Marketing Megatrends

By June 1, 1983 February 7th, 2019 Marketing Theory
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A number of fundamental and mostly irreversible demographic and technological changes are taking place right in front of our eyes. Unfortunately, many marketing practitioners don’t see them, even though they are living through them: this is partly because these changes are evolutionary rather than revolutionary end partly because of their preoccupation with tactical operations, annual budget battles, and continual reorganizations.

Yet these emerging demographic and technological changes are as dramatic and significant as the postwar baby boom and the move to the suburbs which took place in the forties and fifties. One can almost directly attribute failures of basically good companies such as W.T. Grant and A & P to blatant neglect of market changes. Similarly, decline in sales of such basic products as coffee, the electric iron, and family magazines can also be directly attributed to changes in the market place. Many companies and industries today are facing similar challenges created by emerging changes.

In this article we will examine fundamental changes in consumer values and buying behavior as a consequence of demographic changes and technological innovation, First, we will summarize the demographic and technological forecasts and their fundamental impacts on consumer behavior. Second we will develop a list of marketing megatrends which are likely to be the driving forces in consumer marketing. Finally, we will suggest strategies of survival for companies and industries in light of these megatrends.

Demographic and Lifestyle Changes

Demographic changes can be summarized in terms of three fundamental well-known changes:
1. Maturing of America. There is an almost unanimous consensus among demographers that America is shifting from a nation of young adults to a nation of mature adults. For example, the median age in 1980 was 30 and it is expected to be 42 by the year 2050. Similarly, we are witnessing the present migration from the baby boom to the baby bust era. This is indicated by the replacement of the 1840-34 age segment as the biggest buying segment by the 30-10-40 age segment in the population.

This aging of America is directly attributed to the ever-increasing life expectancy (69 years in 1960 to 74 years in 1980 and nearly 80 years in 2000) as well as ever- declining fertility rate (3.8 children in 1960 down to 1.8 children in 1980 and stabilizing at 1.7 by the year 2000). This trend is expected to generate the largest growth in the 30-to-45 age segment and second largest growth in the 65 and above age segment.

2. Dual-Income Households. A second major change is the emergence of dual-income households in which both husband and wife are wage earners. More than 50 percent of women are now In the work force. This has resulted In redefinition of the family roles of breadwinners and homemakers,
It is anticipated that most American families will be distributed on a bimodal basis on the income continuum. Those who believe in the traditional family roles of husband as the breadwinner and wife as the homemaker are likely to experience a sharp decline in their real Income whereas those who adopt the more contemporary roles of dual-income earners will experience a sharp increase in their real income. In short It Is very likely that there will be a decline of the middle class as we know it today. In Its place, we are likely to evolve a two-class society —the Affluent and the Average.

3. Nontraditional Households. A third major demographic shift is the sharp increase in nonfamily households such as singles (single adults), mingles (multiple adults of same sex) and single parent (divorced or separated family) households. For example 22 percent of all households were single adult in 1980 and this group is expected to increase sharply by the year 2000. It would appear that more adults prefer to live alone, or to establish households on the basis of friendship instead of kinship. In the process, the average size of the household is expected to decline sharply (from 3.6 in 1960 to 2.8 in 1980 down to 1.8 in 2000). In short, households will become more and more atomistic.

It is very likely that there will be a decline of the middle class as we know it today.
As a consequence of these three major demographic changes, we will probably experience the following changes in household lifestyles and values.

1. Individualistic Lifestyles. As more and more adults live alone or establish households on a friendship rather than kinship basis, people will be able to manifest lifestyles that are not constrained by the family norms and the desires of other family members. Household consumption activities are therefore likely to be reshaped from household to per capita basis. In short, more and more consumption will be personalized to each individual.

Even in the traditional family households one would expect an increase in individualistic lifestyles as career- or work-related schedules gene rate more conflicts in getting together at the same time. For example, when both husband and wife are professional workers, it is likely that business obligations as well as travel away from home will diminish the chances of their eating dinner together.

2. Adult-Oriented Lifestyles. Maturing age of the population, emergence of single adult households, and formation of household on a friends hip basis all indicate a decline of children’s presence in the household. This decline should result in an Increase of adult-oriented lifestyle, both at home and away from home. For example more and more adult oriented programming is being viewed at home through network as well as cable television, Note the increase in sex- oriented story lines in such soaps” as Dallas and Dynasty.

3. Time-Driven Lifestyles. As the population matures to the prime age it has more activities to perform but within the same time limit. This is because the activity curve over the life cycle from birth to death tends to peak at the middle years. At the same time, we are an affluent nation in terms of both average annual income and personal wealth. It is therefore inevitable that America will become a nation of time-poor, money-rich households. More and more people will substitute time as the scarce resource in place of money, and as a result will establish priorities for products and services based on how much time they will save rather than how much money they will cost. For example more and more people tend to telephone long-distance rather than write letters. Similarly, they travel by air rather than by car for long distances.

Technical Chances and Business Functions

Along with the demographic changes, there are also significant technological changes taking place which impact on the supply function.

The primary technological change is the emergence of the electronics age. It is a direct substitute for the electromechanical technologies which began with the Industrial Revolution, It is also having an Impact on the chemical technologies in many fields such as food processing pharmaceuticals, and photography.

Unlike the previous technologies identified with the industrial era (mechanical, electromechanical. and chemical), the electronics technology seems to possess several unique features which all impact on the business functions.

Low Entry-Exit Barriers

First, electronics is a relatively low capital technology. Therefore, practically anyone with an invention or expertise can think of starting his or her own business. This phenomenon is clearly manifested by the emergence of the Silicon Valley Industry in California as well as numerous high technology industrial parks in and around major research universities. In other words, the electronics technology has immensely lowered the barriers of entry and exit and will thus foster greater competition in all industries.

Global Perspective
Second the electronics technology can be located in virtually any geographic area. It requires much less dependence on such natural resources as water, air, and energy. All it needs is skilled labor and supply of man-made resources. Therefore, it is a worldwide technology rather than being limited to those geographical areas that have unique natural resources. This also means that a company must take a global perspective with respect to manufacturing and distribution of its products and services.

Functional Integration

Third the electronics technology seems to have the capability of improving productivity (output to input ratio) of business functions considerably greater than has any previous technology. By integrating many separate and specialized functions such as orders, shipping. billing, and collection as well as requiring lower capitalization, it tends to generate sharper declining experience curves in manufacturing and marketing of products and services, causing lower unit costs.

Enhanced Quality at Lower Cost

Fourth it appears that the electronics technology is unprecedented in its capability to offer a highly reliable, maintenance-free product or service as compared with the electromechanical and even the chemical technologies. For example today’s electronic calculators and watches are not only cheaper but infinitely more reliable in their functionalities than their electromechanical counterparts. Similarly, you can buy an electronic telephone today that will give a more reliable dial tone and perform other telecommunication functions at lower costs than electromechanical telephones.

The enhanced quality at a lower unit cost is not limited to the electronics products themselves. It pervades all business functions. For example, computer aided (CAD) and computer aided manufacturing (CAM) are enabling suppliers to offer variety of non- electronic products at lower cogs. Similarly, in most consumer goods industries the inventory costs and shipping time axe dramatically reduced with the use of physical distribution. Even professional services such as banking, accounting, and le and consulting services are upgraded in the accuracy, timeliness and reliability with the computerized work methods. Indeed, it is exaggeration to state that the microprocessors are performing routine business functions far once reliably and at considerably lower costs than human beings.

The enhanced quality at a lower unit cost is not limited to the electronics products themselves.

Finally, the electronics technology has made it economical to utilize alternate methods of selling and promotions targeted at highly specialized and fragmented segments of the market. For example, it is possible to target and customize direct marketing efforts at the individual consumer level with computerized mailings. Similarly, it is possible to explore telepromotions as alternatives to mass advertising, and telemarketing as an alternative to personal selling.
These four attributes of the electronics technology (low barriers, global perspectives, functional integration, and higher quality at tower Cost) are also likely to bring about the following supply-driven changes in the market place.

1. Responsiveness to Market Changes

With the integration of information functions such as storage, processing, and transport functions, the electronics technology has significantly reduced the time and space distances in market transactions between the buyers and the sellers. For instance, a company that has computerized order processing and inventory management procedures can respond to demand changes on a real-time basis: Even in highly volatile industries such as fashion or emergency business, it has become possible to reduce the lime and place gap between production and consumption functions.
This situation has encouraged more and more companies and industries to become market responsive and customer oriented rather than being driven by production capacity or resource constraints.

2. Niching and Market Fragmentation

Lower entry and exit barriers as well as more cost-efficient production and marketing of smaller orders has enabled more and more companies to become market or product specialists. It is therefore possible to engage in niching strategies and still remain profitable. The consequence is that the mass markets are getting more fragmented. The diversity of products and services is rapidly increasing in practically every industry, from fast food restaurants to university education, and from home appliances to fruits and vegetables. In the process, the traditional economic concepts of competition such as oligopoly and monopolistic competition are becoming obsolete, replaced by emerging realities of market fragmentation and product specialization as competitive market structures.

3. Single-Vendor, One-Stop Businesses The electronic technology’s capability to integrate business functions as veil as to provide enhanced quality at lower cost is likely to encourage companies and industries to redefine their missions and businesses so that the customer does not have to make separate choices of suppliers and brand names for related products and services. For example, banks, brokerage houses, and insurance companies are planning to redefine themselves into the financial services business. Cable television, motion pictures, and game computer industries are redefining themselves into the entertainment business. Hospitals, medical insurance, and the physical fitness field are getting integrated into the weliness business. Computer data processing. telecommunication, and newspapers and television networks are getting integrated into a single information industry.

Megatrends In Consumer Marketing

The demand-oriented demographic changes and the supply-oriented technological changes in consumer marketing are so dramatic that they must be called megatrends. Furthermore, these megatrends in consumer marketing are highly universal in their impact on diverse consumer products, companies, and industries. Finally these megatrends are likely In persist well into the twenty-first century.
The following seven megatrends in consumer marketing can be identified.

1. Dual-Class Mass Consumption. With the decline of the traditional middle class as a consequence of career-oriented dual-income and adult-oriented lifestyles, the sàIe-class mass- consumption society will likely be replaced by a dual-class mass-consumption society consisting of the affluent and the average dames. It will be possible to offer high-priced, premium products and services to a much segment of the total population than before. In other words, what was within handful of very rich people will be within the reach of as much as 20 to 25 percent of that cal population.

It will be possible to offer high-priced, premium products and services to a much bigger segment of the total population than ever before.

Consequently, companies that specialize in premium products and services will find that the growth potential for their products is enormous. At the same time, they will be able to utilize mass marketing tactics and reduce their marketing unit of transaction. Therefore these companies will also have greater profit potential. Examples include premium cars, custom built homes, luxury products such as boats and satellite dishes, and home appliances. Furthermore, the same process is likely to benefit premium retailers such as Dayton- Hudson, Neiman-Marcus, Bloomingdale’s, and others.

At the same time, those companies who offer mass market functional products and services will find it more and more difficult to survive. As the single-class mass-consumption society partitions itself into a dual-class mass-consumption society, it is inevitable that the total market share of functional products will decline, with resultant intense price competition to protect or increase market shares. Lower market shareholders in the mass markets will probably not survive, and the result will be market consolidation. This is already evident in the home appliance industry, where today only a handful of manufacturers are surviving. A similar possibility exists for the automotive industry, including the aftermarket for replacement tires, batteries, and accessories. For example, a major retailer (J. C. Penney) has recently announced that it will leave the appliances and automotive services business. Even K-Mart has experienced difficulties in its auto care program. Witness also the packaged goods business at both the manufacturing and the retail levels. Among grocery manufacturers such as Pillsbury, General Foods General Mills Nabisco, Procter & Gamble, and many others, one observes a good deal of jockeying for position by mergers and acquisition as well as abandoning of major product lines in order to consolidate their positions of market strength. The same reality is emerging in the ret ail food chains such as A & P. Jewel, Kroger, Safeway and particularly many regional chains such as IGA. –
Those companies who offer mass market functional products and services will find it more and more difficult to survive.

2. Personalized Per Capita Consumption. With the emergence of nontraditional households as well as dual-income, career-oriented lifestyles, most products and services will be demanded and consumed at a per capita level rather than shared at the household level. Furthermore, is we continue to Increase living standards, It will become more and more possible to afford products arid services that are personalized rather than standardized.

In particular, per capita consumption is likely to grow for consumer durables, professional and personal services, packaged foods industries, and leisure. The concept of a family car is likely to give way to a personal car. Therefore, the demand for station wagons should decline and demand for personal cars should increase over time. In other words, the issue facing the automobile industry is not just the size of the automobile but also the type of the car demanded by the market place. Similarly, cameras, radios, television sets, and other brown goods are also likely to become per capita products.

Professional and personal services such as insurance, health care, legal services, and financial services must also be redesigned so that they are offered on a per capita rather than per household basis. This trend is already evident in the banking and medical services.
Third, as we shift from food preparation to food consumption at home, as well as from family dinners to individual eating habits for all three meals, grocery manufacturers will have to innovate new packaging sizes and ready-to- serve foods, which are better suited for personal consumption than household consumption. These include cereals, soups, cheese, bread meat, and all other staple foods.

Fourth, the leisure market, including entertainment and recreation, must shift from family to individual consumption. For example, it is very likely that each member of the family will watch his or her own television or cable programs rather than families’ watching together partly because of time constraints and partly because of increasing individualism. Therefore, television programming in both content and timing needs to shift from prime time family programs to all-time personal programs. This will be necessary even for news programs; it will be more and more difficult for the American family to get together at a specific hour to watch a news analyst such as Walter Cronkite, as they did for a generation, In short, news will have to be offered on a Continuous 24-hour basis.

Similarly, recreation activities are likely to become highly Individualistic and personalized. It is likely that each member of the family will eng age in a different activity even when the family is together at home; for example, the young adults may play videogames or program the personal computer while the parents exercise. The individualism in outdoor recreation will be manifested even more. For example, tennis, racquetball, fitness centers, shopping, and eating out are all likely to compete against individual activities.

3. Role Blurring for Self-Sufficiency. Increasingly consumers are likely to become generalists as they manage and control their own life. The old concepts of the homemaker and the breadwinner which resulted in functional specialization are likely to become obsolete. Women will become buyers of financial services technical products, and other male-oriented products and services. Men are likely to become buyers of household products such as – laundry detergents, grocery foods, and vacuum desires. Finally, young adults of both sexes will learn how to shop and how to manage households along with learning to cope with school, education, and Computers.

The consequence of this role blurring .to become self-sufficient is that most marketing practices will have to become universal in content. This includes media, advertising, product displays, sales personnel, retail promotion, closing and opening hours, and all support services Such as refund, exchange, credit financing, and .other activities. They will have to be designed so that they appeal to all age and sex groups.

4. Time-Place Universality. Because of both demographic and technological changes, it will become increasingly common to disassociate from the time and place separations of work, home, and shopping activities, As Toffler has pointed out in his Third Wave, It Is becoming popular to work at home as we shift from the industrial to the post-industrial society. It is also becoming popular to shop at home through electronic shopping and direct marketing.

It will become more and more common to blur the task-driven time and place boundaries among work home, and shopping activities. Consequently, marketing of consumer products and services will have to be offered on a 24-hour basis. They will also be offered through multiple and often nontraditional channels of distribution as well as at home through electronic marketing program. In short, for the first time in marketing history, the consumer will go to the market and a marketer will go to the consumer at the same time. This Is quite different from either the wagon days. when the marketer went to the consumer, and the more contemporary shopping mall days, when the consumer comes to the marketer, The specific place of transacting with each other will be determined primarily by the tradeoffs of costs and benefits to each party.

In general, however, it can be expected that nontraditional multiple channels of distribution will become more the norm than the exception For example, telephone and other utility services may be procured from the supermarkets and other convenience locations. Durable appliances and automobiles may be bought at home through electronic shopping. Financial services may be offered without personal interactions and from a long distance through telemarketing programs. What is suggested is only a tip of the iceberg. Eventually, it is very likely that the boundaries between specialty and convenience goods will become blurred sufficiently to change the whole pattern of retailing institutions.

5. Dominance of Wants Over Needs. As the society progresses on Maslow’s hierarchy from physiological and safety-security needs to love, affection, and self-esteem needs, psychological wants will come to dominate the consumer motivations over the physiological needs. It is no exaggeration to state that as an affluent nation. America is a want-driven rather than a need-driven society.

America is a want-driven rather than a need-driven society.
It will become increasingly difficult for some companies to survive and grow as the consumer markets shift from need-driven to want-driven markets, for several reasons, First, products acquire want-driven utilities through their associations with socioeconomic and other reference groups or with imageries and personalities, rather than through their inherent functional benefits. Therefore, wants are harder to engineer in products and services. Indeed, it Is precisely this shift from a need-driven to a want society that is largely responsible for the failure of technologically driven products and market programs. Therefore, more and more what will be required wilt be an understanding of the psychology of the markets rather than of the physiology of markets.

Second people are likely to be more divergent on what they want than on what they need. It will therefore become increasingly difficult to mass market want-driven products and services,

Market segmentation and market specialization wilt have to be learned in place of product specialization and mass marketing. Indeed, it will become necessary to utilize pull strategies In place of push strategies in marketing.

Finally, wants are more dynamic and volatile than needs. Whereas needs are fairly stable and consistent over longer time periods, wants tend to rise and subside much faster. This fact suggests that consumer marketing will manifest shorter and shorter product, image, and competitive positioning life cycles. Indeed, it means that consumer marketing companies will have to plan major technological and marketing innovations with shorter payback periods.

The emerging evidence of shorter life cycles particularly for those products and institutions that are positioned on want dimensions is massive. Examples include magazines, recreation entertainment, and fashions. They also include newer retail institutions such as specialty chains, party plan selling, and supermarkets.

6. Pluralistic Specialty Markets. Pluralism In our values, lifestyles, and behavior is likely to increase because of greater tolerance for individualism and personalized consumption. Furthermore, the electronics age permits marketers to cater profitably to smaller and smaller market segments, Therefore, It can be expected that the next two decades will see increasing desire not to assimilate unique market segments into the mainstream mass markets but to cater to their needs and wants as specialty segments. These include ethnic groups such as blacks. Hispanics. Orientals, and Asians as well as more traditional

The electronic age permits marketers to cater profitably to smaller and smaller market segments.
European ethnic groups. Other unique specialty segments Include the handicapped, foreign tourists, people who work at home, farmers, and other unique occupations such as truck drivers and traveling salespeople. (Note: Specially designed jeans called Long Haul are being marketed to truck drivers through truck stops.) These people all have unique needs and wants either due to biogenic needs or due to unique settings in which they live or work.

As we become pluralistic, it is obvious that the potential market out of these segments will increase, Furthermore, as the economies of scale in manufacturing and marketing are achieved at lower and lower capacity levels, it will become more and more interesting for consumer marketers to treat these segments as separate specialty markets.

The trend is already here. For example, cable and television programs and other entertainment media are catering to some of these specialty markets. Food companies are marketing ethnic foods In both retail food chains and fast food restaurants, Witness the emergence of theme restaurants.
7. One-Stop, Hassle-Free Shopping. As the society becomes increasingly time driven and as the marketers increasingly broaden their business definitions, it is likely that consumers will prefer one stop hassle-free shopping for the procurement of products and services.

This trend has been there for several years now, as is evidenced by the emergence of shopping malls and neighborhood shopping centers. However, the future will be even more pronounced in this direction as the traditional location and supplier boundaries between durables and consumables, and between products and services, are also likely to disappear. The emergence of hyper stores is here. For example it is very likely that more and more dry goods such as home appliances, electronics products, perfume, and apparel will be bought and sold at a neighborhood Kroger or Safeway store along with groceries. Similarly, financial services such as insurance, tax preparation, real estate, stocks and shares, and money management services will be transacted in a Sears store. Finally, practically all products and services are likely to be shopped for and procured from the privacy, convenience, and comfort of the home through electronic shopping.

How to Survive, Marketing Megatrends

Both demand-driven and supply-driven changes are massive and unprecedented, Consumer marketers will have to cope with these changes and become more and more adaptive to the changing environments, Those who resist or ignore the inevitable are likely to be swept away by these megatrends. Those who pay attention and adapt are likely to survive and grow.

But how does one cope with these marketing megatrends? In my opinion, it will require a change in the corporate culture. It will require accepting new philosophies of management and adopting new functions and operations. It will require breaking traditions.

The following are some suggestions for inculcating Corporate culture.

1. Focus on the Market. With the maturity of the consumer markets (experienced consumers
and powerful competitors) it is absolutely essential that marketers constantly search for win-win situations between the company and the market place. This will mean striving to deliver more value to the consumers without jeopardizing corporate profitability. It means subordinating technology to customers, It means bending the organization (products, distribution, promotion) to fit the market place rather than bending the market place (customers, intermediaries, competitors) to fit the organization.

While this is an obvious and a deceptively simple rule of survival, it Is as difficult to accomplish as breaking a habit or going on a diet. Large corporations have a way of creating and perpetuating the bureaucracy (traditions and work procedures), Often, the top management team will need to be changed to those who can see the forest while gazing at the trees.

2. Control Your Costs. With the lowering of entry-exit barriers as well as global competitive perspectives, it will become necessary for management of large corporations to identify cost Structures separately for each product-market combination. With very large and diverse product portfolios, it becomes very difficult if not impossible to identify and trace various cost components. Furthermore these costs should include all functional activities associated with procurement, manufacturing, marketing, and management overheads. Greater financial controls and development of on-line real-time information systems will be required. The two most common methods of cost control are functional consolidation and automation. The former is an effort to retrain the specialists into generalists and the latter is the replacing of specialists by microprocessors.

3. Broaden Your Horizons, It will become increasingly necessary to understand competitive forces Outside the industry. These are more commonly associated with substitute technologies and with the customers, including end users, producing their own products and services rather than buying from the market place. At the same time, it will become necessary to redefine businesses more broadly For example, packaged food companies must redefine their businesses as the market shifts from a food preparation to a food consumption society. Banks must redefine their business as financial services as the electronics technology bypasses the regulated geographical franchises. Consumer appliance companies also need to redefine themselves as shopping goods companies as people begin to buy computers, video games, and cassette tape recorders from the same appliance dealers, Greater financial controls and development of on-line information systems will be required.

4. Decentralize the Organization. The span of control versus cost of control is encouraging increasing decentralization of the corporation, It is therefore possible to provide greater autonomy to individual product-market divisions without losing the span of control. The result is that one can easily eliminate as many as two levels of management ranks from the organization without jeopardizing the coordination and control objectives, a move made by many of AT&’s operating companies.

In general, it is desirable to break up the monolithic organization into separate lines of business (profit, or cost centers) based on the commonality of manufacturing, distribution or profit life cycles. Not only is the decentralized organization more cost effective, it also enables the corporation to better focus on the market and thereby become responsive to changing market wants.

5. Practice Pluralistic Philosophy. No single marketing approach is likely to be sufficient in. the future, simply because markets are becoming more and more divergent with respect to wants, needs, and buying power. Therefore, a single way of doing business is unlikely to appeal to all market segments.

It will be necessary for most large companies to offer multiple product lines with significantly different price points and to market their products through multiple channels of distribution as well as develop relationships with multiple suppliers. For example, in consumer durables an appliance is likely to be produced by the same company wider two or three different brand names, each with significant functional differences and significant price difference. Similarly, a single brand name is likely to be distributed by many different retail channels such as department stores, specialty shops, chain stores, discount houses, and catalog stores. Finally, most retailers will find it necessary to offer the same assortment of dry goods or grocery products through separate outlets. For example, grocery chains such as Jewel Companies sell through box stores (self-service) as well as through Super bazaars (full service): Dayton- Hudson (full Service) has a successful alternative retail channel called Target (self-service). By following these five rules, a company is likely to survive the turbulent times.

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