Recent data show that US fertility rates are dropping. US women are giving birth “at record low rates,” according to the CDC. Demographers’ current concern is the “replacement rate.” Replacement rate is the total fertility rate at which women give birth to enough babies to sustain population levels – that is, replace a generation. Replacement rate assumes that death rates remain constant and net migration is zero.
Right now, the US replacement rate is well below the 2.1 children necessary for generational fulfillment. This number affects many socio-economic issues including labor pools, Social Security funding and the military. The current and future landscapes of brands are already being and will continue to be affected as well.
It is true that there is a US youth population similar in size to the Baby Boom generation. This demographic phenomenon means that manufacturers and brands are dealing with a population that is both older and younger at the same time. However, the lower number of babies relates to a different impact altogether. The fewer babies born, the more the challenges and the opportunities for brands. The impact of fewer babies on brands is already significant.
Demographics matter. Demographics matter for brands, not just demographers and army recruiting stations.
Brand-businesses must focus on more than digital and AI. It is imperative to focus on the actual people who will be buying brands that are marketed digitally or experienced through advanced AI technologies.
Forget about the past when demographics was the sleepy section at the end of every survey. Demographics is no longer just for survey screening. Demographics is the way in which our world is shaping up. And, unless there is some major global apocalypse, far beyond the scope of the recent coronavirus, demographics will happen.
Brands must be ready.
Let’s look at diapers. P&G and Kimberly-Clark face a new reality. The issues with diapers are not just about competitive features and benefits, as well as prices, which increased steadily. Diapers are one business where as demand goes down, price goes up.
A critical diaper issue is the fact that there are fewer babies to wear those diapers. Diapers are serious, profitable businesses for P&G and Kimberly-Clark. As reported on Bloomberg.com, the “stagnating birth rate” is intensifying the “rivalry” between these two diaper manufacturers.
The conflict came to a head recently. Kimberly-Clark changed the fit of its Little Movers diapers and advertised this change to customers as the best fitting diaper. P&G challenged the claim with the NAD (National Advertising Division of the BBB National Programs) and won. Little Movers will alter or remove its ads. Previously, Kimberly-Clark challenged a P&G claim and won.
Bloomberg points out, “P&G and Kimberly-Clark… together claim more than half of the US diaper market. P&G’s yearly sales for Pampers alone are more than $7 billion globally, almost 9% of company sales. But the volume of baby-care products sold declined in the fourth quarter amid higher prices. The category is also large for Kimberly-Clark, which gets more than a third of its revenue, or about $7 billion, from baby- and child-care items.”
Both Kimberly-Clark and P&G spend money, time and effort innovating and renovating their lines of diapers. Bloomberg states that Huggies has moisturizing baby wipes, fragrance free diapers and baby clothes. P&G has focused on bigger sizes and overnight training pants. These are not for newborns. Pampers is a high priced brand, so revenues may be up but fewer people are buying. Luvs, P&G’s more affordable brand, is having a difficult time.
Adult diapers are a fast-growth category especially since Baby Boomers are well into their 70’s.
But even with adult diaper growth, data show that adult diapers are still not even half of the baby diaper marketplace.
Diapers for toilet-trained older children who need some extra protection at night is also a focus. P&G told Bloomberg, that the company is producing diapers for larger kids. In the past year, Pampers introduced a size 8, for children weighing 46 pounds or more. One observer stated, “The diaper makers have been finding ways of extending the lifetime of their customer—overnight pants for toddlers, overnight pants for even older kids. So that’s helped a bit.”
From a brand standpoint, the lower birthrate is problematic not just for diapers. There are problems for makers of baby toiletries such as shampoo, soaps, lotions, diaper rash balms. There are concerns for baby wipes, baby foods, baby furniture, baby formula, baby bottles, breast pumps, maternity clothes, strollers, books, car seats and baby toys.
Toys are an especially fickle market. Just look at how quickly people lost interest in Barbie after its blockbuster movie. Toys R’Us is precariously balancing its comeback with stores within Macy’s stores. And, even though Macy’s is in trouble, the demographic troubles will also be significant hurdles to Toys R’Us revitalization. Toys for babies and toddlers are big business. Once a kid discovers digital adventures, they are glued to the family computer. Toys R’Us becomes a less interesting place.
But, let’s take the word baby out of the picture. Imagine the consequences for public education, for example. School districts rely on funding based on number of students. What if there are fewer students? Child care is very expensive. But, imagine there are fewer children to be cared for by non-family members. Or children’s sports such as T-ball or soccer. There are entire infrastructures built into kids’ sports.
Zoo visits might decline, As will grandparents. You need children for grandparents to exist. Food purchases will be lower. Houses will not need as many bedrooms and bathrooms. Cities and towns will put fewer dollars into playgrounds. It is a rare occurrence to have a playground with activities for adults as in Philadelphia’s new Anna C. Verna Playground in FDR Memorial Park. There you can find a megaswing that can handle more than 20 people at a time… not just kids.
Medical practices might alter. There would be fewer maternity wards; fewer children’s wards; fewer obstetricians; fewer children’s hospitals; fewer pediatricians; fewer pediatric dentists. Health care costs would change as well.
Lawyers will have fewer custody cases. Theme parks will have fewer kid visits. Child services will need to refocus. Some colleges may disappear. The pet industry may continue to grow.
A couple of years ago, McDonald’s promoted an adult Happy Meal. It was a big hit. But beyond being a sentimental traffic-driver, the fact is that when there are fewer kids, there are fewer kids’ Happy Meals sold. Burger King is urging crew members to put crowns on adults. Possibly because there are fewer kids to wear the crowns.
Although the demographic data may sound bleak, there are still babies in the US, and women are still having babies. There are just not enough babies being born. For all sorts of reasons, women are delaying pregnancies. Demographers indicate that women are saying they want to have children, just not now. Knowing how long the “not now” will last is tricky to forecast.
In the meantime, brands as well as organizations such as the military or libraries or municipalities must realistically focus on future-proofing themselves for a world with fewer infants leading to smaller cohorts of youth and young adults. Future-proofing means being prepared. Being prepared means that your brand is ready, agile and able to accept, withstand and make changes for enduring profitable growth. Future-proofing is not foolproof, but it is a serious step in the right direction.
What can brands do to be prepared?
To maintain market relevance, brands must do the following:
Here are three fundamentals for creating or adapting products or services to a new demographic landscape.
Conduct Needs-Based Occasion-Driven Market Segmentation
The purpose of market segmentation is identifying and understanding a brand’s customers. Viable, actionable market segmentation addresses several key areas to assist in directing brand-business strategy and brand policy. Segmentation can also help in managing resource allocation.
Market segmentation requires craft as well as research skill. Contrary to what many academics, researchers, and consultants say, the output of a segmentation study does not reveal truth. In fact, it can raise more questions than you had beforehand. If analyzed and synthesized with intelligence and creativity, market segmentation can provide insight into the following:
A proper market segmentation study should help you answer these three key questions:
- Who are the prime customers and prospects?
- What are their needs and problems?
- What are the occasions in which these needs and problems occur?
Satisfying customer desires and understanding the occasions in which these occur is the key differentiator between marketing and selling. Selling is about convincing customers to buy what we know how to provide. Marketing is about providing what we know customers want or might want or that satisfies their problems. Superior understanding of consumer needs and occasions provides the basis for outstanding competitive advantage.
Generate Genuine Customer-Driven Insights
Real insights are incredibly valuable.
Unfortunately, insight is now a marketing cliché. Insight is mis-understood, misused, mistaken and meaningless. Marketers made it a meaningless, useless term. Why? Because marketers have turned everything into insights. And, when everything is an insight, nothing is an insight.
- Is it insight to discover that people’s incomes are under strain and stress?
- Is it insight to learn that people want an easy-to-use clothes washing- machine?
- Is it insight to learn that people like food that tastes good?
- Is it insight to learn that people prefer a dog food the dog will eat?
- Is it insight to learn that a business-to-business customer wants a computer system that won’t go down?
These are not insights. These are observations of the obvious. Yet, in each case, these were reported as insights based on extensive research.
Meaningful insights are more than mere information. Meaningful insights need to meet two criteria:
- Surprise at what you learned. And, as a result of this surprise,
- A change in behavior based on this learning.
Real, actionable insight will not come from superior data analysis. Business schools are turning out MBAs who are analyzers rather than synthesizers. MBA has come to mean, “manage by analytics.” Soon, if not already, with all the MBA financial engineers, MBA will come to mean “murderer of brand assets.”
Superior analysis provides understanding of where we are and how we got to where we are. Superior analysis does not provide insight into what kind of future we can create.
One thing we do have today is lots of information. To generate genuine insights, go from information to insight. This insight will be informed insight; informed judgment not guesswork. Insight means seeing below the surface of information. Insight relies on synthesizing rather than analyzing.
Analysis travels backward. But, brands move forward. Brands are a future promise as in “This brand will promise to do.…” So we must use synthesis. Synthesis means… “the combining of diverse concepts into a new coherent whole.” Analysis leads to understanding what is happening and why. Synthesis leads to genuine insight into what might happen.
Solve Problems
Problem-solution is one of the best ways to generate a new or improved product or service.
For example, in 2004, McDonald’s had a problem with mothers of small children. Kids loved Happy Meals. Children were happy with the Happy Meals, but mothers were unhappy. Mothers told McDonald’s there was nothing for them to eat while their kids enjoyed the Happy Meal. All mothers found on the menu board was coffee. OK, sometimes, moms picked at their kids’ fries. McDonald’s solved the mothers’ problem with a chicken Caesar salad accompanied by Paul Newman salad dressing.
Dyson solved a problem by eliminating bags from vacuum cleaners. TravelPro solved a problem by putting wheels on suitcases. Problem- solution should be at the basis of innovation and renovation. Products and services must address customer problems, satisfy customer needs or anticipate customer needs.
Demographics will happen. How a brand-business addresses the demographic waves is not so certain. As one consultant told Bloomberg, “I wouldn’t count on the birthrates suddenly changing direction, it’s a cultural fact.”
But, by understanding potential market segments, generating genuine insights about these segments and solving problems, you can be confident that what you are doing is the better road to enduring profitable growth.
Contributed to Branding Strategy Insider by: Larry Light, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I
At The Blake Project, we help clients worldwide, in all stages of development, define or redefine and articulate what makes them competitive at critical moments of change. Please email us to learn how we can help you compete differently.
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