By Ken Gronbach
KCG Direct LLC, Haddam
I remember asking a room full of chief marketing officers, in the hospitality industry, how many people were in their respective markets? No one knew. I asked them if the number of people in their markets was growing or shrinking? I got blank stares. You have to be kidding. The most important question in marketing is: How big is my market and is it getting bigger or smaller? Everything else is window dressing.
I am sure you have heard the metaphors about shrinking pie and expanding pie markets. Shrinking pie markets are death. Yes, you can work real hard at being predatory with market share, taking a bigger piece of the shrinking pie. But this almost never works and it is very difficult. Expanding pie markets on the other hand are very forgiving.
You can make mistakes, marketing errors and still succeed. In expanding pie markets overall demand is almost always increasing. So, let's make the assumption that a product or service has little competition and is current, viable and very in demand by a market segment. Can the pie still shrink? Yes, it can. How, you ask? Simple. The number of people in the market segment is reduced demographically because a new smaller generation aging into the market segment replacing a larger one. Conversely, the pie can expand demographically when a large generation ages into the market segment footprint left by a small generation aging out of the segment. It's all numbers.
Legendary iconic Levi's jeans began their rise to stardom in the second half of the 1960s with the Baby Boomer tsunami. This launched the product into the 1970s and by the 1980's and early 1990s Levis Strauss literally could not manufacture enough jeans to meet the demand. Privately held Levis Strauss boasted sales of $8 billion. Levis jeans died the death starting in 1998 when the last Baby Boomer exited, aged out of, Levis market segment of 18 to 34 men and women. Along came the diminutive Generation X. Levis sales fell to less than half of the $8 billion. How many people are in your market and is that number getting bigger or smaller?
It broke my heart to watch Toys R Us go under. My kids would love to go there. I read the CEO's comments in their last annual report to stock holders. The essence was that toys had lost their relevance in an age where kids all had the latest technology, iPads and iPhones. I read in the April 20, 2018 issue of The Wall Street Journal that Mattel had hired its fourth CEO in as many years. It seemed that the three previous CEOs couldn't find the secret sauce that would enable Mattel to restore Hot Wheels and Barbie Doll sales. I am sure that countless heads rolled in Mattel's marketing and advertising departments as well. Ok, so what is the real reason toy sales are so dismal? You think it might have something to do with the fact that there are millions of fewer kids under ten years old in Generation Z (born 2005 to 2024) than Generation Y (born 1985 to 2004)? You think?
I just spoke to National Guardian Life in Madison, Wisconsin. They sell pre-need insurance that essentially covers the cost of a funeral and eases the financial burden for the family of the deceased. It is a solid well-priced financial product with a long history. National Guardian Life's core customer is mid- seventies in age. Eighty million Baby Boomers are currently 54 to 73 years old. The smallest generation of the last one hundred years, The Silent Generation (born 1925 to 1944), is aging out of NGL's market segment. Tell me, what do you think is going to happen to NGL's business?
Demography is destiny!