Demographic trends are important, because they predict current and emerging buyer behavior. (One of the best places to find demographic data is the US Census Bureau website - it’s free and there's tons of information there.)
In the past, it was easier to segment markets because demographic groups were tight. People were put in age brackets, behaved a certain way, bought certain items, and did certain things at certain ages. The structure was defined and somewhat predictable.
Today, the commonalities of people within the same age and gender group are shrinking.
And the differences between people of different ages and genders are decreasing as well – meaning that more products and services appeal across generations. This makes market segments potentially larger, but also more confusing.
Demographic Segments Defined:
Age is no longer just a matter of the number of years since you were born. Pew Research recently conducted a survey in America: “how old is old?” The results are telling:
Age of Respondent:
Ages 18-29 feel 60 is old
Ages 30-49 feel 69 is old
Ages 50-64 feel 72 is old
Ages 65+ feel 74 is old
When thinking about your target customers then, you often need to throw out the old rules and think in the way people are thinking today. The expression “50 is the new 30” means psychologically people are thinking that they are 10, 15, sometimes 20 years younger in behavior than they actually are chronologically.
To start, here is the classic view of US demographic segments:
- Seniors: People born before 1946 are the senior generation.
- Baby Boomers: Any year that four million people are born in America is considered a baby boom year. The first baby boom kicked off in 1946 and ended in 1964. The baby boom was the largest generation ever seen in America. Baby Boomers consist of the 77 million born in the US during these years plus immigrants bringing the total to 82 million.
- Gen X or Baby Busters: From 1965 to 1980, the birth rate declined creating the generation known as Baby Busters. Most parents today are Gen Xers.
- Gen Y or Millennials. Though the start dates vary, people born in the early '80s to the year 2000 are the Millennial generation. Also known as Gen Y, this group is very important today because they are bigger than the Baby Boomers at about 84 million. (And that number does not include immigration.)
- Gen Z, Next Gen or Digital Natives: Children born 2001 to the present are called Gen Z, Next Gen or Digital Natives. The distinguishing characteristic for this group is that they were raised with technology as part of their everyday life.
Now let’s examine trends within these demographics and the resulting market opportunities for savvy entrepreneurs.
The “Kids”: Gen Y and Gen Z
In 2011, which is the last year of updated stats, there were 74 million Americans who were under the age of 18 in the US. In fact each year from 1987 to 2011, there were close to or more than four million kids born – which by the definition above are official boom years. Given that the population as a whole is at a little over 300 million people, “Kids” are a large market.
For this group, you can (and should) slice the market by gender, and age groups. Often we look at babies (0-2), toddlers (3-4), pre-tweens (5-6), tweens (8-12), and teens (13-18): five groups with five very distinctive needs. But the lines are blurry. Tweens, for example, often aspire to do what teenagers are doing.
Don't underestimate this market. They're big spenders of their own money and they have “pester power” or “Mommy/Daddy/Grandma buy me this!” Pester power often directs the choice of restaurant, movie, even family car. All told, this group has significant direct ($21.4 billion) and indirect ($500 billion) purchasing influence.
And what are they spending their money on? Here are a few facts that may surprise you:
- Teens spend 39% of their discretionary income on fashion; but teenage boys spend the most money on clothes.
- Kids from average-income homes spent 18% more on skin care and cosmetics (2011-12 data) compared to only a 6% rise among upper-income teens.
Small business can capitalize on these changes in kid consumers. For example in 2009, Newsweek did an article about cosmetic beauty purchases of tweens, or 8-year-old girls. This trend translated into a new segment of specifically manufactured, kid-friendly cosmetics lines that parents were comfortable buying.
Seniors and Baby Boomers
Seniors and Baby Boomers are faced with the realities of declining health and mobility, the need to care for other family members and the desire to maintain independence. Some business ideas to serve these needs are:
- Senior transportation. As seniors are less able to drive, they still wish to maintain their connections and independence, contracting rides to the mall just to walk around, or to the store to maintain their own grocery shopping.
- Adult daycare is growing around the country. Adult “kids” often look for a daycare facility for their elderly parents where they will have regular activities and a safe environment.
- In-home, non-medical health care. Seniors with dementia may be physically capable but still cannot safely be left alone. There are a growing number of local businesses that organize aides to come directly into the senior’s home.
For more insights on how these demographic trends can create hot new business opportunities, sign up for this webinar.