1

Counting People—What a Concept!

I SPEAK FORTY OR fifty times a year all over the United States and Canada to very different audiences. I speak to manufacturers, distributors, importers, exporters, educators, students, funeral directors, insurance executives, marketers, human resource executives, sales executives, politicians, government employees, and retailers, to name a few. All of my audiences seem to share a similar vague notion of what demography might be. As a demographer I am often asked if I make maps. That, by the way, would be the field of cartography.

My family knows what I do.

When my daughter Libby was 15 she and a close friend were riding in the backseat of our Volvo station wagon. I heard her friend ask, “What does your dad do?”

Libby replied that I was a demographer. There was the usual pause. Then her friend asked, “What’s that? Is that like an economist or an accountant?”

I could tell that Libby was searching for the right answer. Then she replied, “No. Accountants and economists count money and stuff—my dad counts people, and people are more important than money and stuff.”

Good answer! That’s exactly what I do—I count people. Most people don’t count people, even at the most basic levels. Most people have no idea how many people there might be in the world (as of June 2016, an estimated 7.3 billion people, so now you know), or in the United States (about 320 million give or take a few million),¹ or even in their own town or city (depending on the town or city, I might be able to pull up the number). But what may be more problematic is that many marketers have no idea of how many consumers (people) there might be in their specific markets. Let me give you some examples.

I grew up with three older brothers in a single-parent household. They were considerably older than me. Chuck was eleven years my senior and the twins, Bob and Roger, were nine years older. Chuck was big and very aggressive so there was a clear pecking order. When my mother would put an apple pie on the table, a battle would erupt and often injuries would result. It was a clear dynamic of supply and demand. Chuck, of course, would get the biggest piece; the twins would get theirs; and, if I was lucky, I would get a small piece. My mother didn’t interfere with the battle because she was flattered that we all loved her pie and were so enthusiastic about getting a piece. It made her feel good. Then Chuck joined the navy and left home. We kind of missed him . . . a little. Things changed around the house. There was a new pecking order. When my mother would put a pie on the table, the reaction would be measured. There was no more fighting. We didn’t have to. Everyone got all he wanted. What was my mother’s reaction? She was hurt. We apparently didn’t like her pie anymore.

So, what was my mother’s problem? She didn’t understand shifting demography and shifting markets at the most basic level. My mother did not stop cooking quantities for four boys until we had all left home.

I can’t explain exactly why, but I am pretty sure it has something to do with an inability to count people.

About six years ago I was speaking in Florida to a large group of municipal financial workers, and as soon as I began speaking, I discerned that this group seemed decidedly solemn and distracted. I am not the best speaker in the world, but my jokes are funny and I can normally hold a crowd pretty well. Not this one, and it was getting very painful.

Finally I just stopped my routine PowerPoint presentation, held up my hands, and said, “Whoa, time-out—what’s going on here?”

I wondered whether I needed to start my presentation by doing CPR. “You guys look like someone just told you that the world was ending.” What I didn’t realize was that many of them might have been thinking exactly that.

Apparently an earlier speaker had filled them full of Florida’s gloomy financial future. I asked the audience to volunteer what they were thinking, and there was no shortage of replies. It seems that the local economist who spoke just before me showed a lot of crash-and-burn graphs and charts that demonstrated how hard Florida had been hit by the recent housing and financial crisis. The bottom line was that many of the folks in the room were thinking they were facing the possibility of being laid off. The world was ending!

One gentleman near the front volunteered: “Things are bad in Florida and clearly they are going to get a lot worse. It looks like retirees from the North have stopped retiring to Florida and our lifeblood of tourism is in steep decline. Everywhere you look you see empty storefronts, deserted condos, and houses in foreclosure.”

I said, “Now I get it. So why don’t we all slit our wrists and get this over with?” OK, so I was a bit harsh, but sometimes I find that necessary when you want to bring people back into reality. I told our doomsday spokesman that he was half right. Things were bad here in Florida. But they were not going to get worse. They were going to get better, a lot better, incredibly better. I had gained their interest. I needed to deliver.

I explained to my Boca Raton, Florida, audience that it is never a good idea to project the present infinitely into the future. Despite what economists might imply, things do change. I told them that the largest U.S. generation ever to retire was about to do just that, and that this generation, the aging Baby Boomers, had their retirement held hostage by the housing crisis and resultant diminished equity. I told them that the housing market was coming back, slowly at first, especially in states that had judicial foreclosure, but that once the foreclosures were cleared a vibrant housing market would reemerge. Baby Boomers would then sell their homes, recoup their equity, and descend upon Florida and other warm states like swarming locusts. I told them that they did not have sufficient infrastructure to handle the millions of Baby Boomers who were headed their way. They would need to build airports, harbors, roads, bridges, houses, condos, hotels, strip malls, office buildings, shopping centers, and parking structures to handle the volume. Before I knew it, the cheering crowd was carrying me on their shoulders and someone nominated me for mayor.

OK, so I exaggerated a bit, especially about the mayor part. The rest of it is true. Florida will blossom economically and demographically, and, as of the first half of 2016, it certainly appears that my rosy projections are starting to come true. But more on this later.

Meanwhile, I continue to believe that the folks in Florida still have no idea just how much their lives are going to change, just how much Florida is going to change. And that’s because no one down there has bothered to count people. They haven’t counted the massive numbers of Baby Boomers and played around with these numbers based on historic growth and migration patterns for the state of Florida. When they do decide to start counting, I am positive it will be an eye-opener.

Now if you read my 2008 book—The Age Curve: How to Profit from the Demographic Storm—or you’ve heard me speak, then you are familiar with my theories regarding the collapse of Japanese motorcycle sales in the United States in the late 1980s and early 1990s. It bears repeating here because it is the perfect example of corporate failure to count people.

In 1992 our advertising agency lost one of its biggest and most profitable accounts ever—American Honda Motorcycles. It was no real surprise because Japanese motorcycle brand sales had been plummeting during the previous six years. Between 1986 and 1992, the market for Honda, Kawasaki, Yamaha, and Suzuki sport bikes fell by about 80 percent and most of the dealers closed. No one knew why. Not the Japanese. Not the big American advertising and marketing agencies.

It didn’t make any sense. Sales had been so robust throughout the late 1970s and early 1980s that we thought this would go on forever. The shift happened in 1986 when in early spring we ran the television, radio, billboard, and newspaper ads for about 180 dealers from the tip of Maine to Pittsburgh to Washington, D.C., and then waited for the usual tidal wave of customers. It never arrived. Customers trickled in. Our dealers became predatory and began seriously discounting the bikes. It was the beginning of the end. By 1992 it was over. It was the end of an era for the Japanese motorcycle sector. No one, and I mean no one, had an explanation. I remember the folks at Honda saying that they could not compete against the legendary Harley. They even started making bikes that copied the Harley style. They knew the “what” but they did not know the “why.”

I discovered the “why” in 1996.

I had been troubled by the popular and growing perception that Generation X, born 1965 to 1984, was a generation of lazy slacker couch potatoes. I believe this perception gained even more credence with the popular 1991 book Generation X by Douglas Coupland. But I wasn’t buying it. Of the forty people working at our advertising agency, thirty of them were Gen Xers and not one of them was a lazy slacker couch potato. So I had the research department of our agency dive into the real facts about Generation X by looking at data from the U.S. Census Bureau, CIA World Factbook, and Bureau of Labor Statistics.

The findings of this research were simple and profound. Generation X appeared to be underperforming compared to the Baby Boomers they followed simply because Generation X was smaller. We discovered that there were 9 million fewer native-born members of Generation X compared to the Baby Boomer generation. That’s a lot of people. It is almost equivalent to the population of Serbia.

American Honda, Suzuki, Yamaha, and Kawasaki, along with their advertisers, did not see the end of the Japanese motorcycle sales boom because they all failed to understand that the last members of the Baby Boomer generation were marching past their places of business along the generational parade route as of 1986. By 1992 the Baby Boomers had completely exited the Japanese brands’ sweet spot of 16- to 24-year-old men. The diminutive Generation X that followed the Boomers simply did not have the critical mass of 16- to 24-year-old men to satisfy the needs of the market left behind by the Boomers.

Generation X was essentially 11 percent smaller by birth than the Boomers who preceded them through those key sport motorcycle buying years. But no one ever gave any thought to counting them before they were due to arrive.

In the first months of 2016, a news story making the rounds caught my eye. After fifty-six years of Barbie sporting the same body style, toy maker Mattel Inc. introduced its new Barbie with three new body types, seven skin tones, twenty-two eye colors, and twenty-four hairstyles. I applauded the company for rolling out a more realistic version of its iconic doll for impressionable young girls, but it was a number in the news story that caught my eye. Every news byte on the issue I read pointed out that Mattel sales had been declining for two years, with the end of 2015 showing even further sales declines in all categories. None of the “news” writers tried to explain the reason behind the drop in sales, though several alluded that ennui must be at the root of the problem—“Barbie has become increasingly out of touch.” None of the writers, nor Mattel apparently, gave thought to maybe looking at the population of its customer base. From what I could tell from the half-dozen or so stories I read, and from Mattel’s annual report, no one seemed to even consider that just maybe there might be fewer potential customers. In fact, in his message to shareholders, Mattel CEO Christopher A. Sinclair ascribed Mattel products that “were not sufficiently compelling to consumers” as the primary reason for the year’s lower sales.

So, I counted. And guess what? As of the end of 2015, the number of potential Barbie-owning children in the United States within the prime Barbie-owning year of age 5 was about 7 percent smaller than it had been at the end of 2012.² The number of 6-year-olds was about 3 percent smaller, while older children numbers between the two years were roughly equivalent.

Going forward, I don’t care how many changes Mattel makes to Barbie in an effort to make her more compelling to consumers, because that’s not going to change the fact that Mattel’s core customer base is getting smaller. All someone has to do is look at the birth numbers to see that annual births declined by about 300,000 within three years of the 2007 U.S. peak birth year, likely in response to the housing market meltdown and subsequent Great Recession.

Mattel had some boom years due to the robust birth years of 2000 to 2007, but as those customers age out of the toy market there are fewer customers aging into the market. Anyone can look at the birth numbers and figure that out, but has anyone from Mattel bothered to? I doubt it.

Having given you the four examples above regarding most people’s inability to count people, I suppose I should give you at least one example of someone, other than myself, who does count people.

I belong to a workingman’s yacht club on the Connecticut River, just down the 154 Highway in Chester, Connecticut. We keep the expenses down by sharing a lot of the work as opposed to paying someone to have it done. Last year the club put on its annual BBQ chicken fund-raising luncheon, and my wife and I were assigned to help the experienced crew that always puts it on. On the day of the BBQ, vast quantities of chicken appeared near the BBQ pit as did many large bags of charcoal.

I thought to myself, I hope we have enough, but at the same time thought, I hope we don’t have too much. If we didn’t have enough, some people were going to go hungry and get irritated with us, but on the other hand, if we cooked too much chicken, it would likely go to waste and reduce the amount of money that the club would make.

The cost was $25 each, all inclusive. Phil Visintainer is “Mr. Chicken.” He has been barbecuing chicken for decades, both at the club and at the Haddam Neck Fair. I asked him if we had enough chicken, and got an icy stare back. “Of course we do,” he chided me.

I wondered if the BBQ pit was big enough to do all the chicken at once and if the chicken be thoroughly cooked on time. I didn’t ask because I knew Phil’s answer would be, “Of course.” I complimented Phil on his professional confidence but couldn’t resist asking him how he was so confident in his projections.

“I got an accurate count on the people who would be eating with us today,” he replied.

He had done his homework. He knew his market demand and prepared his supply accordingly. We served 144 perfectly barbequed chicken quarters right on time, with four left over to account for any unexpected guests. And if there weren’t any, as Phil had predicted, then he was more than happy to bring the leftovers home for his next day’s lunch and dinner. Mind you, I made him share with me.

Counting people—what a concept!

Pretend you set up a hot dog stand at the state fair. It was not cheap. You had to pay thousands of dollars for a prime location, and you had to pay it up front and pray that it didn’t rain. It’s the morning of the opening day and business has been disappointing. You are vexed. Should you reduce payroll and send people home or should you expect an afternoon rush and order more hot dogs?

You could call your accountant and she would tell you what you did last year. That’s no good.

You could call an economist and he would send you some graphs. No help there.

Or, you could call a demographer. You could call me. Here is the conversation:

You: “I don’t know whether to send people home or to buy more hot dogs. Business has been very disappointing so far.”

Me: “Can you see the parking lot from where your stand is located?”

You: “Yes.”

Me: “Describe it to me.”

You: “It is filling up with school buses.”

Me: “Buy more hot dogs!”

Really, now, is that so hard?