Target Marketing and Market Segmentation

Task

This week's reading of Chapter 6 exposes you to several areas such as the consumer buying process, target marketing, market segmentation and a brief explanation of the differences between B2B and the consumer buying process As you will find in the readings, market segments are relatively homogenous groups of buyers. However, one thing the book doesn't mention is what if these groups become smaller in size. Demographic trends greatly influence marketing segments and ultimately demand for goods and services. Towards this end I would like you to reflect on area that may affect us all in the future, America's Baby Bust.

To get an understanding of this I would ask you read the Wall Street Journal article entitled "America's Baby Bust" appearing in the Feb2-3, 2013 issue page c1. You can locate the article from the FSU library database or from my attached word file.

After reading the article- Your assignment is to:

1. Indicate and defend why you agree or disagree that lower birth rates affect economic activity. Better answers will back this up with citations. (6 points)

2. Take each of the three proposed solutions stated by the author and state why you agree or disagree and then add a solution of your own to increase the baby bust.(9 points)

3. Assume the "Baby Bust" will continue as stated in the article. Develop a list of 4 businesses that you feel would have potential for growth in the slow growth era. Be specific and state the market you would serve and strategy used. Next develop a list of 2 businesses you would avoid due to the baby bust and indicate why you would avoid them. (10 points) Better answers here will use citations.

Assignment Response

Question 1

1. Indicate and defend why you agree or disagree that lower birth rates affect economic activity.

I agree that lower birth rates affect economic activity for many reasons. The first and obvious shift in economic activity would come from the demographic segmentation. In the early stages of the cycle, which we are in right now, the older population will increase creating a population that is disproportionately old and shrinking overall(1). In 2009 people under 18 years of age made up over a quarter of the U.S. population (27.3%), and people age 65 and over made up one-eighth (12.8%)(3). Looking at the study done by the Census Bureau in 2011, the population of persons under 18 was 23.7% and population of persons over 65 was 13.3 %( 2). The change in population is occurring rapidly and projections for 2013 show this trend continuing. The age demographic plays a significant role in the economic activity of older persons and will vary dramatically from younger persons. College students for example, have needs that are very different from senior citizens; and single consumers have very different needs than families with small children (21). Older consumers purchase products based on value, function and quality while younger consumers base their purchase on image, prestige and value (4). The shifting population will also affect overall economic activity in the future as the older population dies off and the population contracts, leaving less consumers in the market place.

In the beginning of the cycle when the older population is larger than the younger generation, the behavioral segmentation will be drastically different than when the population contracts. Marketers will need to focus on the benefits sought by the older generations which are the larger part of the market. When the population contracts marketers will need to shift to the benefits sought by the new population mix.

As the resulting population continues to decline, fewer workers will be in the market leading to lower demand for products. According to the principal of demand, if population decreases the demand curve shifts to the left and prices will fall (14). As product demand shrinks it will effect economic activity and resulting in fewer sales, lower prices, and innovation of products. When sales decrease the number of jobs will also decrease resulting in higher unemployment and lower net income for households. This will start a vicious cycle of decline until we put in measures to combat the situation.

Question 2

2. Take each of the three proposed solutions stated by the author and state why you agree or disagree and then add a solution of your own to increase the baby bust

Solution 1 - Lower Social Security Tax

I agree with the authors point that Social Security is part of the reason the US has a declining birth rate. Historically, families have large amounts of children for religious reasons, to help with household duties, farming, bringing income to the family, and taking care of elders when they could no longer perform labor intensive duties (15). With the emergence of Social Security which was signed into law on August 14, 1935 by President Roosevelt, the need to take care of elders financially was not necessary anymore. This led to having fewer children, but the end result is a social security system that can no longer fund itself (16). This funding concern will continue unless measures are taken to change the dynamic (16).

I think the authors solution of reducing the tax burden for people who take on the costs of creating new taxpayers, children, is good but has some drawbacks. The lower class will benefit the most from this tax reduction and will likely have a minimum of 3 children to take advantage of the governments offer. The middle class may or may not take the offer as they will probably weigh the cost of providing their children the standard of living they are used to, for example saving for college and extra circular activities such as gymnastics, versus the tax benefit that will be given. If the cost to benefit ratio is low, I believe the middle class families will still opt for 1 to 2 children max. The upper class families will not benefit greatly from this solution and will most likely do what they want, regardless of the benefit. This could shift the demographics of the US making the lower class much larger, creating a big disparity between the "haves and have nots" and as we all know this is the major reason for most revolutions.

Finally, one fatal flaw in the plan is that the government will remove a substantial portion of the tax base used to support the elderly citizens and would have to take this burden on until the younger tax payers are old enough to start working and contributing to the social security fund.

I believe a good solution is to keep the social security tax in place, and maybe raise it a little,