In business you need a reliable customer base. It doesn’t matter what
you are selling. To stay in business, you need buyers.

Plus, you need to understand those buyers and stay on top of how that
market of buyers might be changing.

This is where demographics comes in.

When people look at demographics however they usually don’t look
closely enough. Age bands are usually as far as they get.

The reason Zen-Bus Advisory looks at macroeconomics and behavioural
science is because we believe that the big picture gives clues about
how to best position even the smallest of businesses. So before we get
to some on-the-ground implications here's a big picture view of what
you need to know about demographics and why.

To predict how well a business or industry may run, it's important to
know the context that it operates in. That context is the general
economy.

To understand the general economy, you need to look at the factors
that are most important in driving its performance.

There’s no shortage of data to look at to measure the economy but in
the big picture, to properly understand economic growth you need to
look at demographics and include these key three factors:

• working age population • labour productivity • labour utilisation

Age is simply one characteristic in a huge range of variables and
differences in an otherwise similar population group that affect all
the above issues.

(Plus although age structure is considered in labour market
composition, health expenses, education, and pension costs, it is
usually not factored in enough when looking at inflation and discount
rates and the impacts these have as they circle back on economic
activity).

Even within groups that are generally similar, there will be very
different behavioural patterns. For example spending patterns will
always vary amongst people who otherwise seem similar. Behavioural
economics can help demonstrate and explain these differences.

We’ll be releasing reports soon that describe some important
demographic factors that will impact on all economies, and of course
we’ll be explaining why it matters to small and medium enterprise.

Some of these factors are the differences in investment styles and
asset demand across demographic segments. We’ll get into what the
inverse dependency ratio is and why it’s important. And we’ll discuss
what’s been called the ‘demographic shock wave’ and how this will
affect business.

For now though, back to macro demographics and how small and medium
business can take advantage of what it shows.

Some big picture trends are relatively easy to spot: age structures in
many economies are tipping heavily towards older populations. This
means the pharmaceutical and biotech sectors will continue to grow as
more people live longer. Financial services will do well as they cater
to the exact same market with pension products. The need to diversify
those pensions will in turn help alternative asset classes —
infrastructure, real estate, and natural resources. Also, growing
inequality will drive demand in high-end leisure and luxury markets.

Whilst these are all big picture trends that large organizations and
big money are positioning for, there is nothing stopping small
enterprise from taking advantage of the very same opportunities.

Is your business tapping into these bigger trends?

Or is it in place to benefit later, when slow-moving trends eventually
make reactions necessary?

Beyond the simple factor of age, issues of productivity and
utilization indicate that current retirement ages and benefits are way
too generous to recipients. So, that is likely to change. What
services exist for the specific needs of older workers?

As sections of the population do eventually retire, how will the
workforce replacing this older segment look?

What does the labour force participation rate look like in the markets
you cater to? Is there a significant gender gap, or is it closing?
What services can take advantage of this?

A well-run business plans ahead and ensures it offers what the market
wants and needs.

Make sure the road ahead for your business is clear (our macro
industry reports can help here).

Then once you’re on the right road, make sure that you maximize the
interactions you have with consumers.

Optimising the way consumers act when they come to your business can
be simple.

Join our mailing list to receive our free report detailing some
behavioural economics fundamentals that you can easily apply straight
away to enhance the profitability of your business.

-- Michael Hardiman

Director ZenBus Advisory 0401 610 626 zen-bus.com