The social environment includes all factors and trends related to groups of people, including their number, characteristics, behavior, and growth projections. Since consumer markets have specific needs and problems, changes in the social environment can affect markets differently. Trends in the social environment might increase the size of some markets, decrease the size of others, or even help to create new markets. We discuss here two important components of the social environment: the demographic environment and the cultural environment.
Whereas beliefs, values, and customs describe the characteristics of the culture and subculture, demographics describe the observable characteristics of individuals living in the culture. Demographics include our physical traits, such as gender, race, age, and height; our economic traits, such as income, savings, and net worth; our occupation-related traits, including education; our location-related traits; and our family-related traits, such as marital status and number and age of children. Demographic trait compositions are constantly changing, and no American, Japanese, or Brazilian is "typical" anymore. There is no average family, no ordinary worker, no everyday wage and no traditional middle class.
Still, marketing managers must understand consumers intimately. Often, the best they can do is take a snapshot and try to understand what is happening in US culture in the early years of this century. As we see next, some trends are old; others are new. For instance, the aging of the population has been going on for several decades, but births and birth rates in recent years have been much higher than expected. Immigration is also greater than predicted, and so is the backlash against it. In the US, interstate migration to the south and west are old trends. What is new is heavier movement in the US from the northeast rather than from the mid-West and rapid growth in the mountain states. Next, we examine nine demographic changes and how they affect marketing.
• Households are growing more slowly and getting older. About half of all households are aged 45 and older and growing at an annual rate of one per cent compared with nearly 2 per cent in the 1980s. Marketing communicators must plan for a greater number of middle-aged households, consumers who are experienced and have a better understanding of price and value. These consumers should have an interest in high-quality household goods and in-home health care.
• The demise of the traditional family. Married couples are a bare majority of US households. Only one-third of households have children under 18, and nearly one-fourth of households are people who live alone. However, married couples dominate the affluent market as the vast majority of very high-income households are married couples. The long-term trend of high growth in nontraditional types of households and lack of growth among married couples can only mean further segmentation of an already segmented marketplace.
A phenomenon that speaks to the change in the traditional family structure is known as the “sandwich generation”. These are a growing group of adults who are caring for aging parents while raising their own children. According to a study from the National Alliance for Caregiving and the American Association of Retired Persons, there are more than 9 million Americans in this situation, 40 per cent of them between 35 and 49. The stress of belonging to the sandwich generation is taking a toll countrywide. “All of a sudden you are struggling with this huge balancing act,” says Beth Willogen McLeod, author of Caregiving: The Spiritual Journey of Love, Loss, and Renewal. “How do you fulfill all your roles? How do you balance your marriage, your children, your work and elder care?”
• The continued increase in education. Most adults in the United States still have not completed college (approximately 67 per cent), but that number continues to decline. More and more people have attended some college or have an associate or technical degree. More skilled workers mean more knowledgeable and sophisticated consumers who expect more information about product attributes and benefits before making a purchase.
• Nonphysical jobs keep growing. Jobs that do not require physical strength keep growing in number. Virtually all job growth during the next 10 years will take place among service providers, especially in health care and social services. Because providing services requires little investment compared with producing consumer goods, we can expect continued high growth in small businesses, sole proprietorships, and other entrepreneurial activities, Also, the extremely high cost of employee benefits suggests that the use of temporary workers and independent contractors will continue to grow. Marketing managers must assess whether consumers who do not have corporate benefits will become more risk-averse because they lack the safety net of company-provided pension plans and medical insurance. If so, consumers may seek money-back guarantees or other product features that reduce risk. Marketing managers must also see whether people who work for themselves or for small firms are more time-conscious.
• Growing faster than expected. About 272 million people live in the United States. This is an increase of 18 million since 1990, and most of the growth has resulted from an unforeseen boom in births. The United States had about 20.4 million births between January 1990 and December 1994. This was more than in any five-year period since the last five years of the legendary baby boom (1960 to 1964), and 6 per cent more than in the late 1980s. The United States also experienced the highest five-year immigration total (4.6 million) since the turn of the century, an increase of 31 per cent over the previous five years. The annual influx of nearly 1 million new residents has led to an increasingly diverse consumer marketplace, particularly among young people.
• The growth of minorities. Although white non-Hispanics have been the biggest contributors to the US, population growth in the 1990s, Hispanics have been a close second. The number of Hispanics in the United States increased from 22 million in 1990 to 35 million in 2000. That number is nearly twice as many new residents as were added by African-Americans and Asians. If each minority segment keeps growing at current rates, Hispanics will outnumber African Americans in ten years. This trend will be particularly important for marketing communicators that target certain regions, because Hispanics and Asians are more geographically concentrated than African-Americans.
• Baby boomers become middle-aged. More than half of Americans are aged 35 or older, and the oldest baby boomers are now aged 55. The largest ten-year age group, people aged 41-50, has been growing as it absorbs the younger half of the baby boom generation. The number of people in this segment reached a peak in 2000 and then started to decline. The fastest-growing age group is middle-aged people aged 45-54, the age at which income and spending peak. Middle-aged people are also the least likely of all age groups to change their residence. This combination of high growth, high income, and low mobility will provide considerable lift to discretionary spending, particularly in the categories of home furnishings, education, and insurance.
• People in the US are moving south. More than half (54 per cent) of US residents live in the ten largest states, and more than half of US population growth between 1990 and 1999 occurred in these ten states. New York had the largest population of all states in 1950, but in the 1990s, fast-growing Texas pushed the barely growing New York to number three. One reason for the explosive growth in the southern states is the influx of people from other countries. More than half of the four million immigrants that located in the United States between 1990 and 1995 moved to California, Texas, or Florida.
• The middle class gets hammered. According to the US Census Bureau, the share of aggregate household income earned by the middle 60 per cent of households has shrunk from 52 per cent in 1973 to 49 per cent 25 years later. Meanwhile, the share of such income earned by the top 20 per cent (average income USD 98,600) increased from 44 per cent to 48 per cent. In other words, the total purchasing power of the top 20 per cent of US households now equals that of the middle 60 per cent.7.
In addition to understanding general US demographic trends, marketing communicators must also recognize demographic groupings that may turn out to be market segments because of their enormous size, similar socioeconomic characteristics, or shared values. We examine three examples of demographic groupings by age that have or will become dominant market segments: baby boomers, Generation X, and the baby boomlet.
The baby boom
The baby boom occurred from 1946 through 1964. During this 19-year time frame, 76.4 million babies were born in the United States. Today, approximately 70 million of these baby boomers are still alive. They represent about one-fourth of the total population. Because of their numbers and buying power, baby boomers have and will continue to influence the marketing mix for the services and products businesses offer and how these services and products are offered. For example, the majority of baby boomer women work full-time and view their job as a career. This trend has implications for childcare, fashion, automobiles, travel, and fast-food marketing. Health concerns will also grow as baby boomers age.
Generation X, also known as the "baby busters" or the "shadow generation", is the group of people born from 1969 to 1980. This group has been labeled with a "slacker" stereotype. Imagine 45 million humans that are characterized as culturally illiterate, apathetic, and directionless. From a marketers' perspective, they have a total disposable income of USD 125 billion. In tune to the newest rage, Xers—highly steeped in a culture of sound bytes—seem to know instinctively what they want. More importantly, what they do not want.8.
Unfortunately, the more marketers learn about this group, the less it appears to be a market segment. For example, Xers' lifestyles range from the 10 million who are full-time college and postgraduate students to the 15 million who are married. They are also the most radically diverse generation in history. Yet their opinions about life in the United States mirror those of the general population. For instance, 52 per cent of Xers believe that "quality of life" is good compared with 53 per cent of the entire population, and 64 per cent of Xers are more "stressed about money this year", compared to 58 per cent of the general population.
Given the diversity of Generation X, what are the possibilities that an integrated marketing strategy can be targeted to this group? The key will be finding subsegments within this 45-million-person group. For example, level of education might be a point of distinction. Those in college or with a college degree are likely to be computer-literate and can be reached by online media. Their optimism and general concern for a simpler life suggests that non-condescending marketing messages through public relations or cause-related activities would prove effective.
The baby boomlet
Just like the baby boomers, the group of 72 million children of the baby boomers, called the "baby boomlet" or the "echo boom", is creating new waves of change. This group spans 1975 to the present. In 1995, the boomlet had 72 million people under age 19. It is 60 per cent larger than the baby boom. Even if 1995 is the final year for boomlet births, this generation will grow through immigration for several more decades. By 2015, the baby boomlet will again outnumber the boom.
The baby boomlets will acquire their own attitudes, often shaped by new technology and global changes. Global conversations on the Internet will change their outlook on the world. AIDS will change their attitudes toward relationship, marriage, and family. Real time information and the customization of the information will produce a very discerning consumer. Finally, their attitude will also be shaped by defining events. For instance, it will be a generation that expects terrorists acts, such as the Oklahoma City and the 1996 Olympics bombings. Memorable events will have a lasting effect on their outlook.
Cultures and subcultures
All of us are part of a cultural fabric that affects our behavior, including our behavior as consumers. Culture is the sum of learned beliefs, values, and customs that regulate the behavior of members of a particular society. Through our culture, we are taught how to adjust to the environmental, biological, psychological, and historical parts of our environment.
Beliefs and values are guides of behavior, and customs are acceptable ways of behaving. A belief is an opinion that reflects a person's particular knowledge and assessment of ("I believe that ..."). Values are general statements that guide behavior and influence beliefs and attitudes ("Honesty is the best policy"). A value system helps people choose between alternatives in everyday life. Customs are overt modes of behavior that constitute culturally approved ways of behaving in specific situations. Customs vary among countries, regions, and even families. In Arab societies, for instance, usury (payment of interest) is prohibited, so special Islamic banks exist that provide three types of accounts: non-profit accounts, profit sharing deposit accounts, and social service funds. A US custom is to eat turkey on Thanksgiving Day. However, the exact Thanksgiving Day menu may depend on family customs.
Dominant cultural values are referred to as core values; they tend to affect and reflect the core character of a particular society. For example, if a culture does not value efficiency but does value a sense of belonging and neighborliness, few people in the culture will want to use automatic teller machines. What do Americans value? Clearly, a catchall phrase such as the "Protestant work ethic" no longer captures the whole value system.
Core values are slow and difficult to change. Consequently, marketing communication strategies must accurately portray and reflect these values.
Secondary values also exist in any culture. Secondary values are less permanent values that can sometimes be influenced by marketing communications. In addition, secondary values are often shared by some people but not others. These values serve as a basis for subcultures.
A natural evolution that occurs in any culture is the emergence of subcultures. Core values are held by virtually an entire culture, whereas secondary values are not. A subculture is a group of people who share a set of secondary values. Examples include Generation X and environmentally concerned people. Many factors can place an individual in one or several subcultures. Five of the most important factors that create subcultures are:
• Material culture. People with similar income may create a subculture. The poor, the affluent, and the white-collar middle class are examples of material subcultures.
• Social institutions. Those who participate in a social institution may form a subculture. Examples include participation in marriage, parenthood, a retirement community, the army, and so on.
• Belief systems. People with shared beliefs may create a subculture, such as shared beliefs in religion or politics. For example, traditional Amish do not use several types of products, including electricity and automobiles. A whole set of factors has also been correlated with whether a person is a Democrat, Republican, Independent, Libertarian, or Socialist.
• Aesthetics. Artistic people often form a subculture of their own associated with their common interests, including art, music, dance, drama, and folklore.
• Language. People with similar dialects, accents, and vocabulary can form a subculture. Southerners and northerners are two traditional categories in the US.
Capsule 11: Review
• Environmental scanning refers to activities directed toward obtaining information about events and trends that occur outside the organization and that can influence the organization's decision making.
• The following external factors affect planning:
(a) external agencies
(c) legal and ethical factors
(d) economic and political issues
(f) social trends
Understanding other cultures around the world
Adjusting to cultural differences is perhaps the most difficult task facing marketing communicators who operate in other countries. Before entering a foreign market, a company must decide to what extent it is willing to customize its marketing efforts to accommodate each foreign market. Naturally, the more the company standardizes its effort, the less trouble it incurs and the greater the assumed profitability. Is some customization inevitable? More is said about this in a later chapter.