Demographics Matter!

December 29, 2015

 

By 1983 motorcycle sales in the US had climbed to almost 800,000 units per year. The industry was flourishing. Ad agency executives were hailed as geniuses. Design engineers were credited with coming up with just the right product for the market. Industry executives received large bonuses for their good work.

But, in 1985 the trend began to reverse - sales were down somewhat. 1986 was worse. Motorcycle sales went into a freefall. Predictably, price wars followed as the industry struggled to reverse sinking sales. Industry profits were annihilated. But, sales did not rebound.


By 1991 sales had bottomed out at around 300,000 units per year, less than half of their previous highs. Motorcycle industry executives lost their jobs. Ad agencies were replaced. Design engineers worked feverishly to come up with a new model that would sell, but to no avail.

 

The very same people that had been lauded as geniuses in the early 1980's were discarded as failures in the late 1980's. So, what happened? Although few recognized it at the time, the underlying answer is that the market simply went away. To be more precise, it grew up and there is nothing that the ad agencies, industry executives, or design engineers could have done to prevent it.

 

Who buys the hot, high-end Japanese motorcycles made by the likes of Honda, Suzuki, Yamaha, and Kawasaki? The answer is men, and more specifically men between the ages of sixteen and twenty-four. Women buy motorcycles as well, but their numbers are dwarfed by their male counterparts. Why the abrupt cut-off at age twenty-five? The answer is -- at that age men get married. Girlfriends may tolerate motorcycles. In fact, they may even be attracted to the excitement.

 

But, wives, and particularly wives with young children view them as too risky. The ladies are right! High end Japanese motorcycles can do zero to sixty in three seconds. Some can travel at over 200 mph. Motorcycles are the most unsafe form of transportation there is. Twenty-something males think they are invincible and therefore are willing to take more risk than any other group. The combination of these two factors produces unhappy but inescapable statistics. So, by their late twenties, men are no longer in the market for the hot, Japanese made motorcycles.

 

The peak of the Baby Boom generation was born between 1957 and 1961. From 1961 until the mid-1970's live births in the US declined precipitously. Do the math! In 1985 babies born in 1961 were turning 24 years-old. The peak of the Baby Boom generation was outgrowing the Japanese motorcycle buying years. They were moving into a different phase of their lives. The Boomers that were aging out were being replaced by a much smaller group of sixteen year-old young men who were a part of Generation X. At the peak of the Baby Boom there were 4.3 million live births in the US per year. At the trough of Generation X there were only 3.3 million live births in the US per year. That's almost a 25 percent decline! No amount of marketing, product design, or price cutting will sustain sales (let alone profits) through that kind of market reduction.

 

So, what are the implications for your business? Very simply this - demographics matter! It is important to understand who your end customers are and what is happening to the size of your market. The sizes of various generations in the US have alternated between large and small. The GI Generation (who fought WWII and is now dying out) was fairly large. They were followed by the diminutive Silent Generation. The Baby

Boom Generation was almost 50 percent larger than the Silent Generation. Generation X will again be smaller than the Baby Boom Generation. But, Generation Y will dwarf any generation that has come before it.

If you are selling into the front side of a population curve, life is good! If your target demographic is shrinking, there is nothing you can do about it. It's time to think about diversification, expanding your market, or an exit strategy. But whether the news for your business is good or bad, ignorance is most assuredly not bliss, and in this case, what you don't know can most assuredly hurt you - demographics matter, don't ignore them.

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