Hispanic
Black
Asian
1990
2000
2002
2007
Selig Center For Economic Growth, 2002
How to stay informed …
• AdAge now owns American Demographics
– www.adage.com
• US Census
– www.census.gov
• Read broadly!
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”…
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–
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Single
Newly married
Full nest I
Full nest II
Empty Next
Solitary Survivor
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
Stages of the Household Life Cycle
Identifying with Subcultures
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?
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
Generational Influence
Life
Stage
Cohort
Experiences
Current
Conditions
Culture/
Upbringing
Values
Marketing
Communications
Preferences
Marketplace
Behavior
Understanding American Generations
13%
9%
12%
24%
27%
15%
Pre-Depression
Depression
Baby Boomers
Generation X
Generation Y
Millennials
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
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
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 selfsacrifice and individual accomplishment
• Focused on the present and very career oriented
• Highly educated, “above the law”
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
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
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
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
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
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
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
Cultural Influence
Symbols/
Language
Heroes/
Infuencers
Lifestyle/
Customs
Values
Marketing
Communications
Preferences
Market
Behaviors
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?
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…?
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?
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?
Self-Oriented Values
•
•
•
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•
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Active/Passive Lifestyle
Sensual gratification/Abstinence
Material/Nonmaterial
Hard Work/Leisure
Postponed/Immediate Gratification
Religious/Secular
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.
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
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–
–
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Household or group decision making
Word of mouth influence
Social dynamics and reference groups
Role models and aspirational influences
Household Decision Making
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
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.
Multi-step Flow Model
Likelihood of Seeking WOM
Do You Know a BzzAgent?
• BzzAgents actively share their opinions and
experiences with others and earn points for
doing so (see www.bzzagent.com)
• BzzAgents are
– Naturally strong communicators
– Trained how to talk about products and services
with others
– Honest in sharing their opinions
– In touch with new products and trends
What is WOM?
• WOM is not…
– Street teaming where people hand out
freebies and flyers
– “Shill” or “roach” marketing where firms hire
actors to create staged conversations
– Spamming where people send e-mails to
people who don’t want them
– Pseudo on-line opinions where firms post fake
blogs and reviews
What is WOM?
• WOM is …
– Honest – Real – Powerful!!!
– It is something we all do everyday…its how
we communicate
– It is a shared opinion about a product or
service
– It is perceived as much more credible than
marketing communication because
• It isn’t “self-serving” and you hear about the pros &
cons
Benefits of WOM
• Receiver:
• Sender:
– Prestige and power
– Reduces risk
– Increase confidence – Enhanced position
within a group
– Increase likelihood of
– Reduce doubt about
social acceptance
one’s own choice
– High credibility
– Reciprocity
– Saves time
– Increase the cohesion
– Enhanced relationship within a group
Creating “Buzz”
• Viral Marketing leverages the word-of-mouth
channel of information
• Not a new approach…we have known a lot
about the power of word-of-mouth
– It’s twice as effective as radio advertising
– Four times as effective as personal selling
– Seven times as effective as newspapers and
magazines
Creating “Buzz”
• Identify the opinion leaders/influentials to
get the ball rolling
– Grassroots efforts can be very effective
• If you have something “newsworthy” get
the message out to the media
– PR is a great way to get the buzz going
Social Networks
• Scale-Free
• Distributive
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Social Networks
• Scale-free networks tend to
have “hubs” and “spokes”
– Identifying the individuals who
are connected to multiple “hubs”
will speed the spread of
information
Reference Group Influence
• Informational Influence: when an
individual uses the opinions or actions of
peers as information
• Normative Influence: when an individual
engages in a behavior to gain a reward or
avoid sanction from peers
• Identification influence: when an
individual internalizes the group values
and norms
Understanding Social Needs
• Brands that have recognized the social
needs of their customers are reaping
benefits by facilitating the development of
brand communities
– These communities are based on social
relationships among “fans”
– They enhance the attachment members feel
toward the brand and provide value through
the sharing of experiences and information
Characteristics of “brand community”
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Consciousness of kind
A common enemy
Shared rituals and traditions
A social hierarchy
Norms of behavior
A sense of moral responsibility
Assignment
• Reading
– Finish your readings in Chapters 4 - 7, and 13
• Individual assignment
– You might want to consider putting together some multiple
choice questions for the exam
– These can be posted on the class discussion board in the
general area so others can read and study from them
• Team Assignment
– You should have your recruits in place for your primary data
collection soon
– Next time we will discussion ethnographic research techniques
and your team should have thought through what questions they
intend to ask of teens and Clipper Associates.