Select Committee on Science and Technology Minutes of Evidence

Supplementary evidence by Robert Diamond and Professor Merlin Stone



  In this paper Robert Diamond, Founder and CEO of targeted marketing specialists Diametric and Merlin Stone, Business Research Leader of IBM UK Ltd and IBM Professor of Relationship Marketing at Bristol Business School explore the reasons for the apparent lack of take-up from UK business on the opportunity for profitable targeting of the UK's booming 50+ population.

  50+ is the fastest-growing segment of the UK population, with 80 per cent of all personal financial assets and a significant proportion of spending power. Despite this, few businesses have developed products, services and marketing approaches tailored to the needs of this market. In this paper we explore five possible causes for this apparent lack of responsiveness, ranging from a possible "myth" concerning the 50+s wealth statistics through to the recruiting policies and prejudices of business marketing departments themselves. We conclude by asking whether in failing to respond, companies are exposing themselves to significant commercial risk—both from competitive brands who better meet the changing needs of UK consumers, and also from a never-before-seen level of consumer anger at businesses that continue to fail to reflect their interests.


"For the past hundred years, the real division was between the rich and poor. For the next hundred it will be between young and old"

Foundation for the Rights of Future Generations 2003

  Statisticians would have us believe that a 50+ army is on the move. Across Western Europe, the post-war population bubble is approaching maturity and is changing the nature of demand for both public and private services. Within this picture the UK finds itself fitting neatly between "mature" Europe and the "youthful" US, with one of the youngest populations in Western Europe with fewer over 60s than Germany, France, Italy or Spain (source: Eurostat 2002). This means that while the European population is shrinking, from 270 million people to closer to 240 million over the next 20 years, the UK is expected to be stable at around 60 million people.

  However, a stable UK population does not mean absence of change. Here are just a few of the facts.


  The 50+s are the fastest-growing demographic group in the UK today. They currently number 20 million people, expected to rise from 33 per cent to 44 per cent of the population over the next 20 years. Within this, the single largest segment 45-49 age group, currently representing 19 per cent of the total (source: ONS). Meanwhile the UK population aged under 40 is in absolute long-term decline, with 10-19 year olds falling by 9 per cent and 30-39s by 12 per cent over the next 20 years. As a result, "age dependency" has now become a fact of life—over the next 50 years the ratio of people over 64 to working age population is projected to grow from 25 per cent to 45 per cent (Future Foundation).


  Where it comes to money, the UK's wealth, savings and spending power is now heavily concentrated within 50+s. They hold 80 per cent of all assets and 60 per cent of savings, while over 75 per cent of all UK residents with assets worth over £50,000 are aged 50+ (source: Quicksilver). This group delivers 40 per cent of UK disposable income, making them a key buying group in high-profile sectors such as cars, holidays and IT. However the outlook is not all rosy. Many 50+s face an uncertain financial future—nearly 40 per cent of 50+s are dependent on State support for the majority of income. 52 per cent of Retirees say their pension pot is worth too little, with falling annuity rates and stock market returns the main reasons for others postponing their retirement (source: Future Foundation).

Household structures

  The lack of business response to 50+ is all the more surprising when you consider the impact of population ageing on all aspects of family life. Families are starting later, with the average age for having a first child now 31, up from 28 a decade ago. One result is that a third of families with working parents still have children under 18 present at home (source: BMRB/Mintel). Over time this may influence how individuals form their brand preferences and transfer them on to others. At the same time 60 per cent of 50+s still have living parents, requiring them to cope with parents and grandchildren! (source: Joseph Rowntree) This increases the pressures on their time, and also may change the way they take their holidays and spend the rest of their leisure time.


  Finally, with 70 per cent of men and 65 per cent of women now working past 50 there are 1.7 million more 50+s working over the past five years (source: ONS Labour Force Survey 2002). This increases their income, but also creates continued pressure on time-constrained older adults. It may change what happens as the economy's growth rate fluctuates, in terms of different regional and age patterns of unemployment or part-time working.

  Actuaries have been considering the effect of these population trends for many years. As a result, planning for the long-term provision of state and private healthcare, pensions and other support vehicles is well-advanced (if not well prepared for!). However in contrast to this, few UK businesses have considered how the ageing population affects short-term demand: how could the big marketing budget holders—in food, household goods, technology, leisure, automotive etc—do more to respond to this emerging opportunity?


  Despite these economic opportunities and evolving consumer needs, 50+ targeting lags in terms of the investment in innovation and marketing spend. A recent report estimated that as little as 5 per cent of advertising targets the 50+s, despite this age group being half of peak time TV audiences and dominating radio listening (source: Help The Aged 2003).

  In looking for answers, we can begin with how leading global drinks player Interbrew sees the situation:

    This (50+s) important group is traditionally overlooked by advertisers in most fmcg categories—and beer is no exception. Traditional thinking in the media world is that people of this age are settled in their consumption habits so there is little point in targeting them with advertising unless it is for products aimed specifically at them such as Saga holidays. In the world of advertising, it seems nobody lives beyond 49!

    Despite the fact that adults 50+ account for 33 per cent of all on-trade drinkers, and around 50 per cent of ale volume, brewers often focus on advertising that reflects the lifestyle and attitudes of a certain age group, men aged 18-34, with particular emphasis on a trend-setting audience of 18-24-year-olds. But what about the remaining drinkers?

    Advertising is aimed at a younger audience because brewers are keen to recruit new drinkers and build brands among an emerging generation of drinkers as they establish their repertoire. In addition, over-50s are perceived as unreceptive to innovation and change, not easily influenced by advertising, they are not opinion-formers and ultimately they don't drink a high volume of beer.

    Interbrew Report "Targeting beers lost drinkers" 2003

Five reasons for lack of 50+ targeting

  Why are 50+s consumers not being targeted even when robust data exists that demonstrates their collective value to a category or brand? Given the hyper-competitive, mature markets that so many organisations are facing, this lack of commercial responsiveness may appear irresponsible (or certainly biased!). Clearly there is no single reason for this inactivity, but we would like to suggest five main drivers. Let's begin by issuing a challenge to the statisticians who talk of the mobilising "Grey army", by asking whether the level of spending power reported to exist within the 50+s market really exists:

Challenge No 1—50+s Spending Power is a Myth

  We discussed above how 50+s own the majority of assets and savings in the UK. This may suggest the single greatest challenge for targeting 50+ wealth—that the Mature market is essentially "asset rich" but "cash poor". On paper they hold £175 billion of UK wealth (source: 2003) that could in theory be spent, but that the majority of this is locked up in housing and other long-term investments such as pensions.

  Despite the increasing take-up of equity release schemes by older consumers, no-one knows how long the money will need to cover them for. With life expectancy at an all-time high—an average 76 for men, 81 for women (in 2001)—and still rising, people are more eager than ever to maintain their assets. Meanwhile, concerns over deficits in corporate pension schemes have heightened the need for individuals to provide for their own financial futures. On the health side, 7 million 50+s now hold Private Medical Insurance cover given their concerns with state health provision.

  The real winners from the post-war "wealth bubble" could therefore be in 20 or 30 years' time, when the inheritances from current affluent 50+s pass on to their children (although the increasing longevity of their parents means that these children will inherit several years later than earlier generations). The implications for high-end asset management—and potentially for government actuaries involved in projecting future Inheritance Tax earnings—are likely to be significant.

  In the meantime, expect more spending on "little luxuries" for self and others. The fact that 50+s purchase 25 per cent of all children's toys and are the single biggest buyers of gifts at Christmas should come as no surprise—just a pleasure for the recipients!

Challenge No 2—The Idea of a Distinct "50+" Mindset is No Longer Valid

    "Sixty-six-year-old guys were never like us. Today, we have good nutrition and positive attitudes" Jack Nicholson in The Daily Telegraph Feb 2004.

  What it means to be 50+ has also changed. Perhaps there is no longer a clear need to innovate, target and communicate with consumers according to their age. A more relevant approach may be to talk to consumers based on shared values, attitudes and mindsets that cut across age boundaries:

    "For some over-50s more self-focused, hedonistic attitudes will emerge as they imitate the lifestyles of the young". Already surveys suggested that they had similar alcohol consumption, TV, video and reading habits, and DIY and gardening interests, even if they listened to less music or engaged actively in sport"

    Source: Guardian Unlimited

  The key message here is to target individuals based on their self-perception, rather than your perception of them. Consider the following consumer evidence.

    When you use the term "the elderly", would you say this description includes you—88 per cent of 60-64s said no, and 52 per cent of 75-80 year olds said no" (source: MFS PPP Healthcare).

    "Do you feel `young at heart'"—96 per cent of 60-64s said yes, 82 per cent of 75-80 year olds (source: MORI 2002).

Case Study—the growing consumption of "Better For You" foods

  The trends influencing the development of the organic food sector affect consumers of all ages. They include increasing concern with genetically modified foods; concern over food safety and the environment; better and more informative food labeling; and the "macro" trends of a growing national problem with obesity; importance of physical appearance; changing household structures; and the changing role of women in the workplace.

  However, these trends have influenced the 50+s market particularly strongly. Specific trends influencing this sector include having less time-pressured lives (for some, though remember some are managing four generations), with less demand for convenience at the expense of health, and increasing awareness of the need to maintain healthy lifestyles, through diet and exercise. As a result, retailers have extended their organic offers; innovated new chilled and ambient ranges ("Better For You", "Free From", "Be Good To Yourself") and launched targeted "lifestyle clubs" (Tesco "Healthy Living")—without resorting to age-related targeting in any way.

Challenge No 3—Appealing to 50+s Will Alienate the "Mainstream"

  Another possible challenge to 50+s targeting is that companies fear that by appealing to older consumers, they risk alienating younger brand buyers and future category entrants. It would be easy to revisit the Interbrew report earlier and add: In addition, over-50s are perceived as unreceptive to innovation and change, not easily influenced by advertising, they are not opinion-formers . . . and being seen to appeal to them could risk alienating essential younger audiences (our addition).

  However with today's average life expectancies, brands can safely expect 30 years of "lost" business if they ignore or alienate consumers once they pass age 50. At the same time given the number and sophistication of mature (ie, zero-growth) consumer markets, teenagers entering markets for the first time represent one of the few certainties for future growth. Therefore having maximum appeal to younger individuals is considered a key to future success. You may still conclude that you must not target older consumers seems churlish. Perhaps the real reason is that few businesses are comfortable with the idea of a genuinely segmented and targeted approach that allows you to appeal to both 30-somethings and 60-somethings? After all, who is the "mainstream" these days?

Challenge No 4—Marketing is a Youth Industry

"The new society will be a good deal more important than the new economy" Peter Drucker, The Economist 2003

  One reason why businesses are afraid to appeal to 50+ may be the structure of their marketing departments and the services agencies that support them. Unlike other professional services sectors such as law or accounting, where experience is respected and charged out at a premium rate, marketing is staffed by (relatively) young personnel who create brands, advertising and direct marketing messages largely for people like themselves.

  Consider the Institute of Practitioners of Advertising's data about the age profile of today's commercial marketers. For the marketing departments that create and manage brands, they indicated that:

    —  39 per cent of Marketing Directors are aged under 35.

    —  Only 10 per cent of Marketing Directors are aged 50+.

    —  70 per cent of brand managers are under 35.

  Meanwhile for the advertising, direct marketing and design agencies that support them:

    —  82 per cent of people working in marketing agencies are under 40.

    —  51 per cent are aged under 30.

    —  Of the 13,000 people in IPA member agencies, 776 are aged 50+.

  We are not suggesting that people who are outside a target segment cannot create compelling brand and marketing campaigns for that segment. It may be the pervasive culture of constant "new-ness" within marketing which is the real driver behind the interest in eternal youth and reluctance to market relevantly to a maturing population, even though it might be more profitable.

Challenge No 5—Older Consumers are Too Marketing-Savvy

  Finally, there is the argument that businesses have tried (or are trying) to market to mature consumers, but that these individuals are too marketing-savvy to be seduced by targeted promises and propositions. Consider the environment in which today 50+'s grew up in: the first televisions, the first television adverts, growth of the term "mass markets" and "mass marketing"; the first video recorders and even the first digital television. In 1960 there were three national newspapers, now they are eight. They were an estimated 40 titles on the average news stand then, now there are 400. At each stage, today's 50+s have been at the forefront of media and marketing innovation that was later accepted as "mainstream".

  So, mature consumers (especially aged to 60) are the first generation to grow up with mass marketing. Given this, it is reasonable to assume that they are also the first generation to become intolerant of and de-sensitised to the sheer number and type of marketing messages now being driven into the market.


  What does all this mean in practice? Certainly the risks for UK business go far beyond the possibility of upsetting existing customers. In the nearterm, businesses may find that their traditional customer base has simply aged from under them. Alternatively more sympathetic competitors could come up with more convincing ways of understanding, meeting and communicating their product or service benefits for older consumers. Over time the risks could grow to include:

    —  Failure to capture the full value of the Mature spend.

    —  Lack of a channel for listening to 50+ needs.

    —  Risk of creating 50+ "anarchists".

    —  Inefficient marketing spend.

    —  Long-term loss of market advantage.

    —  Sending a de-motivating message to their own staff—many of whom are 50+ or soon will be.

  At a lower level, the implications for establishing and growing brands are equally significant:

    —  Brands will be forced to take a customer portfolio approach—up until now brands have looked to maximise the number of products and services they offer. From now on, expect them to focus in on specific target groups and then optimise—rather than maximise—the offers they deliver.

    —  Customers will make themselves increasingly less available to market to—savvy consumers will begin to opt out (both in a legal and an engagement sense) from traditional marketing. As the law courts move in their favour, expect more consumers to restrict their brand interactions to a limited number of brands and contact channels. For the owners of the databases that power these contacts, opted-in engaged consumers will be key to future success.

    —  Brand-building will become more difficult—a larger proportion of Mature marketing-savvy consumers will make it more difficult for traditional brand-builders to succeed. However this is not because they are unwilling to change brand preferences (as previously thought). Instead, they demand convincing reasons for change, not temporary reasons to switch brands.

    —  There will be increasing frustration (and hostility) towards "inconsiderate" brands—a lack of representation of their peers within modern media will give rise to a group of angry consumers. However unlike writing letters to their local newspaper or TV show, expect these people to actively—and visibly—campaign for fairer representation.

    —  They are also increasingly cynical about the interests of "big business"—as such they will resist all overt (and increasingly covert) attempts to win their custom.

Implications for (perhaps with sector examples eg retailing, telephony, financial services)

Market research and consumer insight (including databases)

Product policy


Marketing communications (use of particular media)


April 2005

2   Copyright Robert Diamond Back

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