Engaging with the over-50s: It's about lifestyle not age!

The 50-plus consumer provides marketers with both huge opportunities and challenges. The demographic is affluent, continues to grow and has influence far wider than its own generation. But there is also a lack of understanding of the group. Dick Stroud explores the key concepts that marketers need to know about the Charmed Generation.

By Dick Stroud, 20plus30

At the beginning of July 2008, 'Advertising Age', the US's most respected marketing magazine, published a lead article titled: 'The changing face of US consumers - what we can learn from census data and why it matters for brands'. The same article could have been published in the UK.

Ignore demographic analysis at your peril!

As such, all marketing directors (and their staff) should have this chart on their desk, showing the forecasted change in population for the next decade.

Two conclusions jump from the chart. The 15-34 age group is 'flatlining' and the number of 50-74 year olds continues to grow. Would you prefer to be trading in a stagnant or a growing market?

Understanding the demographics is the first and necessary step to engaging with the older market. This article provides some of the other key concepts that marketers need to understand.

Don't confuse age-silo and age-neutral marketing

For most people, marketing to the 50-plus involves some type of 'special' older person's product or service. Examples of these are 'discount' car and medical insurance and products to help with physiological ageing (e.g. stairlifts, hearing aids and retirement housing). This is age-silo marketing.

The far larger market involves the categories of products that span the age spectrum (e.g. TVs, cars, PCs etc). For instance, 50% of all new cars are purchased by the over-50s but the marketing materials and channels are invariably optimised for the younger buyer. Targeting and appealing to a wide range of customer ages is age-neutral marketing and is something marketers rarely do well.

Age-silo and age-neutral marketing are very different. Don't confuse the two.

The buying influence of the 50-plus is growing

Remember that the 50-plus are increasingly making decisions about products and services where they are the primary source of funding but not the customer. The person creating the marketing materials for car finance, aimed at the 30-something, should realise that the person making the buying decision may well be the parent. The majority of 30 somethings, buying a property; require their parent's financial support.

The influence of the 50-plus is far wider than their own generation.

Focus on lifestyle not age

Most companies segment their markets by age. This made sense when age was a proxy for behaviour, but that is no longer true. There are very few instances where you can deduce a person's wants, needs and behaviour from their age.

Increasingly, this same conclusion applies to defining consumers by lifestage. Terms like 'retirement' and 'empty nesters' are increasingly losing their meaning as older people, and their families, stop behaving like the stereotypes of the 1980s and 1990s.

As the president of Unilever US recently said: "The 50-plus generation is anything but homogenous."

When OMD researched the 50-plus market in its 'Understanding the Fifties and Over (UFO)' study, it identified seven distinct lifestyle groups, each differing dramatically in their media and brand preferences; their reaction to contemporary advertising and how they organised their lives.

Understand the importance of the 'Charmed Generation'

In the UK, a significant section of the people, who are retired or who will retire in the next 5-10 years, have a level of wealth and income that is unlikely to be repeated in future generations? They are the Charmed Generation, and represent a business opportunity that, once gone, is unlikely to be repeated. They represent 10–15% of the over-50s.

The reason for this generation's good fortune is explained by the four Ps: pensions, property, parents and prudence – not to be confused with marketing's four Ps!

• Pensions - many people of this generation receive, or will receive, a defined-benefit pension. This scheme pays the highest level of guaranteed income, relative to the person's final salary, of any type of pension. It is unaffected by changes to the stock, bond, currency or any other market. Its recipients receive a guaranteed level of income for the rest of their lives. This generous form of pension provision is fast disappearing for all but state employees. Tomorrow's generation of the 50 year olds will have to use a lot more of their income to get an inferior pension.

• Property - if you are 30 or younger you are less likely to own a property now than 20 years ago. If you were buying a house between 1960 and 1970 it would cost you three times your annual earnings. Today, it is exactly six times. In the last 10 years property prices have trebled. These facts mean that much of the UK's property assets are owned by people aged over 45 and that the financial barriers for future generations to join the ranks of property are immense. House prices would have to fall significantly to have a serious impact on this group.

   

• Parents - another repercussion of the rapid rise in property prices is the inherited wealth the over-50s receive on the death of their parents. Few older people in their 70s and 80s have used the equity in their property to fund their retirement; consequently most of the property value is passed on to their children as an inheritance.

  Today's 50-year-olds differ from their parents, and see releasing equity (wealth) from the value of the home as an important way of funding retirement. Already a fifth of people, moving between owned properties on which there is no mortgage, say they want a cheaper house. This is a euphemism for saying they want to release some of their property value as cash. The outcome of the over-50's dependence on property wealth has a worrying implication for their sons and daughters. Property wealth spent on funding mum and dad's retirement will not be inherited. We have witnessed the birth of the SKI phenomenon—spending the kids' inheritance.

   

• Prudence - very little of the UK's vast mountain of consumer debt resides with today's retired generation. They come from the pre-credit card era, when debt was something to avoid at all costs. Things are different for younger people and those close to retirement. Many 50-year-olds are spending rather than saving, and this is setting the trend for 40- and 30-year-olds. There is a cohort of people entering retirement with considerable levels of debt that has to be serviced by retirement income, rather than earned income. This change in behaviour is likely to affect intergenerational transfers of wealth, as older people have to use their property value to repay debt.

   

  "Most companies segment their markets by age. This made sense when age was a proxy for behaviour, but that is no longer true."

  The Charmed Generation grew up during a period when the state paid for higher education, and when all but the very wealthy went to state-funded schools and used the free health service. Now the burden of paying for education and health is increasingly transferring from the state to the individual.

  Even before the credit crunch and looming recession, the 20-34-year-olds, the grandchildren and the younger children of the Charmed Generation had been labelled the iPod generation (insecure, pressured, over-taxed, and debt-ridden). If the UK has an economic downturn it will have a greater impact on younger people than the Charmed Generation, which makes even more important to marketers.

  Beware of the 'average' 50-plus

  The following chart shows the channel consumption habits of the 'average' 50-year-old. This type of data can be dangerously misleading. For instance:

   

• A 55+ year old person in socio-economic group DE consumes 13 hours a week more TV than their age peer who is in the AB group.

   

• Somebody in the age group 55-64 in socio-economic group AB is nearly three times as likely to use the internet as a person of the same age in groups DE.

   

• Only 16% of the over-65s are regular internet users but those 16% have the longest connect time than any other age groups.

   

  Because the 50-plus is such a large and diverse group, it is impossible to make generalised comments about their channel and media preferences and responsiveness to modern marketing techniques. It would be like answering the same question for a country the size of Holland.

  The 50-plus includes consumers purchasing care homes and overseas holiday villas. It contains the frail and ill and those with a passion for physical fitness. A 50-year-old living and working in the prosperous South of England is very different to somebody, of similar age, unemployed and living in a poor area of Glasgow. For one thing there will be 20 years' difference in the life expectancy!

  Trying to understand Mr, Mrs and Ms 'average' 50-plus is more likely to distract than assist in understanding the older market.

  Fortune favours the brave

  Two companies that have understood the mindset of the older person and used the knowledge to create new products and marketing campaigns are the UK retailer Marks & Spencer and Dove, the global cosmetics company.

   

  "Forget the caricatures and myths that abound about older people and apply the same rules of marketing as you would any other age group. And don't forget, it is all about lifestyle not age!"

• In 2006 Marks & Spencer's ad campaign, using Twiggy, Erin O'Connor and Lizzie Jagger was credited with helping the company to turnaround its financial fortunes.

  The advertising creative was humorous and full of vitality. It was a perfect example of age-neutral marketing, appealing to women of all ages.

  Dove's advertising and PR campaigns have challenged the advertising industry's concept of beauty by using models of all ages, shapes and sizes. In 2007 the company launched its pro.age product range that did the same thing by positioning age as something positive rather than negative. Dove's advertising was original and challenging and appears to have worked well.

  The 50-plus consumer provides marketers with a huge opportunity and a huge challenge in equal measures. The starting point for success is to forget the caricatures and myths that abound about older people and apply the same rules of marketing as you would any other age group. And don't forget, it is all about lifestyle not age!

  Dick Stroud is a consultant, lecturer and writer. His latest book, The 50-Plus Market, explains how companies must embrace the concept of age neutral marketing if they are to thrive in the world of a rapidly aging population. He is also the founder of the marketing consultancy 20plus30 and the training course director at the Chartered Institute of Marketing and a visiting lecturer at the London Business School.