America is in the midst of seismic changes. Unprecedented demographic shifts. Rising educational attainment. Migration of young talent to urban centers. A technology revolution reshaping our economy and empowering consumers in ways previously unimaginable. What does this mean for the face of tomorrow’s consumer market? Are we witnessing the emergence of a new mass market?
Everyday there is some new story about America’s march towards becoming a majority/minority nation. Each article seems to offer some superficial anecdote about the generational cohorts driving the demographic shift and some broad observations about cultural trends that will accompany this change. But what does this really mean for consumer behavior, opportunities, and challenges in the marketplace. How does a CMO/CEO make sense of all this change to focus their company on the most meaningful opportunities? What really matters?
To put some numbers around the demographic shifts we will be experiencing, according to 2014 US Census data, 93% of the population growth through the end of the decade will be driven by non-whites. Hispanic population alone will be responsible for 54% of this growth. The magnitude of the wave of change facing America will have profound effects on our cultural center. Understanding the ripple effect of this cohort will be key in unlocking tomorrow’s opportunities. But examining these changes through the lens of traditional multicultural demographics is limiting and can blind us to larger opportunities. Brands that tap into the larger cultural shifts in society resulting from these demographic shifts will be well-poised to win in tomorrow’s marketplace.
Predictors of consumer behavior: race and ethnicity vs. cultural identity
What is more important in understanding consumers, how you see them, or how they see themselves? Race, and to a lesser extent ethnicity, is about how the world sees you. Race and ethnicity are assigned. Cultural identity is about how you see and relate to the world, and how you choose to express yourself. Cultural identity is a choice. Consumer behavior is a choice. Choices are what matter in the marketplace.
There are three factors that generally drive consumer behavior and choices: human aspirations, the context in which the human exists, and their life stage. These in turn are largely driven by the components of cultural identity; variables like educational attainment, current geography, family class and social values, political and economic environment are all parts of cultural identity that have a profound effect on how people see themselves and the choices they make, both in how they identify themselves and what they want, need, love and support.
What is really happening?
Taking a quick look at some of the factors behind cultural identity and context reveals an interesting story. Changes in educational achievement can be telling. While the rates of BS degree attainment for all racial/ethnic groups are on the rise, the historical rates for African Americans and Hispanics are significantly lower than whites and Asians, diminishing the impact of increases in base rates. Couple that with the likelihood that, according to 2014 NCES.org data, these groups are twice as likely to obtain their degree from a for-profit institution, and more likely to have burdensome student loan debt levels, and we have a recipe for slower income and wealth growth for those driving the expansion of the market. The current tech-driven “winner take all” job market is demanding not just a BS degree, but one that delivers differentiated skills. A person equipped with BS degree may not fare any better than a person with a HS in previous generations. Despite increased educational achievement, the groups that are driving our population growth may end up lower end of the middle class and not the upper classes to which they may have moved to in previous generations with similar levels of improvement in educational achievement, if their degrees are not “productive.”
Examining geographic population shifts can uncover the emerging consumer trends companies are so eager to capitalize on. Today, there is a clear movement on the part of Millennials into city centers, both financially strong ones like NY, SF or Boston, or struggling ones like Detroit, Buffalo and Cleveland. According to an October 2014 report by the City Observatory, a think tank on urban development, folks 25-34 with are 2x more like to move to a city center than in previous generations. Our urban centers are becoming magnets for the young and talented. And unlike previous generations where folks moved to where the companies are, we are seeing evidence that companies are now moving to where the talent is.
So what does this mean?
What does this confluence of factors tell us? What cultural groups are emerging or evolving? Well, we see the beginnings of a fundamental change in the mass market. A more educated, diverse group of Millennials, in the midst of a tech inflection point disrupting the job market, is heading to city centers. This shift is creating a New Mass Market. Whereas in the past, the mass market may have been centered on a white majority that was a mix of blue collar and service workers, both urban and rural, we now see a mass market that is more urban and multicultural, more heavily weighted towards service workers. This New Mass Market is not a collection of groups that are to be addressed according to their respective proportion in society; it is a group whose collective identity and values are evolving driven by a fundamental shift of its core. A tipping point has been reached.
What do I do about it?
In the near term, identifying what the emerging cultures are where you compete – as well as how and why – will be critical for brands searching for fertile ground to drive growth. To capture that growth, brands will need to identify areas of “shared identity” between themselves and these emergent cultural groups where they can authentically and legitimately connect their brands with the culture of tomorrow’s consumer.
Recognizing that effective segmentation will go beyond traditional demographic cuts or “total market + minorities” will be key to build a deep cultural connection to this market. Simple add-on marketing efforts to reach the groups driving the growth and shift of the New Mass Market will be viewed skeptically by a Millennial population that, while aware of their racial and ethnic identity, don’t define themselves solely by it. Segmentation for the New Mass Market will include race and ethnicity, but increasingly will not be driven by it. Segments that may appear to correlate with race will also include those outside of the largest racial ethnic groups in a segment, exposing a shared cultural identity.
For the rest of the decade, thinking about how your company’s brand identity and brand expression shift to ensure relevance and a deeper cultural connection your company and the New Mass Market is the first step in capturing the opportunities this market holds. Today, products are not sold as much as they are selected and purchased (and hopefully loved and held dearly) by consumers. So, providing consumers the information that helps them identify where your company and their identities overlap, will be a key factor for success in that selection process.
So beware of one-off observations of generational cohorts, cultural trends, and multicultural consumer behavior. Simplistic and disconnected observations will fail to uncover the seismic changes and significant opportunities a holistic analysis of the demographic, generational and contextual environment will reveal.
This article was written by Maurice Nicholson, SVP, Kantar Added Value New York