The Golden Economy: the consumer marketplace in an ageing society

David SinclairHead of Policy and Research – ILC-UK

Summary

• The older consumer has money

• They value good service

• Lots of companies get it wrong

• Age not best predictor of behaviour

• There is money to be made by those who get it right.

• But! Is there no such thing as “the older consumer”

We influence Government policy and debate

The ILC-UK was established in 2000 to explore and address the new longevity revolution and its impact on the life-course and society.

• Think Tank

• Global (12 ILCs)

• Evidence Based

• High visibility around Westminster (e.g. 17events/1000 people in 2010)

• Engage at highest levels of Government

• Focussed on life-course

Some of our publications

It’s a big market

• Older people’s spending reached an estimated £97bn in 2008 (over 65)

• The over 50s spent £276bn in 2008. This represents 44% of the total family spending in the UK

ONS Family Spending 2010

The World is Ageing

How much further will we age?

Aubrey de Grey believes that human life expectancy at birth in 2100 will be 5000 years

“I think the first person to live to 1,000 might be 60 already”

Or perhaps more realistically?

"In ancient times, half our children would have died by the age of 20. Now, in the western world, 98 per cent of them are surviving to the age of 21.

"Our life expectancy is now so good that eliminating all accidents and infectious diseases would only raise it by two years. Natural selection no longer has death as a handy tool."

But irksome for Her Majesty

“I cannot say if the Queen will sign every card in the future. But I can confirm that if the number of centenarians does reach 1 million then the sovereign retains the right to review the policy and raise the age threshold that warrant a card”

Source: A Spokesman February 8th 2006

Moving the goal posts Ma’am!

An ageing society means more older consumers

• The 65+ age group now accounts for 20% of the UK consumer population (16+), and is expected to rise so that in 2030 over 65s account for 25% of the consumer market. PRFC for ILC-UK

• The older market will grow by 81% from 2005 to 2030 while the 18-59 year old market will only increase by 7%. EU figures quoted by Stewart

• In the UK, the number of consumers over 60 years old could increase by 40% over the next 30 years. Meneely, Burns and Strugnell (2008)

What makes a consumer an older consumer? Impact of biological ageing on consumption

• Loss in physical strength may make opening jars/bottles more difficult

• Older people losing mental capacity/dementia may find difficulties with problem solving or processing information. They may also find it difficult to shop around or exercise choice

• Those housebound can be excluded from the physical marketplace

• Ageing can make it more difficult to carry heavy weights and can also result in reduced appetite (Twofers!)

Difficulty with shopping, communicating and handling money

Impact of social ageing in the consumer marketplace

• Older people could assume that certain products and services aren't for them and therefore don't consider purchase

• Older people may assume that certain technologies are for younger people and don't consider their use as a means of engaging with the consumer market

• The media and corporate sector may strengthen the negative impact of social ageing through ageism

Are older consumers changing?

“It is blindingly obvious that there is enormous difference between the seniors of yesteryear and people of the same age today.” Saga 2008

We have a wealthy cohort (on average) (and there are more of them)

Recent retirees “are more strongly defined by the impact of consumer society on their lives and expectations of post work life than previous generations”

But is this a new phenomenon?

“They have fewer ties to family responsibilities... With their homes paid for their major housing concern is for property taxes and repairs... Being essentially free from obligation, they may spend their income and assets as they wish. Here is a potential market, therefore for those marketers who wish to appeal to it. It is a new market, almost unrecognised which must be developed with care as it depends upon the changing role of older persons in our society and the realisation that they are more free than their predecessors in the past century.”

Dodge, 1962

Let’s not assume older people are all the same

Many like to travel

And they want to have fun

When you get to retirement age and your

kids are off your hands and the mortgage

is paid, my opinion is: go and enjoy it”

If they aren't the same, how do we segment?

• Companies use different ways to segment the market

including

• Chronological age; Generational segmentation; income; life

stage; cognitive ages and vales

• There is no such thing as a single “older consumer”

• Chronological age is widely used a poor tool for

segmenting the population

• Some research finds that age has little impact on

consumer demand

The Baby Boomers as a Segment

• Different generations have different experiences and attitudes (e.g. Exemplified by attitudes to sexual behaviour and religion)

• Baby Boomers often talked about as the “new older consumer”

• There were 2 baby booms (can we say they are the same?)

• Arguably the boomers are more rather than less heterogeneous than previous generalisations

The Baby Boomers

• Yes, arguably the first generation of modern consumers

• There is lots of misunderstanding – often used as a term for all older people. They aren't “elderly”

• There is no strong evidence that this group will be different consumers to previous generations (they say they will)

• Few identify with the term baby boomers (40% Cultures of Consumption)

Cognitive age and segmenting

• Stronger evidence of link between cognitive age and attitude

• But there is a link between cognitive age and income

• Cognitive age impacts on the way marketers present the older consumer

• People think they are 15 years younger than they are and marketing imagery represents this.

Social Participation and Age

Yet people would like to participate more

There are some very wealthy people not spending

It’s not just about money.

Distribution of net household financial wealth1: by age of household head (2006/08)

Are older consumers ignored?“Just because I’m over 60 nobody wants to sell me anything anymore” Germaine Greer

“Advertisers and marketers are astonishingly neglectful of older audiences even for products primarily sold to older people” Mike Waterson, Chair World Advertising Research Centre

• Advertising/marketing agencies rarely asked to pitch for the older consumer

Why don’t companies target older people?• Perception of a lack of buying

power

• Stereotyping of older people as “powerless, ugly, dowdy or uninspiring” (alongside an obsession with youth)

• Lack of information about older people’s sensitivity to marketing Tynan and Drayton (2008)

But some companies are getting more interested

“Coca Cola moved into the wine, coffee, tea and orange juice markets during the 1980s to capture older consumer markets who were less interested in their coke brands” Simcock and Sudbury 2006

“Anheuser Busch, the largest US beer maker, attempted to reach the 50 plus age group and wound up creating one of it’s top selling brands” Green 2004

How might an ageing society change the consumer marketplace?

• Older people currently spend more than other ages on: drugs and healthcare; personal care; and coffee

• They represent a significant market for new cars and travel.

• Clothing spend declines with age

• But less on eating out, movies, theatres, petrol and champagne

• Certain industries will need to adapt to an ageing society

Even beer …

“German beer

consumption fell 2.1% in

2009 based on an ageing

population”

Bloomberg.com

Categories of household expenditure by age of household reference person (2007)

Average Weekly Expenditure by Age of Household Reference Person

Growth in expenditure (BIS)

The older consumer as giver and recipient

• Marketers note that older consumers buy a relatively high proportion of toys (25%?) and confectionary

• Grandparents spend £50,000 on their first grandchild (Oct 2010)

• Younger children/grandchildren often buy for the older person

• In other words, people aren’t always buying for themselves.

Representation of older people in advertising

• Older people, particularly women, are under-represented in advertising (NB Cognitive age effect) IPC/Simcock and Sudbury (2001)

• Where older people are represented, evidence that it is for products such as “pain relievers, digestive aids, lacistives and denture forumlas” Freimuth and Jamison (1979)

• There is limited evidence that older people are badly represented in advertising Simcock and Sudbury

• We’ve started to see more examples of companies using older models (e.g. Dove)

• Scant evidence and no consensus that using older models puts younger people off the product/service Simcock and Sudbury (2001)

Representation of Older People

Representation of Older People

Technology – an opportunity (and a challenge)

Around 820,000 older consumers (65+) in the UK made an internet purchase PRFC Analysis for ILC-UK (EFS 2007)

New technology will change the older consumer

“One day soon the Gillette company will announce the development of a razor that, thanks to a computer microchip, can actually travel ahead in time and shave beard hairs that don't even exist yet”

 Dave Barry

Artificial Intelligence entity

passes A level

Possible technology innovations to 20502010 2020 2030 2040 2050

Artificial Intelligence causes redundancies

Computer controlled hunger suppressant

Emotion control devices

Auto-pilot cars

Holographic TV

Full voice recognition PCs

Thought input mechanisms widespread

Viewers can choose film roles

Global voting on some issues

Tooth regeneration

Listing of individual DNA

Circuits made with bacteria

Bionic Olympics

Active skin makeup

Disposable phones

Digital mirrors

Face recognition doors

Smart bath

Individual pollution credits

Human memory

enhancement

Virtual holidays

Hydrogen fuel stations

Self drive cars

VR windows

Prison countries

Invisibility cloak

Self clean houses

Global ID card

Robocops

Human memory downloads

Nuclear fusion

Humanoid robots beat national football team

Artificial brain

Brain downloads

Virtual displays

Wave energy =50% in UK

Technology limited by imagination

Google knows!

“But how much smaller do we want a phone?”

• Some/many do but: “I don’t want to live in a smart-home – I’d rather be dead”

• Moral and ethical debates – can’t afford to ignore them

• Must help older people choose technology when it is right for them (tagging/urine tests)

Inclusive design

Can you read the menu?

In many European cities one of the main groups eating in restaurants are those over 50, yet very few 50 year olds are able to read a menu by candlelight with out their reading glasses. That is because the menus are usually designed by younger people in print shops, not for senior citizens. What a crazy situation: the people who the restaurants want to market to cannot read any of their sales literature. Patrick Dixon (2008)

Shopping Around

Mixed evidence but in terms of insurance; utilities; communications technologies, thereis evidence that as we get older we are less likely to shop around. WHY?

• Older people are happy with the product?

• Difficult to calculate the benefit of switching (telecoms/utilities)

• There are few alternatives (e.g. upper age limits)

• Switching is a hassle

• Reduced information processing abilities (but does experience compensate for age?)

• But if marketers assume people don’t shop around they won’t target them.

Direct and indirect age discrimination

“Interflora, Britain’s biggest

flower delivery business, has

been accused of ageism as their

new ‘happy birthday’ balloon

range only goes up to 60 years

old.” Telegraph, September 2010

Ghost Town Britain (& Transport/toilets)

Other findings

• Limited evidence about older people and ethical consumption

• Mixed views on brand loyalty

• Mixed evidence on the best way to reach the older consumer

• Incomprehensible jargon and modern phraseology a barrier to the market (esp. financial services)

Other findings

• The end of the cheque could have a negative impact on the older consumer

• Older consumers are often the main target for fraud, scams and mis-selling

• Need for an age friendly retail environment: In 2009 Tesco announced it was building an older person friendly retail environment complete with wider shopping aisles and brighter lights

Other findings

• Some Investigate! participants argued that they had less choice than when younger

• Investigate! volunteers also highlighted access to information and advice about what was available in the consumer market

• Examples of good customer service – but it is often poorly promoted.

Do we need to take age out of the equation?

Age Neutral approach argues that:

• An Age Neutral approach should be taken to marketing

• Needs of older people are not that different from other adults

• The principals of marketing to all ages are the same

• Lifestyle or interest is going to be more important than age

Dick Stroud

Summary

• The older consumer has money

• They value good service

• Lots of companies get it wrong

• Age not best predictor of behaviour

• There is money to be made by those who get it right.

• But! Is there such a thing as “the older consumer”?

Many thanks

David Sinclair - Head of Policy & Research,International Longevity Centre (ILC-UK)

davidsinclair@ilcuk.org.uk

Twitter:

@sinclairda@ILCUK