Ignore demographics at your own peril

Demographics don’t lie. They are one of the few external trends shaping organizational outcomes around which there is little if any controversy. The baby boom is aging. The voting electorate is getting more diverse. A critical question facing business models therefore is “What will be the impact of demographic trends on our future success?”

The answer depends upon context. Lima, a small city in the eastern part of Pennsylvania, has a median age of 79. It suffered a 15 percent decline in population from 2000 to 2010. City officials and local businesses clearly have an issue! On the other hand, a large city with one of the oldest populations (Scottsdale, Arizona) experienced a 7.2 percent growth in population over the same period. Here, demographics work to city government and local business advantage, as Scottsdale attracts new residents by positioning itself as a retirement hub. It can be expected to grow unless Phoenix water shortages create inherent limits to growth – but that is another topic. The GOP on the other hand chose to ignore the entire context of demographics.

The older demographic usually behaves differently than the younger ones. One way to think about older buyers is the “tail” that refuses to budge when industries get disrupted. Think landlines. The segment of the population that is holding onto landlines no longer broadly represents the population as a whole. That’s why it’s no wonder that the election polls reliant only on landlines performed far worse than those using Internet polling or landlines and cell phones. As Nate Silver, author of FiveThirtyEight, commented in his post-election Sunday NYT Blog, “Google may be our next Gallop” in light of Gallop ranking last in polling accuracy. Trust his word – he hit the bull’s eye in 2008 and 2012 with his election predictions.

Ignore demographics or make assumptions that they do not matter at your peril, as the GOP is waking up to realize. Newspapers need this message. Newsoaur blogger and media expert Alan Mutter points out that the growth of digital readers should not fool publishers into thinking there is a growing consumer base. Apparently, the new digital audiences are largely drawing from the existing print audiences. Editors and publishers might try to calm themselves by believing that as people age they will take up the newspaper habit — making newspapers the “Scottsdale of media.” But doing so would be self-deception worse than Karl Rove’s. Just watch your kids in action to understand how news channels are changing. Symphonies and operas that reach out to younger audiences are strategically smart.

If the target market of your business model is off trend – be it for demographics or any other segmentation driver – it’s time to rethink your target. Changing the target is tricky, as you do not want to lose your core audience. Talbots learned this lesson the hard way as the brand that would appeal to First Lady Pat Nixon tried to appeal to the Victoria Secret crowd. I predict that Penny’s CEO will learn this lesson the hard way when he loses his job – not for trying to change Penny’s retail store experience and target, but for not experimenting with change before rolling out an experiment so broadly and expensively. (See my earlier blog on the store experiment.)

Some facts that will impact your success are known. Are you paying attention to them?

How do you proceed with expanding your target market? You must target a mind-set that remains appealing to your existing target market, while bringing in younger or newer members. Call it the “expanding our tent” as the politicos refer to this move. To stay in business, newspapers will have to find a mindset that explains both why their core demographic of older women read the news and why younger ones should. Perhaps they could target people who want to form their own opinions based on objective information. Or people who are curious and welcome important news they were not necessarily seeking out.

But saying you have a new target isn’t enough. “Expanding our tent” but offering the same old immigration and social policies did not work for the GOP any more than the same old product will work for newspapers. You must disrupt yourself with a fresh offering that works for the new mindset – both your core audience and the new demographic segments that you are trying to attract.

Changing your target market work is tricky. Sometimes it requires a new brand and customer experience, not unlike Lexus departing Toyota to win upscale drivers. Sometimes it requires distinct products, like Scion versus Camry under the Toyota brand, to attract younger drivers. All I know for sure is that changing your target market when it’s no longer on trend requires looking at data with objectivity (not desire) and being willing to change.

Good advice for today’s GOP.

Kay Plantes is an MIT-trained economist, business strategy consultant, columnist and author. Business model innovation, strategic leadership and smart economic policies are her professional passions. She was an economic advisor for former Wisconsin Gov. Lee Dreyfus.

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