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TRACKING LARGE COHORTS

People born in a certain time period, such as 1946-1966, are called a 'cohort'.



Some cohorts are larger than others as there were more people born during those years. Two notable cohorts, are the 'baby boomers' (born 1946-1966) and the 'baby boom echo' (born 1980-1995), which are the children of the baby boomers. In terms of size, these groups are relatively large compared to the cohorts that are immediately in front of and behind them.



Large cohorts are like a large set of consumers with common needs. The types of products and services that a person requires in their 20s, (such as education, apartment rental space), may be different than the products and services that a person requires in their 30s (starter homes, products for babies and starting a family).





By tracking the changing age of large cohorts, it is possible in some regards to predict demand growth in certain products. Where the growth rate is high, there is a large cohort entering the age group compared to the size of the cohort leaving it.

Because of ageing baby boomers, there is a large amount of people entering early retirement, compared to the number of people entering late retirement and the end of their lives.






PREDICTABILITY OF DEMOGRAPHIC TRENDS

Unlike many macro factors, demographic trends tend to have high predictability due to a comparatively low number of inputs with limited variability.

From census records, we know how many people are in each age group.

We can forecast the number of people in each age group going into the future. This is primarily based on the principle that, every year, a person gets a year older. A person in their 20s will, in 10 years, be in their 30s.





Inflows occur only from births and immigration. Outflows only occur from deaths and emigration. As a result, you can determine, with a fair amount of accuracy, the number of people in each age group 5, 10, 15 years from now, and the growth rates in each age group.


AGE-RELATED PRODUCTS AND SERVICES

Many products and services have different consumption levels depending on age. Toys, strollers, amusement parks, apartments, homes, insurance, travel, health care, and funeral services are some examples.





Using market size growth (from the relative size of cohort entering the target age group), and the consumption intensity rate for that age group, it is possible to forecast product demand.