Business is an ever-changing landscape, one driven by creativity and constant innovation. Failure to adapt to changes is a sure-fire way for a company to meet its end. This is one of the reasons why so many businesses have started to advocate for diversity—it helps them stay relevant to their consumers.
Census data shows that demographics are becoming more diverse. According to the Center of American Progress, the U.S. will no longer have any clear racial or ethnic majority by the year 2050. The labor force too is increasingly diverse with nearly a third being people of color and nearly half being women.
It’s important that a company’s workforce reflect this emerging reality of diversity. How can you capture a market you don’t understand? According to a Harvard Business Review study, employees of firms that exhibited diverse leadership are 45% more likely to report a growth in market share and 70% more likely to report capturing a new market. Often a company with a homogenous workforce and culture makes products and services that is marketable to people like them—ignoring niche markets whose patronage could improve their bottom line.
If they do try to reach out to other markets, their tactics miss the mark and even alienate their consumers—who, according to a Selig Center report, have a ton of spending power. African-American buying power, for example, is estimated at $1.2 trillion in 2016 and is expected to increase to $1.5 trillion by 2021.
Not only can diversity be discussed in racial or ethnic terms, in can be seen as a matter of generational age. Millennials are a larger and more diverse group. In 2013, there were 87 million millennials in the U.S., outnumbering the 76 million baby boomers. Out of those 87 million only 56% were white, while baby boomers were 72% white.
The diversity of the millennial age group instills within them more inclusive and progressive values, which companies should be aware of. Considering that millennials are now the largest generation in the U.S. labor force, companies can retain millennial employees by keeping them motivated and engaged in an inclusive work culture.
Millennials have a total $1.3 trillion in spending power and are changing the way consumer marketing is done by demanding more brand engagement that is driven by relevant trends. For example, millennials are less likely to trust expert advisors such as doctors and are more likely to be influenced by family, friends and celebrities.
By developing an understanding of how diverse groups think and spend their money, companies are able to cater to their specific needs, stay relevant and ultimately improve their bottom line.