112 CHAPTER 5 EXTERNAL CONSIDERATIONSINMARKETING
Despitelowunemploymentlevelsandrisingwages,theaverageAmer-
icanhousehold'sspendinghasbeencautious,ifnotdownright
miserly,inthelastdecade.Theaveragehouseholdspent13%lesson
foodawayfromhomein 1997 thani:11987,afteradjustingformfla-
tion.Itspent25%lessonmajorapplicmces;24%lessonalcoholic
beverages;18%lessonnewspapers.books,andmagazines;ane:15%
lessonclothing.
Themostimpofcantpredictorofspendingislifecyclestage.Typi-
cally,householdsheadedbytwenty-somethingsspendlessth3:1aver-
ageonmostproductsandservicesbecausetheirhouseholdsare
smallandtheirincomesarelow.SpendinghitsamaximuminmiddlE
ageasfamilysizeincreasesandincomespeak,thenfalbagainin
olderageashouseholdsizeandincomedecline.
Thesestages.combinedwiththe::Jabyboomsandbustsofpast
decades,havemadeconsumermarketingacomplexendeavor.Adda
fundamentalchangeinthelifecyclepat~ernofspending.andmar-
ketersarediscoveringthatdoingbusinesstodayisa101.likebuilding
ahouseinanearthquakezone.Sources:"TheNewConsumerParadigm,"AmericanDemographics.April1999,
pp.50-58;EdwinS.Rubenstein,"Inequality,"Forbes.January2000,pp.
32-33;"Cuttinga Pie,"Forbes,S<:ptember4 .2000,p.86;SusanJacoby,
"Money,"ModernMaturity,July-August2000,pp.36-41.TheBusiness Cycle
Fluctua~ionsinoureconomyfollowagenera:patternknownasthebusinesscycle.Thefluc-
tuationsineconomicconditionsaffectsupplyanddemand,consumerbuyingpower,con-
sumerwillingnesstospend,andtheintensityofcompetitivebehavior.Thefourstagesin
thebusinesscycleareprosperity,recession,depression,andrecovery.Prosperity Prosperityrepresentsa periodoftimeduringwhichtheeconomyisgrow-
ing.Unemploymentislow. consumers'buyingpowerishigh,andthede,nandfo;:-products
isstrong.Duringprospe:'ity,consumerdisposableincomesarehighandtheytrytoimprove
theirqualityoflifebypurchasingproductsandservicesthatarehighinqualityandprice.
TheU.S.economywasina periodofprosperityfrom 1991 to2000.Formarketers; oppor-
tunitieswereplentifulduringprosperity,andtheyattemptedtoexpandprodJctlinestotake
advantageofconsumers'increasedwilli'lgnesstobuy.Recession Recessionischaracterizedbya decreaseintherateofgrowthoftheecon-
omy.Unemploymentrisesandconsumerbuyingpowerdeclines.Recessiontendstooccurafter
periodsofprosperityandinflajon.Duringa recession,consumers' spendingpowerislow,as
theyarebusypayingoffdebtsincurredthroughcreditpurchasesduringmoreprosperoustime~.
Duringrecessions,marketingopportunitiesarereduced. Becauseofreducedbuyingpower,con-
sumersbecomemorecautions,:,eekingproductsihat?oremorebasicandfunctional.Depression Depressionrepresentsthemostseriouseconomicdownturn.Unem-
ploymentincreases,buyingpowerdecreases, andailothereconomicindicatorsmovedown-