The Importance of Older Consumers to Small Business Survival: Evidence from Rural Iowa

Article excerpt

Small retail businesses in rural areas must compete for their limited consumer base with nearby giant discount and chain stores. Many rural community residents are enticed to shop beyond the local marketplace, creating a leakage of tax income from the community and reducing net sales for small retail business managers (Papadopoulos 1980; Stone 1995). Outshopping, coupled with consequences arising from agricultural adjustments and population outmigration, has been found to greatly reduce the survival rate of small independent retailers in several rural communities in the U.S. (Aryes, Leistritz, and Stone 1992; Bryant 1989) and in several rural communities located in the United Kingdom, Finland, Norway, Sweden, and Greece (Jussila, Lotvonen, and Tykkylainen 1992; Monk and Hodge 1995; Simmons and Kalantaridis 1996). Retail concerns in several rural Midwestern U.S. communities have decreased from 60 percent of all business establishments to 33 percent (Strange 1996).

Although small business managers in rural communities are often dependent on a changing economic environment, they can also be responsive to these changes as active decision-takers. Rural retail businesses faced with declining numbers of customers can employ various adaptive strategies. For example, two strategies have been successfully employed by rural retail shop owners in Lapland, Finland (Jussila, Lotvonen, and Tykkylainen 1992). The efficiency strategy concentrates on reducing overhead or production costs by focusing on a specific segment of the customer market. As a second solution, the small business manager pays more attention to market differentiation and attempts a market increase by combining new activities or service offerings.

Although several studies have attempted to assess the causes of rural consumer outshopping behavior, little is understood about those consumers who inshop - meaning those who choose to shop with local businesses (Anderson and Kaminsky 1985; LaForge, Reese, and Stanton 1984; Miller and Kean, 1997a; Samli, Riecken, and Yavas 1983). For small retail businesses that are located in rural areas, identifying potential consumers from a limited population base (efficiency strategy) and accurately interpreting the likelihood of their adopting specific products or services offered to meet their needs (entrepreneurial strategy) require an understanding of the rural community and its marketplace.

Generally, one of the first steps in developing a focused or target market strategy of efficiency is to analyze the characteristics of potential customers. Through analyses of demographic and psychographic information, consumers in a market can be segmented by identifiable characteristics differentiating them from others in the market area (Solomon 1994). Demographic information describes characteristics of the population such as age or income, whereas psychographic information frequently pertains to consumers' lifestyle or activities, in addition to their personality as expressed by their interests and opinions (Mowen 1990). Additional psychological aspects of the consumer are also important. Knowing something about rural residents' attitudes, motivations, and behavior with regard to their interests in and opinions of the community and its marketplace will further the rural retailer's ability to efficiently target viable segments in the rural community (Jarratt and Polonsky 1993).

Demographic analyses of age trends have identified consumers in both the baby boom and elderly age segments as critically important to marketers in several regions of the U.S. (Mowen 1990). As the first consumers of the baby boom generation (born between 1946 and 1964) pass their fiftieth birthday, their consumption behavior will continue to affect marketing strategies for many years to come. The "senior citizens" or elderly market is traditionally defined as consumers aged 65 years and older (Lambert 1979; Tongren 1988). Lengthening life spans and the celebrating of 75 million baby boomers' 65th birthday beginning in the year 2011 will result in a great increase in the elderly population. …