The Economist April 9, 2016 Schumpeter
Older consumers will reshape the business landscape
“IN 1965 Diana Vreeland, the editor-in-chief of Vogue, coined a phrase “youth-quake” to describe how baby-boomers were shaking up popular culture. Today the developed world is in the early stages of a “grey-quake”. Those over 60 constitute the fastest-growing group in the populations of rich countries, with their number set to increase by more than a third by 2030, from 164m to 222m. Older consumers are also the richest thanks to house-price inflation and generous pensions. The over-60s currently spend some $4 trillion a year and that number will only grow.
Yet companies have been relatively slow to focus on this expanding market—certainly slower than they were to attend to the youth-quake. The Boston Consulting Group (BCG) calculates that less than 15% of firms have developed a business strategy focused on the elderly. The Economist Intelligence Unit, a sister organisation to The Economist, found that only 31% of firms it polled did take into account increased longevity when making plans for sales and marketing.
Age affects people in different ways
But the biggest reason is that oldies are such slippery customers. The definition of what it means to be “old” is complicated and dynamic. Sixty-five-year-olds are not the same as 85-year-olds. Age affects people in different ways: some fade early while others march on. Class divisions are more marked now than for previous generations of retirees: the winners, sitting on suburban mansions and defined-benefit pensions, cannot spend their money fast enough, while losers go cap in hand to charities (31% of working-age Americans don’t have a pension or savings, according to the Federal Reserve). Most greying baby-boomers in the rich world are in denial about ageing: 61% say that they feel at least nine years younger than their chronological age.
The surest way of alienating older consumers is to treat them as old. When Procter & Gamble, a consumer-goods company, repackaged some of its dental products as “selected for aged fifty-plus consumers”, it saw sales plunge. Bridgestone blundered by promoting a new line of golf cubs as one for pensioners, producing poor sales.
Change is in the air
Some industries such as health care and automobiles have been thinking about the grey market for a while. Others such as retailing and consumer goods started paying attention more recently. Now comes the silver rush. A report by the McKinsey Global Institute points out that older consumers are one of the few engines of growth in an otherwise sluggish global economy. The emerging-market boom is slowing in some countries, notably China, and turning into a bust in others, notably Brazil. Millennials suffer from the twin burdens of student debt (especially in America) and the lingering effects of the 2008 financial crisis. They are starting families and buying houses later than their parents, if at all. MGI calculates that pensioners in the rich world spend an average of $39,000 on consumption compared with $29,500 for the 30-44 age group. The old are becoming the new new thing.
Some firms are trying to understand older people better. Kimberley-Clark, a maker of consumer products, has built a mock-up of what a senior-friendly shop might look like in the future. Ford has created a “third-age suit” for car designers to wear to help them understand the needs of older people: the suit thickens the waist, stiffens the joints and makes movement more cumbersome. Thick gloves reduce the sense of touch and yellow-tinted goggles simulate eye cataracts. BCG research on older people suggests they are less eager to acquire material possessions than preceding generations and much keener to acquire experience, particularly through travel and study.
Ageing in place
Understanding is giving birth to new products and business models. NTT DoCoMo not only produced a phone with large keys and a big display screen. It also redesigned it marketing, promoting the new phones during bus tours for pensioners and providing classes in shops to explain the ins-and-outs of apps. Electronics makers are producing devices that are designed specifically for old people: for example, Independa manufactures a monitor that sends an alert if something untoward happens, making it easier for the frail elderly to stay in their own homes (“age in place”) rather than move to nursing homes.
Companies are also mastering the art of discretion—addressing older people, but not too explicitly. Retailers are surreptitiously lowering shelves and putting in carpets to make it harder to slip. Package-goods firms are printing larger typefaces and using more white space. Kimberley-Clark has overhauled its Depend brand of adult nappies to make them more like regular underwear. Sabi, a design company, now sells walking canes in bright colours. Car firms don’t make a song and dance about the fact that old people with stiff necks and fading vision will benefit disproportionately from self-parking cars.
Only the early stages of a revolution
Baby-boomers have spent their lives making noise and demanding attention. They are not going to stop now. They will be the biggest and richest group of pensioners in history. They will also be the longest lived: many will spend more time in retirement than they did working. The baby-boomers have changed everything they have touched since their teenage years, leaving behind them a trail of inventions, from pop culture to two-career families. Retirement is next on the list.”
Source: The Economist April 9, 2016 Schumpeter