Household Life Cycles and Lifestyles in the United States

Household life cycle has been widely used as a determinant of consumer behavior and a basis for market segmentation. However, there is considerable disagreement about how life stages should be defined and how households progress through these stages. Existing studies use a priori definitions, which...

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Bibliographic Details
Published in:Journal of marketing research 2006-02, Vol.43 (1), p.121-132
Main Authors: Du, Rex Y., Kamakura, Wagner A.
Format: Article
Language:English
Subjects:
Age
Children
Consumer behavior
Consumer research
Demographics
Demography
Empty nest syndrome
Households
Life cycles
Market segmentation
Marketing
Markov processes
Modeling
Social life & customs
Studies
Transition probabilities
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Summary:Household life cycle has been widely used as a determinant of consumer behavior and a basis for market segmentation. However, there is considerable disagreement about how life stages should be defined and how households progress through these stages. Existing studies use a priori definitions, which are tested on a cross-sectional survey of households collected at a single point in time and thus cannot reveal the real dynamics of the household life cycle. The Panel Study of Income Dynamics provides longitudinal data on household composition in the United States for a period of 34 years; the authors use this to identify empirically the most typical stages and paths that U.S. households have followed since 1968. They develop a hidden Markov model in which the stages of the household life cycle are taken as latent, unobservable states that are uncovered from the manifest household demographic profiles over the 34 years, assuming that households evolve through these latent stages following a first-order Markov process. The authors apply their results to classify members of another panel (Consumer Expenditure Survey) into life stages, which enables them to study the impact of the household life cycle on households' budgetary allocations, providing a comprehensive analysis of lifestyles (through expenditure patterns) over the household life cycle.
ISSN:0022-2437
1547-7193
DOI:10.1509/jmkr.43.1.121