Supplementary evidence by Robert Diamond
and Professor Merlin Stone
WHY IS UK BUSINESS TAKING ON THE 50+ CONSUMERS?[2]
ABSTRACT
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.
WHY ALL
THE FUSS
ABOUT 50+?
"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.
Population
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).
Wealth
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.
Employment
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?
WHY ISN'T
50+ TARGETING TAKING
OFF?
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:
msn.co.uk 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:
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.
CONCLUSIONS—IMPLICATIONS
AND RISKS
FOR UK BUSINESS
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
Branding
Marketing communications (use of particular media)
Distribution
April 2005
2 Copyright Robert Diamond Back
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