The U.S. Demographic Shift: A ‘Tipping Point’ for Marketers

(Updated to include comments from Wharton marketing professor Barbara Kahn.)

The demographic makeup of America’s nurseries is changing — and marketers who ignore the shift will face serious challenges in the future.

A U.S. Census Bureau report released last Thursday estimated that as of July 1, 2011, minorities made up 50.4% of the nation’s population less than one year old, up from 49.5% in the April 2010 Census. The report defines a minority as anyone who is not single-race Caucasian and not Hispanic. The population younger than age five was 49.7% minority in 2011, up from 49% in 2010, the report added.

For marketers, this demographic trend creates a need to recast their products and strategies to reach non-whites. Smart companies have long followed such shifts and are already acting on them, according to Wharton marketing professor Yoram (Jerry) Wind, who specializes in market segmentation studies. But the Census data underscores the importance of continuing to design products for different ethnicities and producing marketing materials in the languages and media channels they favor, he says.

The growing importance of ethnic markets is not new, notes Wind. “For those who had ignored what was happening around the world, this might be a tipping point,” he says. Wharton marketing professor Qiaowei Shen agrees the changing demographic trends could mean new product opportunities for companies, and require them to adopt different segmentation strategies. “Companies have to be alert to the new trends, understand the needs and traits of different demographic groups and figure out the best way to reach the target segments,” she says. “For example, the most effective advertising messages and media channels could be very different for minorities, and companies have to tailor their marketing strategies accordingly, from marketing campaigns to probably the product itself.”

According to Wharton marketing professor Barbara Kahn, this demographic shift is a continuation of a trend that has been happening for a while. She focuses her research on customer relationship management and consumer choice, among other areas. “Of course, consumer product companies are changing marketing strategies to appeal to the needs of the new consumer segments,” she says. For example, differences in foods that various segments like, or in religious values can affect product design and promotional and distribution strategies, she adds.

The percentage of Americans who are Caucasian continues to fall steadily, especially among the youngest generation. Barack Obama’s election as America’s first black president “was in some ways emblematic of the nation’s changing face,” according to a Wall Street Journal story on the Census report.  “It’s a major turning point for American society,” William H. Frey, a demographer at the Brookings Institution told the Journal. “We’re moving from a largely white and black population to one [that] is much more diverse and is a big contrast from what most baby boomers grew up with.” Whites, alone or in combination, fell as a percentage of the population from 77.1% to 74.8% between 2000 and 2010, noted a September 2011 Census report titled, “The White Population: 2010.”

Most of the newborn non-whites are concentrated around the East and West Coasts, especially in the southern states, a map in the Journal report shows. But that doesn’t necessarily offer ready solutions to marketers, according to Wind. “Demographic/ethnic groups are not homogeneous and are composed of number of segments,” he points out.

Also, Wind says, demographics are “a mere descriptor rather than a driver,” and smart marketers have to incorporate myriad influences in their marketing strategies. “The critical determinants of consumer behavior include previous purchase behavior, benefits sought, the influence of others, the context of the purchase and consumption.”

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