AARP Webcast

“How retirees are managing today and what effect pension trends and other economic factors will have on future retirees?”

Sound interesting? This is the title of one of the sessions being covered during an AARP webcast. If you are in Washington on the May 14th you can go and see the thing live, otherwise contact AARP for the Web version of the event. Dick Stroud

Chase the Silver Foxes

The UK, like the US and the rest of Europe is getting a tad worried about the resilience of consumer spending. More accurately the lack of resilience of consumer spending.

CACI has been analysing the demographics of the UK and concluded that the closer you get to London the more likely consumers are going to be able to plough on through the credit crunch unscathed. The folks living in the frozen north of the country are in for a tough time.

The age group that CACI has identified as most resilient to economic downturns are the over-55s that it terms the “silver foxes” (don’t you just hate these daft names).

This group is 1.5 times more likely than the average household to have an income of more than £100,000. This group accounts for 14% of the population and analysts estimate that they have £23bn to spend on discretionary items, such as clothing, books and CDs, irrespective of a downturn. That is out of total pot of £153bn.

The article in the Observer, where this is all discussed, provides a pen sketch of the foxy rich oldies.

The Silver Foxes are a fifty-something couple living in Epsom, Surrey. He manages the finances; she shops at Marks & Spencer. They are well-informed readers who keep on top of the financial pages. Their favourite food stores are Sainsbury's and M&S, but they also have a penchant for John Lewis.

Most are retired and settled at their financial peaks in pleasant locales, such as Guildford, Winchester and Tunbridge Wells. They are unfazed by house prices as they are mortgage-free and the children have left home. Their savings will be double, often treble, the norm.

I call this group the Charmed Generation. If you prefer Silver Foxes, or rich oldies it doesn't matter - they are a group of consumers that all companies should be targetting. Dick Stroud

Know your U-Boomers from your Uni-Bombers

A couple of consultants at McKinsey, as reported in Forbes, have come with the term U-Boomers.

The U's are the largest segment of the baby boomer generation, sandwiched between roughly 10 million well-to-do households with high hopes for a comfortable retirement and the financial resources to pay for it, and 11 million disadvantaged households that are deeply pessimistic about the future.

They are supposed to have share all the optimism and expectations of their wealthier counterparts but don’t have the bank accounts to live the high-life. As the US (and most of Europe’s) economies head south it is likely that a tranche of the U’s will be joining their disadvantaged and pessimistic compatriots.

McKinsey thinks the Us are a marketing opportunity. As Class 1 Boomers turn left at the door of the 747 their U-Boomer friends turn right. Answer – make the right of planes longer and shorten the left.

I am not sure how marketers will deal with these financially constrained Boomers but I am sure they will find a way. Dick Stroud

Adage is becoming Boomer Friendly

A couple of years ago you would not have expected to have read this type of statement in AdAge.

Boomer Marketing has finally come of age. Yes, the game-changing, paradigm-shifting, neologism-inducing sea change has indeed arrived and is actually living up to the hype. Marketers of all kinds are waking up to the largest, wealthiest, most tantalizing market in history.

Back in Feb the magazine published another Boomer Friendly article. I wonder what has brought about this change?

Here is a thought for you this Saturday morning. Let’s say we do have a recession/down-turn or whatever you want to call it and let’s say it goes on for a year or so rather than a couple of months. What differential impact will this have on the different demographics? OK, take out the very rich and the very poor – their position isn’t affected that much changing economic conditions – but what about the large group in the middle?

When I say “down-turn” I mean shrinking asset values (houses) lower/negative returns from investments and hence pensions higher unemployment, higher costs of servicing debt and difficulty getting credit all mixed together with diving consumer confidence.

Let’s say that you have to give a presentation for the head of marketing about the impact all of this nasty stuff is going to have on consumers of different ages. What would you say? Might be an idea to think through this issue since it is a question companies should be asking themselves. I will publish my views in the next couple of weeks. Dick Stroud

Are the 50-plus recession proof – part 1?

The Sunday press has lot of stuff about the 50-plus. The Observer puts a positive spin on the subject with its article:” That five-trillion-pound lifebelt can keep you afloat in the downturn.” The conclusion of the article was that the over-50s are a relatively safe bet since they are worth about £200,000 each on average. People over 50 tend not to have unsecured borrowing and hence are people the banks like during a credit famine.

CACI reckons that one in four unsecured loans is being made to this age group and the loans are larger than for the young. The average personal loan is for £9,690, but the average such loan made to an over-50 is 8% higher, at £10,419.
During 2007, Manchester was the city where the over-50s extended themselves most through taking out personal loans, followed by Liverpool and Wigan. At the other end of the scale, 50-pluses in Cambridge took out fewer loans than anyone else, followed by Harrogate and Bradford. This can be explained by a mixture of socioeconomics and ethnicity.

The article concluded by identifying a big disadvantage faced by the age group of not having future income streams. This brings me onto the second article. Dick Stroud

Over-50s forced back to work to meet rising bills

This was the headline The Daily Mail – a paper with a high 50-plus readership – and was in response to the latest figures from the Office of Statistics showing that about 60% of the people who found a job over the last year were over 50.

Of the 296,000 jobs created over the last 12 months, 58% went to people born before 1958. The paper then made the jump of logic with this statement: “Experts said that the older worker boom will continue as financial problems force people to keep on working.”

Anyway, whatever the reason, the ONS figures show there are 7.8 million workers over 50 in Britain, which is the highest figure since records began - and the number of older workers is growing faster than any other age group.

The ‘experts’ in question appear to be the Age and Employment Network who are quoted as saying that even more older workers who want jobs, but cannot get them. Of the 1.2million people working over state pension age, they think a further 2.4 million want, or need, paid work.

The organisation is quoted as saying: "This is not just to pay for life's little luxuries, but for the basics of food, fuel and lighting."

In the same batch of news stories is another with the headline: “Puzzling jobs figures show over fifties account for majority of rise in employment”.

The puzzle is this, as explained by the head economist of the Chartered Institute of Personnel and Development.

Taken at face value the ONS figures suggest that most new jobs at present are going to people aged 50 and over – this age cohort accounts for almost 6 in 10 of the additional people in work last year. But this sits oddly with the observation that most new jobs are being taken by migrant workers – a group overwhelmingly aged under 40.

The CIPD reckons this conundrum is explained by the fact that migrant workers are taking the major share of new job vacancies but older workers are better able, than in the past, to hold onto their jobs. In jargon terms, over 50s employment is rising because of increased job retention not increased hiring of older workers.

Just goes to show you have to dig behind the numbers to get to the truth. I am not sure either The Mail or the CIPD know the real answer. Dick Stroud

Mimetic isomorphism

What a fantastic term. If you read this blog you are going to see it used a lot more during 2008.

This is time of year, for me at least, when I can make a start to read that huge pile of articles/reports/snippets that I have accumulated during the year - feel impelled to keep - but have not had the time to read.

I have made a start and read: “Lessons of the Last Bubble”. This is published (free) on the Strategy+Business site and is by Tim Laseter, David Kirsch, and Brent Goldfarb. It should be mandatory reading for everybody who has a sure fire winning business idea.

The article debunks many of the myths that have grown-up about the dot.com bubble. Perhaps the worst excess of that period was the dose of economic idiocy that gripped great sways of the technology/finance industry. I would say the herd mentality – the authors call it mimetic isomorphism. Why does the social networking application keep coming into my mind?

The other topic addressed in the article is the way that when a theory (scientific or business) becomes accepted as the norm, we spend more time looking for evidence to justify its position rather than trying to reject or refine its substance. The article quotes Karl Popper, the leading scientific philosopher of the 20th century who argued for challenging conventional wisdom: “By criticizing our theories, we can let our theories die in our stead.” Popper also noted that “no matter how many instances of white swans we may have observed, this does not justify the conclusion that all swans are white.” Why do the words environmentalism and globalisation keep coming into my mind?

What the hell has this got to do with the 50-plus? Lots. Our obsession with distilling the complex issue of 50-plus marketing into a set of simple ‘guidelines’ is one example. I will point out a few more ways during 2008. Dick Stroud

Boomers Drive U.S. Consumer Confidence

The US’s Department of Labour Consumer Expenditure Survey shows that Baby Boomers outspend other generations by an estimated $400 billion each year on consumer goods and services. That’s a lot.

Are the Boomers a happy and confident bunch? Well not according to the survey conducted by the Boomer Project and BIGresearch.

For each of the last nine months, according to the monthly BIGresearch Consumer Intentions & Actions CIA) study among more than 7,000 consumers, Boomer Consumers report lower scores than both older and younger generations when it comes to their confidence in the U.S. economy over the next six months.

"This is hard proof that today's older Boomers still fuel the U.S. economic engine," said Matt Thornhill, president of the Boomer Project. "Let's hope this wakes up the remaining skeptics who think marketing and retailing is all about the young -- it isn't. Boomers are still critically important consumers."

There is a lot more in this press release worth reading. I suspect the data for the UK would look pretty much the same. Dick Stroud

High risk France and Spain

This chart shows an Aging Vulnerability Index that attempts to measure how vulnerable countries are to an aging population. The index looks at things like pensions, healthcare, numbers of younger people, education etc...

The worrying thing is that two of the most vulnerable countries (France and Spain) are the top places for retiring Brits, who will only make matters worse. Dick Stroud

Reasons not to be cheerful

It is Friday, the weekend beckons, the sun shines, skyrocketing property prices have made you that bit richer but you might (if are a European) be in danger of drifting one more day closer towards the economic abyss. That’s the conclusion if you believe an article (Europe’s productivity challenge) in the McKinsey Quarterly. Sorry subscription only.

Much rubbish is written about the ageing population ‘problem’ but you don’t need a Nobel prize in economics to understand why, in varying degrees, European countries are sleep-walking into a pit of social and economic problems.

So read this quote- depression inducing stuff. But as Mr Bennet, in Pride and Prejudice says: “It will pass away soon enough.'' The outcomes of mega trends take ages to materialise and if our politicians aren’t bothered about such issues there is little point in us fretting away.

The “old” continent (Europe) appears rich, socially progressive, and culturally exciting. It has an impressive crop of global companies. But far from catching up with and overtaking the US, Europe is finding that the economic cracks in the facade may be getting wider. A huge effort is now required not just to realize the full potential of Europe but also to ensure that an aging population doesn’t overwhelm what it has already achieved. The consequences of failure would be relegation to the second economic division and a blow to Europe’s self-esteem.

Dick Stroud

Don’t confuse me with the facts

What are Baby Boomers all about – what have they done – what do they want to do in the future? A big question.

Unfortunately, the commentators (in the UK) who proffer their insights and opinions are doing a bad job of answering it. Ha it is Sunday, I can be a bit more direct; they are making an abysmal pathetic mess of it.

Some smart character wrote that the ‘environmental debate’ is like a Christmas tree – you can hang upon it all of your personal or corporate prejudices and come to any answer you want. The same is true of the “Baby Boomer question”.

Let’s look at the media’s attempts. A few days back I posted an item about the BBC’s rather puny attempt to answer the question. Around the same time I noticed an article in the New Statesman by Faisal Islam entitled: “The great generational robbery”. Its naivety had a certain quaintness about it and I assumed Mr Islam was a recovering ASBO (recipient of an Anti Social Behaviour Orders) who was being given a second chance by the magazine. To see the article’s silliness read this analysis in the humanists for labour blog.

Much to my amazement I find that Mr Islam won the award of Young Journalist of the Year at the Royal Society of Television awards. The mind boggles about the other candidates!

Mr Islam, like so many of his generation, maunder on about having to pay for their university education and how the Boomers had their higher educated paid for by the state. What is never mentioned is that at the start of 1960s only one in sixteen kids participated in higher education. By 2010 the figure is planned to grow to 1 in 2.

I appreciate that many journalists are numerically-challenged but surly it is obvious that only a tiny number of the 1960s generation were recipients of college grants – the great majority of them were paying taxes for a few of their peers. This was the era when kids leaving school had the ‘gap-week’ – not the gap-year that today’s generation perceive as their God given right.

Academia doesn’t do much better. This week I sat through what can only be described as mind boggling boring and simplistic set of presentations by a group of academics who have spent my taxes producing ill-founded motherhood conclusions. The culprits will remain nameless.

Another example of the dubious quality of academic research is the simplistic study about Boomers’ size 12 carbon foot prints. I posted about this study a few weeks back.

Naively I have always thought that academia applies rigour and structure to its research. Not so.

Finally, we come to the corporate world. There are numerous examples of companies spending a few bob on research to generate some cheap headlines. The most recent example is Scottish Widows: “Baby Boomer generation of retire-easies”. Notice the mandatory silly name (retire-easies) intended to make the release more likely to be picked up by the media. The conclusions of the research don’t stack up with the reality.

Fact: 20% of the age group 55-70 own 80% of the wealth of that age group and contains most of the high income earners. There are a lot, the majority, who are not in this Retire Easy position.

Fact: See the diagram and read this quote from the CCCS.

Last year debt problems of the over 60s accelerated faster than for any other age group while contrary to popular perception, the debts of young people declined. CCCS predicts that by the end of 2007 its counsellors will be helping more people over 60 than under 25.

So what does all of this mean? Facts are better than prejudices. Facts always trump simplistic generalisations. And, facts require a bit of hard work that it seems the media, academia and the corporate world are not prepared, or capable, of doing. Dick Stroud

Factlet of the day – UK Regions

This is only vaguely linked to 50-plus marketing but very important if you are interested in the distribution of economic activity in the UK.

This chart from Oxford Economics shows the regions that are net beneficiary of government expenditure (i.e. who receive more than they contribute in taxes). As you can see; London, the South East and Eastern regions fund the rest of the country.

This is a rough indication to the wealth profile of the UK and illustrates the highly distorted nature of the UK economy. If this subject interests you then a report just published by IPPR gives a detailed breakdown on the levels of over-50s economic inactivity across the UK. Dick Stroud

Here is an economic puzzle for you to think about

How can a country have both problems with shortages of workers whilst at the same time the amount of money being spent by consumers remains weak? Normally, shortages of labour lead to increasing prices and increasing consumer expenditure.

Give up?

Well this is what is happening in geriatric Japan. As great swathes of high paid workers retire they are being replaced by much younger people who are paid less and hence spend less. Japan is experiencing labour shortages and falling/static consumer spending.

This phenomenon is something that Europe will experience. Strange stuff, the economic impact of the aging population. Dick Stroud