Memorandum by Robert Diamond
UNLOCKING THE VALUE OF THE OVER-50 CONSUMER
Marketing to the UK's over-50 customers is being
heralded as a key industry trend for the first decade of the 21st
century. The appeal is obvious, given the concentration of 80
per cent of assets, 60 per cent of savings and 40 per cent of
disposable income within the 33 per cent of the UK population
aged 50+. The potential returns from tapping into this value are
equally clear, and demonstrated in the US where dedicated 50+
marketing has been underway for over a decade.
The first challenge to unlocking 50+ value is
in delivering effective targeting when age and incomethe
most common variables for market segmentationare not clear
indicators of true spending power. Meanwhile, as customers replace
peer influences and aspiration with self-awareness and buying
confidence, a more sophisticated approach to offer development
is needed. Finally, as customers move into the unique position
of time-rich media and marketing consumption (rather than time-starved),
a more targeted view of communication is needed.
A SNAPSHOT OF
THE UK OVER-50
Much has been written about the demographic
"time bomb" of the ageing UK population. However, many
of the headlines hide the key messages that make the 50+ market
so crucial for future brand sales.
A thorough investigation of the detailed dynamics
within the over-50 market would take a paper in itself to explain.
So, below is a summary of the situation in five key messages about
the 50+ market.
1. Over-50s are the fastest-growing demographic
group in the UK today:
20 million people today, rising from
33 per cent to 44 per cent of the UK population in 20 years.
2. Fewer teens and young adults means more "empty
nests", presenting a challenge for the process of long-term
nearly half of European households
have no one under 30.
3. UK wealth, savings and spending power is
concentrated in the over-50s:
50+s hold 80 per cent of assets,
60 per cent of savings and 40 per cent of disposable income.
4. These trends make over-50s a key buying group
in several sectors, in addition to their role as "parent-payer"
for their children's spending:
50+s are the top buyers of new cars,
holidays, IT equipment and fashion.
5. The need for actionable segmentation of the
50+ market is crucial, given that a significant number of over-50s
are still less well off:
40 per cent of UK pensioners are
totally dependent on (meagre) state benefits.
A MARKET IGNORED?
Despite this demographic and economic certainty,
many marketers seem to ignoreor misrepresentthe
over-50 market. Some concerns are validfor example that
overtly appealing to a 50+ audience could alienate younger buyers
(in the same way that the reverse is true). However, other perceptions
are less well-foundedthat long-established brand loyalties
cannot be changed and 50+s are unresponsive to modern marketing.
Is the UK marketing communitywhere only 10 per cent of
Marketing Directors are 50+ and 80 per cent of agency staff are
under 40doing this market a disservice?
In an attempt to resolve what the real industry
view on the over-50 opportunity is, we solicited the views of
senior brand owners from a range of UK marketing departments.
In summary, there is a widely-held appreciation of the 50+ opportunity
but there are challenges in delivering against this, given current
levels of customer insight.
These comments set an important tone for our
exploration of the 50+ opportunity:
that the ageing of the UK population
presents more of an opportunity than a risk;
that, generally, over-50s are less
well understood than other segments of the market;
that sensitivity is required towards
50+ customers when considering how the overall brand should be
positioned (even if discrete 50+ targeting is not an option);
and finally, that companies will
need to tailor their offers, messages and channel choices in order
to appeal to 50+ customers without alienating other buyer groups.
The prevailing "hype" around 50+ is
clearly justified. The question is what to do about it.
The concept of 50+ targeting is nothing new.
Most visibly in the UK, SAGA has been building relationships,
mainly with the "older" end of the 50+ market, since
the 1920s. However, the key change is that we are now seeing a
significant element of the buyer base for "mainstream"
brands (ie not dedicated to 50+) being made up of over-50s, who
bring different expectations and experiences to their purchase
While the demographic trends do not materially
affect the underlying economics of SAGA, the implications for
"mainstream" brands managing a customer portfolio that
includes over-50s are more fundamental. Ageing and changing household
structures result in shifting product consumption patterns, different
purchasing characteristics and expectations of customer service.
In order to sustain and grow sales from existing customer bases,
a shift in marketing approach is required.
OF 50+ SEGMENTATION
Marketers looking to target discrete segments
within the overall, mainstream market usually focus on two key
discriminators: age (or broader lifestages) and household income.
Given the need for fast and effective targeting tools, age is
a logical shorthand for a customer's likely needs, behaviours
and influences at certain times in life. Income is used as a proxy
for potential value, either to the category or a specific brand.
Many observers, therefore, went ahead and applied
an age-based approach to defining behaviours, needs and potential
financial values within the 50+ market. Typically, the "Young
Old" in their 50s today, are pictured as free-spirited, affluent
and unconventional. The "Growing Old", aged 60-74, have
been brought up with values influenced by post-war austerity and
a firm belief in family values. Then there are the "Old Old",
carrying the memories of the depression and frightened into staying
behind locked doors by the threats of modern society. Using this
model, marketers use broad homogenous segments (for example "Baby
Boomers") and develop offers and creative to reflect this.
In recent years, however, there is increasing
evidence that age for over-50s is much more relative, becoming
as much a state of mind as a state of body. Recent surveys suggest
that three in four over-50s feel no more than 75 per cent of their
chronological age. Given this, a more sympathetic view of ageing
is needed, where physical age (what your birth certificate says),
health age (how old your body feels), mental age (how old you
feel) and lifestyle age (how old you act) are brought together
to create a profile that is relevant and can be targeted. More
about this challenge later.
At the same time as challenging age as a tool
for 50+ selection, income also appears to bear little relevance
in an environment where over-50s' spending power is often determined
more by returns on assets rather than earned income. This point
is illustrated by Figure 1, showing how (reported) income declines
precipitously with age.
However, our experience tells a very different
story. One of our automotive clients recently found that buyers
of their new cars had an average income of £5,000 a year.
However, buyers of used vehicles shared an average income band
of £15-20,000in other words, people who buy more expensive
new cars are more likely to be living off asset-based income rather
than still earning a regular wage.
This illustrates why a new approach is required
that reflects an individual's real spending power, rather than
a set of simple assumptions based on "regular" working
Our solution to this targeting challenge began
with the insight that as people near 50, they face a number of
fundamental life decisions that influence their personal (and
spending) priorities. Three factors rise above others around age
1. Children leaving homeby
50, 86 per cent of UK households have no one under 18 living there.
2. Mortgages paid offby 50,
60 per cent of home owners have paid off their mortgage (for over
65-year-olds the figure rises to virtually 90 per cent).
3. Planning for retirementalthough
68 per cent of UK households are still working between 50 and
the legal age of retirement, financial planning for the years
afterwards starts long before-hand.
A NEW TARGETING
These three factors create a unique situation
whereoften for the first time everan individual's
financial commitments on the mortgage, school fees and household
items fall at a faster rate than the disposable income coming
in from salary and interest on assets. This opens up a gap in
uncommitted expenditure which we call an individual's "Financial
Freedom". The degree of "freedom" will vary for
each individual, reflecting the amount of money coming in and
also what is required to cover the bills. Within this, the marketer's
challenge is to attempt to target each individual according to
their "Financial Freedom", then marry this with other
considerationssuch as how they spend their leisure timein
an attempt to marry spend potential with relevant interests that
will drive a response to a marketing offer. Now we have an actionable
approach that reflects age (as an entry criterion), but then moves
beyond income to provide a precise and targetable measure of individual
To help define an individual's financial freedom,
we have reached out to commercially-available databases that contain
a comprehensive range of variables relating to lifestyle needs
and behaviours. As a side-benefit, using commercial data also
allows us to overlay the findings on to third-party rental lists
to facilitate future customer prospecting.
While the specific insights and action plans
resulting from our "Grey Matters" segmentation will
vary by sector, overall key headlines include the following (Figure
The "classic" targeting
group of wealthy, older individuals may be as small as 3.5 per
cent of the UK's over-50 population (our "Healthy & Wealthy"
Of the 40 per cent of UK households
that rely on state benefits for most or all of their income, nearly
half also claim sickness or disability aid (our "Survivors").
The "baby boomer" generation
(which we call "Making the Best") are a formidable force,
representing nearly a quarter of all UK over-50s.
To drive the development of relevant offers
and messages to each segment, "pen portraits" are required
that explain the needs and wants of each group. Using a combination
of in-house material and commercial lifestyle databases (such
as TGI and Claritas data as we have used here), we are able to
demonstrate the different behaviours between segments.
As an example: "Healthy & Wealthy"
are independently wealthy, likely to be retired (perhaps company
directors). They may have second homes in the UK and Europe, they
use charge cards rather than credit cards, enjoy a hectic social
life (at home and out), fine wines and reading. They support charitable
causes and drive luxury cars, and so on.
"Making the Best""baby
boomers", many are still working, mortgages often remain
(despite equity release), they carry multiple credit cards, enjoy
DIY, gardening and betting, drive 4x4s and family cars, and eat
at family-style restaurants.
(TGI, Claritas over-index versus UK population).
This approach may not be appropriate for all
categories and brands. However, the overall approachof
moving beyond age and income as targeting variablesrepresents
a fundamental shift for all marketers looking to unlock over-50
value. See box for a more general view of the age group, from
To ground us in the reality of creating relevant
customer propositions and delivering these through cost-efficient
channels, we will illustrate this challenge using a client case
study from the luxury Automotive sector.
Traditionally, over-50s had been
the only target group, given that 65 per cent of all new luxury
cars in the UK are bought by over-50s.
Recently a range of less-expensive
vehicles had been introduced, reducing the entry-level price from
over £50,000 to nearer £20,000.
Today the customer portfolio ranges
from 25 to 75+.
Retain the core brand essence (quality,
heritage and sports performance) for all owners.
Retain over-50s as a core buying
Introduce a higher volume of younger
buyers who will be managed up into more premium vehicles over
Insights into over-50 buyers.
Media selection and targeting.
Proposition development and delivery.
Our first step was to investigate whether purchase
behaviour in the category varied with age. Without disclosing
any of the client's proprietary findings, we can use an industry-standard
after-sales survey (the New Car Buyers Study or NCBS) to demonstrate
how car purchase behaviour evolves over time (Figure 3).
Design and price are the key reasons for under-50s
choosing our particular vehicle. For over-50s, drive and size
have become greater considerations. In addition, under-50s seem
to score all factors more highly than their over-50 counterparts,
suggesting stronger views about what they like and why. At the
topline level, a different customer proposition (or slant on the
product's benefits) may be needed for segments within each group.
NCBS data also demonstrate why "value"
propositions need to be created relative to the buying group,
given that over-50s buyers are significantly more likely to pay
for their new car with cash rather than manufacturer or dealer
When it comes to defining the most relevant
"platforms" for communicating benefit messages and value
offers, a key to understanding the over-50s market comes from
understanding the use of leisure time. For family lifestage groups,
you may be what you eat (as Tesco believes in its targeting).
For teens, you may be what you wear (for Littlewoods). Alternatively
you may be what you read (for WHSmith). For a significant proportion
of over-50s it is often a case of "you are what you spend
your free time on".
Going back to our "Grey Matters" segmentation
and profiling tool, we helped this client find the different leisure
interests of its target segments. For their traditional heartland
buyer ("Wealthy & Healthy" in our matrix), we identified
their media preferences to be:
Daily Mail and Financial Times are preferred titles.
For reference, Over 50s represent 33 per cent
of the UK population but 49 per cent of newspaper readership.
Most broadsheet (Guardian, Independent, Times, Financial Times)
readership falls off with age but the Telegraph has exploited
its unique position using a database of 400k subscription names
to innovate new lifestyle clubs in wine, travel, fashion.
Birds (RSPB), Amateur Gardening and Woman and Home
over-index for "Wealthy & Healthy" readers vs total
population. Dedicated 50+ magazine titles (Yours!, People's
Friend, My Weekly, etc) offer lower-than average cover pricesbut
with lower print quality as well.
SAGA's subs-based magazine stands out, delivering
a 1.2 million monthly circulation as the bedrock of the Saga holiday
and 50+ services offering.
to BBC 1 and 2, with select Sky Sports programming mixed in. Over-65s
are significantly more likely to watch news and factual programmes
than 16-44s. However, many 50+s see themselves as portrayed negatively
Radiolistening focused on
Classic FM, Heart and BBC Radio 2. 49 per cent of 55-64 year olds
tuning in versus 82 per cent of 15-24s.
Internet-"Wealthy & Healthy"
usage, at an average 10 hours a month, is significantly ahead
of average. 40 per cent of over-50s are Online, visiting more
sites, more often and for longer. Usage varies by demographic:
ABs = 61 per cent online, C1 51 per cent, C2 29 per cent, Ds 12
per cent. Email click-through is higher for this group (8-10 per
cent vs. 3-5 per cent average).
Based on this information, our recommendation
was to focus on broadcast TV and print to deliver a single brand
communication message around core values and product news. However,
more targeted mediaincluding "lifestyle" magazines,
direct mail and customised internet siteswould then be
used for delivering a discrete proposition to segments of the
Our detailed proposition remains confidential
to the client. However, one of the options we considered demonstrates
how 50+ lifestyle targeting can create a relevant platform for
managing customer loyalty (in this case) using discrete contact
channels to generate the highest response rates.
Profiling identified gardening as a key leisure
pursuit for the more affluent customers that our client was trying
to retain. By blending this with media consumption insights and
the overall target of getting drivers back into their vehicles,
we were able to recommend an integrated plan that reinforced brand
loyalty, product benefits and offered a platform for further prospecting.
In summary we proposed offering:
1. a short UK leisure break itinerary, taking
in the finest gardens of Britain's stately homes;
2. our client to provide free admission using
a Heritage pass;
3. providing a vehicle for response measurement
and further data capture;
4. providing a commercial tie-in with the
Daily Telegraph's lifestyle clubs matching premium hotel
and restaurant deals in with the gardens itinerary.
5. leveraging our client's presence at special
house-and-garden event days, to offer test drives to new customer
prospects (marketed through advertorial coverage in SAGA's monthly
6. ability to plan and track your journey
using a microsite on the brand's website. Look out for some news
in Summer 2003!
Successful 50+ exploitation demands an alternative
to the mainstream mass-marketing that many of these customers
grew up with. Here is a group where value is highly concentrated
within a minority of customers, who are more likely to be time-rich
rather than time-starved, and whose responsiveness to marketing
offers relies on personal relevance rather than peer pressure.
Not all businesses will find themselves needing
to respond to the same degree, at the same time, or with the same
level of sophistication. However, those that chose to ignore or
misrepresent the over-50 opportunity will eventually find out
thatsooner or latertheir traditional customer base
will have aged from under them.
1 Copyright Robert Diamond. Back