What is the significance of having the Annual Consumer Spending by Age analysis for Full Service Restaurant in a business plan for A Touch of Tuscany?
The Annual Spending by Age analysis tells a small business owner like Jack Gordon and the reader of the business plan, how much money is being spent on the products and services offered by the industry sector in which the business operates. This is key industry as well as demographic insight for small business owners like Jack Gordon. It tells us a great deal about the age of our potential customers and this information is of course critical in creating a strategic marketing plan and out smarting the competition tactically. Another great advantage of this analysis is that it looks at annual spending by consumer age range over a period of 10 years and thus business owners like Jack Gordon are able to see with clarity how much folks of different ages used to spend when compared to the rest of the population and how much they are spending today.
In order to conduct this analysis we take in data on annual consumer spending for 6 categories over a 10 year period for Full Service Restaurant. Even if we are not able to find the spending by consumers on the exact same industry category that the business belongs in, we recommend that this analysis be conducted using that industry segment data that most matches with the one that we are interested in analyzing. Thus for example if the business is in the fast food industry and annual spending by age data is not available for the fast food industry, we recommend that the data for the annual spending by age on food in general be used instead. The following are the categories classifications used in this analysis:
What changes can one expect when looking at this analysis and how does that impact a business like A Touch of Tuscany?
Over a period of 10 years there can be subtle changes in the spending habits of the American Consumer or you may even find in some instances that there are drastic changes depending on the industry you are in. It is critical to analyze this carefully since some of the trends denoted in the past years may actually be a decent harbinger of what is to come in the future. Thus lets say that an industry used to have a very high amount of spending by consumers who were less than 25 years old and in the recent years we find that the same younger consumer is now spending a lot less than they used to - that may well mean that young people are not being attracted to the products and services of a particular industry as much as they used to in the past because they have grown out of it. On the other hand, you may find that there are folks in the say 34 to 44 age group that used to spend very little money on a particular industry sector, but are now spending a lot more than they used to in the past.
Besides the changing nature of spending amongst different age groups, this analysis also shows just how an industry itself may be changing and that of course has tremendous impact on a small business owner like Jack Gordon. Lets say you are a manufacturer of ceramics and pottery and are looking to expand your operations by putting down some serious investment into infrastructure, but you find that the total amount being spent by your traditional target market of consumer between 34 and 54 has dropped from $1000 per year to $800 per year over the last five years - it will certainly give you pause and you will have to reconsider your decision to expand. If other industry metrics also confirm that spending on ceramics and pottery is slowing down and the demographics of a target market like Westchester County are showing an aging population, you have have to consider expanding to a newer or different target market - perhaps selling items online or partner with another geographical distributor who will help you spread your wings and get your product out to different parts of the country.
Which consumers should a business like A Touch of Tuscany be looking to target if they have a choice?
More often that not, it is the product or service that a business is offering that determines who the ultimate clientele is going to be in terms of age. For example if you have a small practice as a math tutor for high school math - guess what? - your target market is high school students and their parents and so in this case you really don't have a choice in selecting the age group of your customers that you can market to. On the other hand, in the event you have a product or service that is useful to many age groups like say a collectors shop where all kinds of collectible items are sold from baseball cards to train sets - you will most probably have a target market of consumer of all ages.
In the event you have a broad audience in terms of age, it is always recommended that your marketing should target folks with the deepest pockets and that of course is folks who are earning a good income. Generally speaking people in their late twenties and early fifties make the best customers for businesses who rely on consumers disposable income - these are the folks who end to be earning decent wages and have the disposable income to make the discretionary and lifestyle purchases they want. Marketers find that folks in age groups below 25 may have the need and desire but may not have the purchasing power and folks above their late fifties tend to start changing the way they consume since they see an upcoming retirement looming on the horizon.
Coming back to age - there are many businesses that have done very well because they have understood the teen market - a market that is known to have very different tastes and preferences from the older market and also whose tastes and preferences change rapidly. A good example of this may be entrepreneurs who were able to capitalize on the hip-hop boom in the early nineties and get involved in creating merchandise like clothes, shoes and even after market automotive accessories that marketed to a young generation of clients that were looking to embrace the hip-hop lifestyle made famous by the music genre.
Understanding market trends and being able to catch a good trend are critical to the success of small businesses and almost every large well known fashion designer started off as a relatively small business that was able to grow incredibly well because they were able to identify and take advantage of trends in the young and fashion conscious segment of the clothing market. Even very large sporting goods companies like Nike and Addidas have learnt the importance of tapping into the younger generation who often spend two or three times more money or a shoe than older consumers.
Is it rare to see consumers older than 55 do a lot of spending?
Not really. Consumers who are older than 55 tend to spend their dollars on industries like health care and retirement services. Thus businesses who benefit from senior and retired folks tend to be retirement communities, assisted living facilities, nursing homes, home health aide services and so on. The entire State of Florida in one sense is a great beneficiary from the retired and senior community consumer given how many relocate and retire there. As sad as it sounds, certain medical practices like oncology also tend to do well in older target market environs since as we get older, our bodies tend to develop more health issues which we did not have to cope with when we were younger!
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