External Influences on Consumers

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External Influences on Consumers

• MKT 750
• Dr. West

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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

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This weeks readings
Last weeks readings
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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?

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Snapshot of Demographic Trends
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Snapshot of Demographic Trends
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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.

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Snapshot of Demographic Trends
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Snapshot of Demographic Trends
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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.

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Snapshot of Demographic Trends
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Snapshot of Demographic Trends
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US Growth Projections

• The mature segment of the population will
  increase dramatically.
• 65 segment will increase from
• 12.7 to 23.5 of the population
• 85 segment will increase from
• 1 to 5.9 of the population

Projected Growth (Millions)
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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

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Snapshot of Demographic Trends

• National Trends Projections

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Buying Power (billions of dollars)
Selig Center For Economic Growth, 2002
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How to stay informed

• AdAge now owns American Demographics
• www.adage.com
• US Census
• www.census.gov
• Read broadly!

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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
• Single
• Newly married
• Full nest I
• Full nest II
• Empty Next
• Solitary Survivor

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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

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Stages of the Household Life Cycle
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Identifying with Subcultures
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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 ones values, preferences, and consumption
  behavior
• Remember PEST?

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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

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Generational Influence
Life Stage
Current Conditions
Cohort Experiences
Culture/ Upbringing
Values
Marketing Communications
Preferences
Marketplace Behavior
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Understanding American Generations
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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

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The Depression Generation

• This cohort of 35 million consumers was born
  between 1930 and 1945 and dont 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

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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 self-sacrifice and individual
  accomplishment
• Focused on the present and very career oriented
• Highly educated, above the law

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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

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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
• Dont have the live for today mentality of the
  BBs

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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

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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

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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
• Dont 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

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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 themeven
  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

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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

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Cultural Influence
Symbols/ Language
Heroes/ Infuencers
Lifestyle/ Customs
Values
Marketing Communications
Preferences
Market Behaviors
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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?

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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?

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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?

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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?

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Self-Oriented Values

• Active/Passive Lifestyle
• Sensual gratification/Abstinence
• Material/Nonmaterial
• Hard Work/Leisure
• Postponed/Immediate Gratification
• Religious/Secular

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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.

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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
• Household or group decision making
• Word of mouth influence
• Social dynamics and reference groups
• Role models and aspirational influences

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Household Decision Making
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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

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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.

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Multi-step Flow Model
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Likelihood of Seeking WOM
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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

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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
  dont want them
• Pseudo on-line opinions where firms post fake
  blogs and reviews

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What is WOM?

• WOM is
• Honest Real Powerful!!!
• It is something we all do everydayits 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 isnt self-serving and you hear about the
  pros cons

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Benefits of WOM

• Receiver
• Reduces risk
• Increase confidence
• Increase likelihood of social acceptance
• High credibility
• Saves time
• Enhanced relationship

• Sender
• Prestige and power
• Enhanced position within a group
• Reduce doubt about ones own choice
• Reciprocity
• Increase the cohesion within a group

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Creating Buzz

• Viral Marketing leverages the word-of-mouth
  channel of information
• Not a new approachwe have known a lot about the
  power of word-of-mouth
• Its twice as effective as radio advertising
• Four times as effective as personal selling
• Seven times as effective as newspapers and
  magazines

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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

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Social Networks

• Scale-Free
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• 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

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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

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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

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Characteristics of brand community

• Consciousness of kind
• A common enemy
• Shared rituals and traditions
• A social hierarchy
• Norms of behavior
• A sense of moral responsibility

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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.