Every second of every day, there are 4.1 births and 1.8 deaths, resulting in a global population increase of 2.3 people, according to the U.S. Census Bureau. This reality, along with other important factors, are causing major shifts in demographics that will undoubtedly impact your target markets.

To successfully invest your capital, sell your goods and services, add or delete product lines, or make product alterations, you’ll need to know where tomorrow’s major populations will live, what they are likely to buy, and how much they are willing and able to spend. Answers to these questions may seem difficult to obtain, but if you analyze available data, you'll learn where tomorrow's major populations will live, their ages — an important indicator of needs and tastes — and their income levels.

99 Percent of Population Growth Will Occur in Developing Countries

By 2004, world population is anticipated to reach nearly 6.38 billion people. And although world growth rates are decreasing, the population is expected to exceed 6.81 billion by 2010 — an increase of 430 million or more than the combined populations of the United States, Germany and France. Virtually all world population growth will occur in developing countries, with India and China accounting for 21 and 12 percent, respectively.

Per capita income levels play a major role in determining whether or not to pursue a particular market. Yet, when establishing a global marketing strategy, the size of the middle class can be more telling. For example, in 2004, major global markets like the U.S., Germany and Canada are forecast to support per capita incomes of approximately $40,000, $30,000 and $27,000, respectively, according to the International Monetary Fund. On the other hand, per capita incomes in Mexico, China and India are anticipated to reach $6,000, $1,120, $530, respectively.

At first glance, U.S. producers are likely to assume that consumers in these countries can’t afford their products. However, they could be mistaken. India is estimated to have a middle class of 300 million people with purchasing power similar to the U.S. middle class. Compared to the entire U.S. population of 289 million, many would agree that an additional market of 300 million consumers with substantial buying power is worth pursuing.

Focus on the Fastest Growing Age Segment

Due to medical breakthroughs and improved diets, the elderly are living longer, healthier lives. In fact, on average, men and women are living 11 years or more than they did in 1970. Consequently, over the next two decades, the age structure of world population will shift, with older age groups making up an increasingly larger share of the total.

Existing trends indicate that by 2020, two-thirds of the world’s elderly will live in developing countries. And in that time, the elderly population in the United States and the rest of the developed world will increase by more than 50 percent. What does this mean for your business? The demand for travel and other leisure-related services, second homes and furnishings, and healthcare and related services all will increase.

Median Age Is Increasing

As the population of the elderly is increasing, the growth rate of children is decreasing. In fact, from 1998 through the year 2025, the number of children under age 15 will increase only by 6 percent. This is the result of lower fertility rates. As children become a smaller proportion of the total population and older age groups become more dominant, the world’s median age — the midpoint that separates the younger half from the older half — will rise. In 1996, the world’s median age was 26 years. By 2020, it will be 31. What does this mean for business?

According to Harry S. Dent, Jr., author of The Roaring 2000s Investor, on average, Americans enter the workforce at age 19. They get married at age 25.5 (27 for men and 24 for women), bear their first children two years later, and purchase their first homes at age 33 or 34. They trade up to the largest homes they’ll own by age 44, and fully furnish them by age 46.5 or 47.

Interestingly, average Americans also reach peak spending at age 46.5 or 47, which is the same time their children usually leave home. Dent observes that empty-nest couples then spend more on vacation homes, travel and leisure. They also become prospects for investment services and products as they approach retirement age. Since American consumer spending patterns are similar to those of other developed countries, it’s reasonable to assume that as the median age rises in those countries, consumer spending also will rise. Depending on your products or services, closely targeting these consumers may be a sound strategic decision.

Reassess Your Marketing Strategies

As U.S. and world populations shift, traders and investors must reassess which markets to pursue. For some, this may mean targeting the growing needs of the elderly. For others, it may result in providing goods and services to median age consumers in developed countries, where incomes are rapidly increasing.

To achieve your goals, it may be necessary to eliminate, redesign or add new product lines and services. However, before acting, research where your target market will be both in the near and distant future.

This article appeared in Crain's Detroit Business, October 2003. (CO)
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the ManzellaReport.com, is a world-recognized speaker, author of several books, and a nationally syndicated columnist on global business, trade policy, labor, and economic trends. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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