The Hole in the Middle

In the latest sign that America’s middle class is hollowing out, The Wall Street Journal reported today that Procter & Gamble is pivoting away from decades of marketing to this once-vast market.

Instead, the maker of Crest toothpaste, Tide detergent and 22 other brands that generate more than $1 billion in annual sales will be setting its sights on upscale consumers and economically pinched consumers, with not much in between. As the Journal summed it up: “The world’s largest maker of consumer products is now betting that the squeeze on middle America will be long lasting.”

Peter Drucker—who, as we’ve noted, loved to study shifts among populations—saw this trend coming some time ago. “It’s not that the rich are getting richer and the poor are getting poorer,” Drucker said during a lecture he delivered at Claremont Graduate University in 1989. “It is that the large middle class, without education and without skill, is no longer growing, but is shrinking fast.”

Thus, Drucker would have applauded Procter & Gamble—both for its specific strategy and, more generally, for paying such close attention in the first place to demographics (which he defined as “changes in population, its size, age structure, composition, employment, educational status and income”).

[EXPAND More]“Any attempt to anticipate tomorrow,” Drucker wrote in Management: Tasks, Responsibilities, Practices, “has to start with demographic analysis as the sturdiest and most reliable foundation.”

Still, as basic as this may seem, Drucker thought that many business leaders ignore demographics. “All this is so obvious that no one, one should think, needs to be reminded of demographics,” Drucker wrote. “And indeed businessmen . . . have always acknowledged the critical importance of population trends, movements and dynamics.” But at the same time, Drucker added, many fail to consider “demographics in their day-to-day decisions.”

Why the disconnect? Many people assume “that population statistics change slowly,” Drucker contended in an article in Harvard Business Review. Increasingly, “however, they don’t.”

What demographic changes are affecting your business—and how have you responded?[/EXPAND]