CASE: The grey market

Introduction

The over-50s market has long been ignored by advertising and marketing firms in favour of the market. The complexity of how to appeal to today's mature customers, without targeting their age, has proved just too challenging for many companies. But this preoccupation with youth runs counter to demo-graphic changes. The over-50s represent the largest segment of the population, across western developed countries, due largely to the post-Second World War baby boom. The sheer size of this grey market, which will continue to grow as birth and mortality rates fall, coupled with its phenomenal spending power, presents enormous opportunities for business. However, successfully unleashing its potential will depend on companies truly understanding the attitudes, lifestyles and purchasing interests of this post-war generation.

Demographic forces     

Following the Second World War many countries experienced a baby boom phenomenon as returning soldiers began families. This, coupled with a more positive outlook on the future, resulted in the baby boom generation, born between 1946 and 1964. Now beginning to enter retirement, this affluent group globally numbers approximately 532 million. In Western Europe they account for the largest proportion of the total population at 14.9%, followed closely by 14.2% in North America and 13.5 % in Australia.

Table 1: Global population aged 45-54 by region: baby boomers as a % of the total population 1990/2002

The grey market is big and getting bigger. Between 1990 and 2002 the global baby boomer population increased by 41%. The rate of growth is predicted to decrease to 35% between 2002 and 2015. Particularly noteworthy is the predicted increase in the proportion of baby boomers in many Western European countries, such as Austria, Spain, Germany, Italy, and the UK. In developed countries, according to the United Nations, the percentage of elderly people (60+) is forecast to rise from one-fifth of the population to one-third by 2050. The growth in the elderly population is exacerbated by falling fertility rates in many developed countries, coupled with a rise in human longevity.

The influences and buyer behaviour patterns of baby boomers

The members of the baby boomer generation are quite unlike their more conservative parents' generation. They are the children of the rebellious 'swinging sixties', growing up on the sounds of the Beatles and the Rolling Stones. Better educated than their parents, in a time of greater prosperity, they indulged in more hedonistic lifestyle. It has been said that they were the first 'me generation'. Now, in later life, they have retained their liberal, adventurous and youthful attitude to life. Aptly termed 'younger older people' they abhor antiquated stereotypes of elderly people, preferring to be defined by their attitude rather than their age.

Baby boomers are also tend to be very wealthy. Many are property owners and may have gained an inheritance from parents or other relatives. They have higher than average incomes or have retired with private pension plans. With their children having flown the nest they have greater financial freedom and more time to indulge themselves. Having worked all their lives, and educated their children, many baby boomers do not believe it is their responsibility to safeguard the financial future of their children by carefully protecting their children's inheritance. They are instead liquidating their assets, intent on enjoying their later life to full, often through conspicuous consumption.

Based on research conducted by Euromonitor, the main areas of expenditure in the baby boomer market are financial services, tourism, food and drink, luxury cars, electrical/electronic goods, clothing, health products, and DIY and gardening.

Table 2: Global population aged 45-54 in thousands by country: developed countries 2002-2015

Figure 1 Global Baby boomer market: % analysis by broad sector 2002 (% value)

Note: sectors valued on the basis of estimates by senior managers in major companies in each sector, consumer expenditure and industry sector data.

Unsurprisingly the financial sector is the largest in this market. Baby boomers are concerned with being financially secure in their retirement. An ageing population, coupled with a rise in human longevity, is giving rise to a pensions crisis across Western Europe. Baby boomers are therefore right to be preoccupied with how they will maintain their lifestyle over the long term. They are actively engaging in financial planning, both before and after retirement. Popular financial service products include endowments, life insurance, personal pensions, PEPs and ISAs.

Baby boomers have adventurous attitudes with a desire to see the world. In their retirement foreign travel is a key expenditure. Given their greater levels of sophistication and education, baby boomers are much more demanding of holidays that suit their lifestyles. This group is very diverse, with holiday interests ranging from action-packed adventures to culturally rich experiences.

Baby boomers want to maintain a youthful appearance in line with their youthful way of living. Fear of becoming invisible is a genuine concern among older generations. This image conciousness is reflected in their spending on clothing, cosmetics and anti-ageing products. Luxury cars also a key status symbols for this group.

The home is another area of expenditure. Once children have flown the nest, many baby boomers redecorate the home to suit their needs. Electrical and electronic purchases are key indulgences among these technologically savvy consumers. Gardening is another pastime enjoyed by older generations. Health is also a priority. Baby boomers invest in private health insurance and over-the-counter pharmaceutical products to maintain their healthy lives.

Business opportunities

The sheer size of the grey market, which is getting bigger in many countries-characterized by consumers with disposable income, ample free time, interest in travel, concern about financial security and health, awareness of youth culture and brands and desire for aspirational living-makes this market enormously attractive to many business sectors. Pharmaceuticals, health and beauty, technology, travel financial services, luxury cars, lavish food and entertainment are key growth sectors for the grey market. However, successfully tapping into this market will depend on companies truly understanding the attitudes, lifestyles and purchasing interests of this post-war generation. Communicating with this group is a tricky business, but, done right, it can be hugely rewarding.

When targeting the older consumer it is important to target their lifestyle and not their age. Older people do not want to be reminded, in a patronizing way, of their age or what they should be doing now they are a certain stage in life. With an interest in maintaining a youthful way of life these consumers are interested in similar brands to those that appeal to younger generations. The key for the companies is to find a way of making their brands also appeal to an older consumer without explicitly targeting their age. One tried-and tested method of targeting this group is to use nostalgia. Mercedes Benz used the Janis Joplin song 'Oh Lord won't you buy me a Mercedes Benz' to great effect despite the obvious irony in that the song was written to highlight the dangers of materialism! Volkswagen's new retro-style Beetle has also been popular among this group. In the tourism sector Saga Holidays, the leader in holidays for the over-50s, has changed its product offering to reflect changing trends among this group. In line with the more adventurous attitudes of many older consumers it now offers more action-packed adventure holidays to far-flung destinations.

More recently, Thomas Cook has rebranded it over-50s 'Forever Young' programme to reflect the diverse interest of its target customers. Its new primetime brochure targets five distinct groups with the following holiday types: 'Discover', 'Learn', 'Relax', 'Active' and 'Enjoy Life'.

Conclusion

The over-50s represent the largest segment of the population across Western developed countries. This affluent market is big and getting bigger. Having ignored it for so long marketers are finally beginning to see the enormous opportunities presented by the grey market. But conquering this market will not be easy. The baby boomer generation is quite unlike its predecessors. With a youthful and adventuresome spirit these 'younger older people' want to be defined by their attitude and not by their age. Only time will tell whether today's marketers are up to the challenge.

Questions:

1) Why is the grey market so attractive to business?

2) Identify the influences on the purchasing behaviour of the over-50s consumer.

3) Discuss the challenges involved in targeting the grey market.