It is an interesting question and not one most companies consider on an ongoing basis. The average age of your customer is increasingly important, not just in the Consumer Products industry but in every industry. It is a question that gradually transcends all other demographics. Generating sustainable growth requires maintaining or decreasing the average age of your customers. A customer base that is growing older will grow smaller.
A few clarifications may be helpful here.
The customer is the one with the need and the money who decides to use your product or service. In business to consumer markets, your customers are those you directly serve creating immediacy between customer demographic and revenue stream. In a business to business context, the customer does not have to be a direct recipient of your product or service, but they are the one with the power of choice.
This is not an argument concerning age chronological as much as age identity. Time will ensure that we will all become ‘older’ but are we a vibrant market at any age?
This post is intended to point to a question that executives can use to assess their strategies, products, services and channels and keep them as innovative and adaptive as possible.
We all grow comfortable working with people who are like us, who share our values, with whom we have relationships and history. There is nothing wrong with that, but we also need to be constantly looking for new opportunities to learn, to grow, to serve.
Knowing the average age of your customer is a measure to see the degree to which you are working with people who bring a different perspective to business. The average customer age should at least be stable and at best be growing younger for several reasons:
• Demographic factors form the first reason, as growth requires engaging in markets that are themselves growing. The consumer baby boom market withstanding, that requires either maintaining or lowering the average customer age. This is particularly important for firms looking to grow outside of North America and Western Europe where companies and countries have an average population age of under 30 and in some cases under 25.
• Innovation requires both demand and supply. Too often we think of innovation from the supply side – new technologies, but the need for new ideas is just as simulative and interesting. Existing customers know your products, services and practices. They are vested in the status quo, which dampens demand for new ideas, configurations, pricing, etc. Younger customers are less experienced, more demanding, and want to participate in creating new offerings for themselves and their peers. Active engagement with younger customers provides a demand for innovation that keeps your organization on its toes.
• Opportunities for growth, product extension and expanded relationships are easier to acquire with customers who have not formed rigid buying patterns and stable values. Customers who have not formed beliefs around your products, services, or brands are open to new ways of working with you, new sources of value and new value propositions. Launching new brands or products from within established companies Monster Energy from within Coca Cola, Touchstone Pictures or Pixar from within Disney, or Scion from within Toyota are all examples.
• This customer segment has different demands and requirements often incorporating non-price factors into buying decisions. There used to be an assumption that younger customers would grow-up into preexisting established market demographics. For example, people in their 20’s were expected to drive Chevy’s and then graduate to a Buick or Cadillac when they go the key to the executive washroom. But younger customers appear to be qualitatively different in their values and expectations. Understanding how these customers view the comprehensive value inherent in your value proposition and products is important and informative.
• Technology adoption and application rates are different between various age groups. While its true that those over 50 are among the fastest growing set of users on FaceBook, in general adopting new business oriented technologies is more prevalent among groups with a lower average age. This will become important as enterprises digitalize their businesses, products and services as the early majority will be a younger majority
As mentioned previously, this is not an argument against working with established or more mature customers. It is not an argument against retaining current customers who are core to current revenues and earnings. Organizations that adopt ‘youth movements’ in their strategies and initiatives are foolhardy and such knee jerk reactions are a sign of weak management.
Rather recognizing the diversity of your customer base and how to create value across that diversity involves understanding the things that make your customers different and one of those differences, like it or not, is age. The average age of your customer is just one indictor of the diversity of your customer base, one that is not often considered beyond a marketing plan, but one that can lead to growth, innovation, value and insight.
How old are your customers? It’s a question of identity as much as the passage of time.
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