Demographics are objective, quantifiable, easily identifiable, and measurable population data.
Lifestyles are the ways in which individual consumers and families (households) live and spend time and money. Visit our Web site (www.pearsonhighered.com/berman) for several useful links on these topics.
Consumer Demographics
Both groups of consumers and individual consumers can be identified by such demographics as gender, age, population growth rate, life expectancy, literacy, language spoken, household size, marital and family status, income, retail sales, mobility, place of residence, occupation, education, and ethnic/racial background. These factors affect people’s retail shopping and retailer actions.
A retailer should have some knowledge of overall trends, as well as the demographics of its own target market. Table 7-1 indicates broad demographics for 10 nations around the world, and Table 7-2 shows U.S. demographics by region. Regional data are useful since most retailers are local and regional.
In understanding U.S. demographics, it is helpful to know these facts:
䉴 The typical household has an annual income of $50,000. The top one-fifth of house-holds earn $100,000 or more; the lowest one-fifth earn $21,000 or less. If income is high, people are apt to have discretionary income—money left after paying taxes and buying necessities.
䉴 One-seventh of people move each year, yet 60 percent of all moves are in the same county.
䉴 There are 5 million more females than males, and three-fifths of females aged 20 and older are in the labor force (many full-time).
䉴 Most U.S. employment is in services. In addition, there are now more profession-als and white-collar workers than before and fewer blue-collar and agricultural workers.
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TABLE 7-2 Selected U.S. Demographics by Region
Region
Percent of Population
Percent of Household Income
Percent Ages 18–24
Percent Ages 62 and Older
Population Per Square
Mile
ENC 15.2 15.8 9.7 16.0 156
ESC 5.8 5.3 9.4 16.7 98
M 7.0 7.2 9.9 15.5 25
MA 13.3 14.6 9.6 17.4 377
NE 4.8 5.3 9.6 17.3 207
P 16.3 16.8 10.7 14.7 50
SA 19.4 17.6 9.7 17.4 206
WNC 6.6 6.9 9.7 16.7 39
WSC 11.6 10.5 10.0 14.2 81
ENC (East North Central) = Illinois, Indiana, Michigan, Ohio, Wisconsin ESC (East South Central) = Alabama, Kentucky, Mississippi, Tennessee
M (Mountain) = Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming MA (Middle Atlantic) = New Jersey, New York, Pennsylvania
NE (New England) = Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont P (Pacific) = Alaska, California, Hawaii, Oregon, Washington
SA (South Atlantic) = Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia
WNC (West North Central) = Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota WSC (West South Central) = Arkansas, Louisiana, Oklahoma, Texas
Source: Computed by the authors from U.S. Bureau of the Census, 2008 data.
䉴 Many adults have attended some level of college, with more than one-quarter of all U.S. adults aged 25 and older graduating from a four-year college (at the least).
䉴 The population comprises many ethnic and racial groups. African Americans, Hispanic Americans, and Asian Americans account for one-third of U.S. residents—a steadily rising figure. Each of these groups represents a large potential target market; their total annual buying power is $1.7 trillion.3
Although the preceding gives an overview of the United States, demographics vary by area (as Table 7-2 indicates). Within a state or city, some locales have larger populations and more affluent, older, and better-educated residents. Because most retailers are local or oper-ate in only part of a region, they must compile data about the people living in their trading areas and those most apt to shop there. For a given business and location, the characteristics of the target market (the customer group to be sought by the retailer) can be studied on the basis of some combination of these demographic factors—and a retail strategy planned accordingly:
䉴 Market size—How many people are in the potential target market?
䉴 Gender—Is the potential target market more male or female, or are they equal in proportion?
䉴 Age—What are the prime age groups to which the retailer wants to appeal?
䉴 Household size—What is the average household size of potential consumers?
䉴 Marital and family status—Are potential consumers single or married? Do families have children?
䉴 Income—Is the potential target market lower income, middle income, or upper income? Is discretionary income available for luxury purchases?
䉴 Retail sales—What is the area’s sales forecast for the retailer’s goods/services category?
䉴 Birth rate—How important is the birth rate for the retailer’s goods/services category?
䉴 Mobility—What percent of the potential target market moves into and out of the trading area yearly?
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TECHNOLOGY IN RETAILING
Consumer Insight Magazine (www.nielsen.com/
consumer_insight) provides a good
perspective on emerging consumer trends.
䉴 Where people live—How large is the trading area from which potential customers can be drawn?
䉴 Employment status—Does the potential target market include working women?
䉴 Occupation—In what industries and occupations are people in the area working?
Are they professionals, office workers, or of some other designation?
䉴 Education—Are potential customers college-educated?
䉴 Ethnic/racial background—Does the potential target market cover a distinctive racial or ethnic group?
Consumer Lifestyles
Consumer lifestyles are based on social and psychological factors and are influenced by demographics. As with demographics, a retailer should first have some knowledge of con-sumer lifestyle concepts and then determine the lifestyle attributes of its own target market.
These social factors are useful in identifying and understanding consumer lifestyles:
䉴 A culture is a distinctive heritage shared by a group of people that passes on a series of beliefs, norms, and customs. The U.S. culture stresses individuality, success, education, and material comfort; there are also various subcultures (such as African, Asian, and Hispanic Americans) due to the many countries from which residents have come.
䉴 Social class involves an informal ranking of people based on income, occupation, education, and other factors. People often have similar values in each social class.
䉴 Reference groups influence people’s thoughts and behavior: aspirational groups—
a person does not belong but wishes to join; membership groups—a person does belong; and dissociative groups—a person does not want to belong. Face-to-face groups, such as families, have the most impact. Within reference groups, there are opinion leaders whose views are well respected and sought.
䉴 The family life cycle describes how a traditional family moves from bachelorhood to children to solitary retirement. At each stage, attitudes, needs, purchases, and income change. Retailers must also be alert to the many adults who never marry, divorced adults, single-parent families, and childless couples. The household life cycle incor-porates life stages for both family and nonfamily households.
䉴 Time utilization refers to the activities in which a person is involved and the amount of time allocated to them. The broad categories are work, transportation, eating, recreation, entertainment, parenting, sleeping, and (retailers hope) shopping. Today, many consumers allocate less time to shopping.
Reaching Customers in New Ways
QVC (www.qvc.com) recently teamed up with Case Western Reserve University (www.case.edu) to launch the use of two-dimensional (2D) scanning codes in the United States. These scanning codes are barcodes that contain information in both horizontal and vertical directions.
Through this approach, consumers can scan a code on their cell phone and it will be automatically directed to a retailer’s Web site. Although this technology has been used exten-sively in Asia and Europe, it is new to the United States.
According to QVC’s chief marketing officer, “It’s [2D]
the next killer app in advertising, and we’re taking it to the next level.” Using 2D, a consumer who scans a picture of a QVC product would be taken directly to that product’s
specific Web site within QVC. This technology has obvious applications for product or service information, as well as to facilitate placing an order.
In QVC’s teaming with Case Western University, stu-dents were encouraged to develop their own 2D codes and then get other students to use the new codes. In one application, a student placed a code on his business card.
When scanned, the code directed the user to the student’s online résumé.
Sources: Linda Haugsted, “QVC Goes ‘2D’ with Cellphone Test,”
Multichannel News (April 7, 2008), p. 3; and “QVC Challenges Case Western Reserve Students to ‘Make It’ Or ‘Break It,’ ” QVC Press Release (September 2, 2008).
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Consumer psychology can be studied with tools such as the Keirsey Temperament Sorter.
Take the online test (www.keirsey.com/cgi-bin/
keirsey/newkts.cgi) to learn about yourself.
FIGURE 7-2
The Impact of Perceived Risk on Consumers
Types of perceived risk • Functional
• Physical • Financial • Social • Psychological • Time
Outcome
• Purchase new product • Stick with old brand • Talk to friends • Seek more information • Nonpurchase
Factors affecting perceived risk • Product/retailer newness • Consumer’s budget
• Level of consumer experience • Number of alternatives • Social visibility
• Amount of information available • Time available to shop
• Urgency of need • Price of product • Etc.
Consumer
These psychological factors help in identifying and understanding consumer lifestyles:
䉴 A personality is the sum total of an individual’s traits, which make that individual unique. They include a person’s level of self-confidence, innovativeness, autonomy, sociability, emotional stability, and assertiveness.
䉴 Class consciousness is the extent to which a person desires and pursues social status.
It helps determine the use of reference groups and the importance of prestige pur-chases. A class-conscious person values the status of goods, services, and retailers.
䉴 Attitudes (opinions) are the positive, neutral, or negative feelings a person has about different topics. They are also feelings consumers have about a given retailer and its activities. Does the consumer feel a retailer is desirable, unique, and fairly priced?
䉴 Perceived risk is the level of risk a consumer believes exists regarding the purchase of a specific good or service from a given retailer, whether or not the belief is correct. There are six types: functional (Will a good or service perform well?), physical (Can a good or service hurt me?), financial (Can I afford it?), social (What will peers think of my shop-ping here?), psychological (Am I doing the right thing?), and time (How much shopshop-ping effort is needed?). Perceived risk is high if a retailer or its brands are new, a person is on a budget or has little experience, there are many choices, and an item is socially visible or complex. See Figure 7-2. Firms can reduce perceived risk with information.
䉴 The importance of a purchase to the consumer affects the amount of time he or she will spend to make a decision and the range of alternatives considered. If a purchase is important, perceived risk tends to be higher, and the retailer must adapt to this.
A retailer can develop a lifestyle profile of its target market by answering these questions and then use the answers in developing its strategy:
䉴 Culture—What values, norms, and customs are most important to the potential target market?
䉴 Social class—Are potential consumers lower, middle, or upper class? Are they socially mobile?
䉴 Reference groups—To whom do people look for purchasing advice? Does this differ by good or service category? How can a firm target opinion leaders?
䉴 Family (or household) life cycle—In what stage(s) of the cycle are the bulk of potential customers?
䉴 Time utilization—How do people spend time? How do they view their shopping time?
䉴 Personality—Do potential customers have identifiable personality traits?
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䉴 Class consciousness—Are potential consumers status-conscious? How does this affect purchases?
䉴 Attitudes—How does the potential target market feel about the retailer and its offerings in terms of specific strategy components?
䉴 Perceived risk—Do potential customers feel risk in connection with the retailer?
Which goods and services have the greatest perceived risk?
䉴 Importance of the purchase—How important are the goods/services offered to potential customers?
Retailing Implications of Consumer Demographics and Lifestyles
Demographic and lifestyle factors need to be considered from several perspectives. Here are some illustrations. By no means do the examples cover the full domain of retailing.
Gender Roles: The huge number of working women, who put in 60 to 70 hours or more each week between their job and home responsibilities, is altering lifestyles significantly.
Compared with women who have not worked outside the home, they tend to be more self-confident and individualistic, more concerned with convenience, more interested in sharing household and family tasks with spouses or significant others, more knowledgeable and demanding as consumers, more interested in leisure activities and travel, more involved with self-improvement and education, more appearance-conscious, and more indifferent to small price differences among retailers. They are less interested in unhurried shopping trips.
Due to the trend toward working women, male lifestyles are also changing. More men now take care of their children, shop for food, do laundry, wash dishes, cook, vacuum, and clean the bathroom. Eighteen percent of U.S. grocery shoppers are men who shop alone and 20 percent are men who shop as part of a couple.4See Figure 7-3. In the future, there will be still more changes in men’s and women’s roles. The clout and duties of husbands and wives will be shared more often. Retailers need to appreciate this trend.
FIGURE 7-3
Blurring Gender Roles Due to changing lifestyles, more husbands and wives shop together now, as at this A&P store.
Source: Reprinted by permission.
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VALS (www.sric-bi.com/
VALS) classifies lifestyles into several profiles. Visit the site to learn about the profiles and take the
“VALS Survey” to see where you fit.
FIGURE 7-4
King Kullen: Addressing the Poverty of Time To make shopping and food preparation much more convenient for today’s time-pressed customers, King Kullen’s Web site (www.kingkullen.com) offers weekly specials, easy-to-access recipes, a section that describes each in-store department, gift cards, and a lot more.
Source: Reprinted by permission of King Kullen.
Consumer Sophistication and Confidence: Many shoppers are now more knowledge-able and cosmopolitan; more aware of trends in tastes, styles, and goods and services; and more sophisticated. Nonconforming behavior is accepted when consumers are self-assured and better appreciate the available choices. Confident shoppers experiment more. For example, some “shoppers are cutting back, trading down to less-expensive brands, shop-ping in less-expensive stores, putting less on the credit card. They are incorporating old and new techniques to be smarter shoppers—cutting coupons (again), reading retail circulars (again), and taking advantage of shopping online to buy more efficiently. Buying pre-owned products is another method some shoppers have adopted to stretch their dollars. This is now a legitimate way for shoppers to get everything from cars and books to home décor, clothes, even baby products.”5
Poverty of Time: The increase in working women, the desire for personal fulfillment, the daily job commute, and the tendency of some people to have second jobs contribute to many consumers feeling time-pressured: “No matter how rich or poor consumers are, time is the great social equalizer. A new priority of making the most of the limited time we have is taking over. Consumers are looking at all the ways they spend their time, including shopping, and demanding a more time-efficient, time-conscious way to shop.”6There are ways for retailers to respond to the poverty-of-time concept. Firms can add branch stores to limit customer travel time; be open longer hours; add on-floor sales personnel; reduce checkout time; and use mail order, Web sites, and other direct marketing practices. See Figure 7-4.
Component Lifestyles: In the past, shoppers were typecast, based on demographics and lifestyles. Now, it is recognized that shopping is less predictable and more individ-ualistic. It is more situation-based, hence, the term component lifestyle: “Have you wondered what’s going on with consumers? Why the contradictions when it comes to spending money? Why they will buy a $500 leather jacket at full price but wait for a
$50 sweater to go on sale? Will buy a top-line sports utility vehicle then go to Costco for tires? Will pay $3.50 for a cup of coffee but think $1.29 is too much for a ham-burger? Will spend $2.00 for a strawberry-smelling bath soap but wait for a coupon to buy a $0.99 twin pack of toilet soap?”7
Consumer Profiles
Considerable research has been aimed at describing consumer profiles in a way that is useful for retailers. Here are three examples:
In creating the ideal shopping experience for teenage shoppers, retailers need to acknowledge the desire of teens to socialize and belong—regardless of
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RETAILING AROUND THE WORLDwhether they are shopping in stores or online. And although stores tend to be the venue for most transactions, the Internet often is where the teen shopper journey begins. Specialty apparel retailers tend to focus more on the store environment while department stores and mass retailers are using the Internet to compensate for the difficulty in adapting the store environment to the teen shopper.8
Hispanics can be found across America. For example, in Indianapolis, there are close to 40,000 Hispanics living within a two-mile radius of one of the 20 Kroger supermarkets in the market. Within that same radius, 7,500 Hispanic households are entirely dependent on Spanish. Hispanic buying power can be seen in sales of beef and pork. They spend almost $10 million annually on beef and pork inside Kroger’s Indianapolis units, accounting for double-digit market shares in five of the stores. Hispanics tend to gravitate toward products they recognize. If popular brands sold well in their countries of origin, typically these goods continue to be purchased by them in the United States.9
According to Claritas’ “geodemographic segmentation,” these are the wealthi-est demographic groups in America. (1) Upper crust—This is the wealthiwealthi-est demographic. They live in elite suburbs and are 45- to 65-year-old empty nesters. Favorite store: Bloomingdales. (2) Blue-blood estates—The second wealthiest group, these are mostly white-collar baby boomers with kids who accumulate wealth as their family matures. They live in elite suburbs. They are well educated and often white or Asian. Favorite store: Talbot’s. (3) Young digerati—Tech-savvy, young (25–44), and often childless, they tend to be highly educated, ethnically mixed, and live in fashionable urban neighbor-hoods. Favorite stores: Banana Republic, J. Crew. (4) Country squires—These are well-educated baby boomers with kids who’ve fled the city for the spacious estates in small towns or scenic rural areas. Favorite stores: Amazon.com, Target. (5) Movers & shakers—These are dual-income couples without kids who are highly educated, and typically are between the ages of 35 and 54. They achieved affluence in middle age, tend to be executives or business owners, and live in suburbs. Favorite stores: Apple, Costco.10
Understanding Russian Car Shoppers
According to PricewaterhouseCoopers (www.pwc.com), a consulting firm, Russia recently passed Germany to become Europe’s largest car market. During the first half of 2008, 1.65 million new cars were registered in Russia ver-sus 1.63 million new cars for Germany. There are currently 26.8 million vehicles on the road in Russia, about 184 cars per 1,000 people. However, more than one-half of all vehi-cles are 10 years or older, 27 percent are 5 to 10 years
According to PricewaterhouseCoopers (www.pwc.com), a consulting firm, Russia recently passed Germany to become Europe’s largest car market. During the first half of 2008, 1.65 million new cars were registered in Russia ver-sus 1.63 million new cars for Germany. There are currently 26.8 million vehicles on the road in Russia, about 184 cars per 1,000 people. However, more than one-half of all vehi-cles are 10 years or older, 27 percent are 5 to 10 years