In my last blog we looked at the need to understand consumer behaviour, the social science that incorporates psychology, sociology and behavioural economics. It’s based on understanding behavioural habits related to an individual’s buying and use of products and service.
This week I want to focus on customer demographics, and how demographics are different from – but affect – consumer behaviour. Demographics segment your customers based on age, ethnicity, gender, income, schooling, occupation and marital status, and are an integral part of understanding them and their perceived needs. To grow your business, it’s important to have knowledge of both your customer demographics and consumer behaviour in your toolkit.
Understanding both the demographic and behavioural wants and needs of your customers is paramount to your future success. There are no easy answers. You simply have to take the time to better understand your customers and study the data around them.
Let’s take a quick look at the impact of just one demographic: age.
The impact of age and generations on your customers’ buying behaviours
Population today is broken down into a number of generational cohorts: Baby Boomers, born between 1946 and 1964; Gen X, born from 1965 to the late ’70s; Millennials, born up to late ’90s; and then Gen Z, born in the Internet era.
Today’s Boomers, now between 55 and 73, spend $400 Billion more than other generations. For those over 65, a not-entirely-insignificant amount of this ($7 Billion) is spent online1. But as this affluent group ages, consider how that impacts their buying habits and decisions. They certainly have evolving needs, a different mindset to purchasing decisions, and different use of products and services.
Boomers often own their own homes, cottages, cars and furniture. They are established and have been for decades, so their day-to-day needs are different than those of Millennials.
Millennial (and Gen Y) needs are different than those of their parents and grandparents
Today’s Millennials are getting married, looking to buy their first home, building careers, and thinking about starting a family, all later in life.
A full 72% of Millennials list owning a home as a top priority, according to Bank of America’s 2018 Homebuyer Insights Report. However, they are, for many reasons, operating at a different pace than previous generations.
Millennials are also spearheading consumer trends such as the desire for authenticity from brands, buying experiences over owning things, and sharing and consuming online content heavily. Studies have shown they want authentic, shareable marketing efforts that are personalized to reach and connect with them and their interests directly. What might have once been viewed as invasive marketing by previous generations is embraced by Millennials. So, you can see how the demographics can impact consumer buying behaviour and the challenges associated in targeting and marketing to each generation.
Boomers have the wealth; Millennials have the needs. But they aren’t alone.
Over the next 30 years, an estimated $30 Trillion (with a T) of wealth will exchange hands from the Baby Boomers to Generation Xers and Millennials. Just to put that in perspective, that is $10 Trillion more than the U.S. GDP in 20172. As Boomers transfer their wealth to Millennials and Generation Z, how will you engage this younger generation to do business with you? Will you understand their unique needs? Will they understand what you have to offer?
Generation Z, (today’s children and teenagers) have their own characteristics they will carry with them. True “digital natives,” they are innovative, tech-savvy and passionate about social issues (think environment). They spend ten hours a day on their phones and tablets and watch TV half as much as Boomers. They will soon join a Millennial-transformed workplace, and it remains to be seen how they settle into homes and families.
And, don’t forget about Gen X. This is the lost generation wedged between Boomers and Millennials. They’ve fallen off most marketers’ radar screens. Gen Xers are spending approximately one-third more than their Millennial counterparts, yet they are struggling to save for retirement. However, they are well positioned to become the wealthiest generation within the next decade.
Understanding the demographics of these basic groups changes not only how you would reach them, but how you would serve them, and better understand their respective needs. Add to this, North American immigration policies and you can quickly see how different social and economic backgrounds have a dramatic impact on how you would target and serve the changing needs of Boomers, Generation Xers and Millennials.
Where does it all lead?
Understanding demographics like age will give you some insight into your customers’ needs and expectations, and is an important piece in their behaviour and buying habits. But you’ll need to dig deeper and understand consumer behaviour and the diversity that motivates each generation. There are no easy answers. A conversation with your customers is a good place to start. Make the investment to understand what’s important to them, what motivates them. It’s a huge task to be sure, but like the proverbial elephant, make a plan to learn about your customers in bite-size chunks.