Playing The Numbers Game

Some people look to the stars to figure out the future. Others stare into a crystal ball or study the mysteries of tarot cards. Ken Gronbach takes a very different approach: He analyzes demographics.

Studying vital statistics may look simple, but it’s anything but. Numerous companies have lost bundles of money, not to mention prestige, because they badly misjudged their markets. Despite these inherent challenges Gronbach has a long record of correctly forecasting the trends, transitions, and opportunities around the world.

Gronbach, president of the marketing firm KGC Direct and an author, is an internationally respected demographer who has predicted commercial, economic, cultural, and political changes with great accuracy.

So what’s his secret? “Twenty-two years ago, as the president of a very successful retail advertising agency, I made a remarkable discovery about the relationship of shifting demography and changing markets,” he says. “The evidence was overwhelming.”

According to Gronbach, the most important questions businesses need to ask themselves are: “How many people are in my market?” and “Is that market growing or shrinking?”

While this may seem obvious, numerous companies keep overlooking them. Among those is Mattel, one of the premier toy companies. Mattel was experiencing steadily declining sales and hired four CEOs in four years to reverse this trend. None of them, however, had been able to do that, and sales of Hot Wheels and Barbie Dolls continued to decline.

According to an article in The Wall Street Journal, “The real problem is that kids now are so enthralled with their iPhones that they no longer have any consideration for those toys.” But according to Gronbach, the real problem is that there are 25 percent fewer children now under age 10 than there were 10 years ago.

“Do you think just maybe that has something to do with their sales decline?” he asked. “If there is a 25 percent decrease in your market, no matter who you are, your sales are going to decline. Mattel needs to reach a large number of kids, but many of them were never born.”

Generations Tell The Story

Demographers group people into generations, which last for 20 years. There are 78.2 million baby boomers, born between 1945-64, and they helped fuel the growth in autos, homes, toys, and other industries.

The boomers are followed by Generation X, which consists of 69.5 million people; they were born between 1965-84. Their numbers, clearly lower than the baby boomers, resulted in slower auto sales, fewer new homes being bought, and declines in other areas too.

Gen Y includes the 100 million people born between 1985-2004 and are an even larger group than the baby boomers.

What do these people need? What will they buy? Is there anything they will stop buying? “The future is not mystery; it’s simple math,” says Gronbach. “The thing that drives commerce and consumption is the number of people in a market – period.”

About 20 years ago, Levi-Strauss called Gronbach to help resolve a serious problem they were experiencing. For 20 years the company couldn’t make their products fast enough, and consumers were delighted with them. Then, suddenly, sales began to fall off a cliff, plunging from $8 billion to $2 billion in just two years; the company couldn’t understand what was going on.

“What happens at 34 years of age that makes consumers stop buying your products?” Gronbach asked a company executive.

“Many no longer can fit into them,” was the reply.

“Do you realize you’re a boomer business?” Gronbach asked.

“What does that mean?” the executive replied.

“It means you’re not paying attention to demographics,” he answered.

A similar story happened some 20 years ago. Baby boomers had been purchasing SUVs in vast quantities. Auto makers wanted to sell the same numbers of SUVs to Generation Xers as they did to the baby boomers but were not able to.

“The auto makers kept on firing their marketing departments and chief marketing officers because they weren’t selling as many SUVs to Generation Xers as they had to the boomers. Nobody bothered to count the number of people in that market,” which was substantially smaller

Gronbach has not only analyzed the size of the various markets in the US but of those in other countries as well, and this has led him to make some very surprising and even shocking forecasts about some of the trends and events that may lie ahead.

What The Future Holds

The following Gronbach forecasts are based on changes in the sizes of core markets and other important trends:

*The market for marijuana will be bigger than that for wheat.

*Florida’s population will explode.

*Russia’s power will fade.

*China’s economy will implode.

*Europe will be changed forever.

Gronbach added that since Russia has a shrinking population and very few immigrants they will need to get more people by annexing countries, specifically Ukraine, which has “50 million healthy people,” to use his expression. He believes that China “shot itself in the foot” with their “one child” policy of the 1970s and now have no younger people to drive their economy; no “heavy-lift taxpayers,” to use another of his expressions.

The largest population increase, said Gronbach, will be in Sub-Saharan Africa, where the population will grow to 4 billion in the next 50 years. Back in the US, Gronbach sees women taking more of the degrees in higher education than they do now and having more of a leadership role in the future.

According to Gronbach, of particular interest to US investors is that demographics point to a severe shortage of health care and funerary services for the aging baby boomer population. “Smart investors and workers will migrate to these industries and others focused on an older population,” he said.

Investors: Take note, because numbers don’t lie.

Sources: kgsdirect.com; interviews with Ken Gronbach and YouTube videos featuring him.